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BP and Shell will keep (some of) it in the ground

One of the biggest liabilities on the world’s climate balance sheet right now is all of the oil, gas, and coal sitting in the ground, discovered, but not yet dug up. For more than a decade, environmentalists and scientists have argued that we’re going to need to practice some restraint and keep those fossil fuels buried if we want a livable planet.

Now, the “keep it in the ground” movement may be getting its most significant victory to date. In recent weeks, BP and Shell, two of the biggest fossil fuel companies in the world, indicated they plan to lower the official value of their assets by several billion dollars due to declining oil and gas prices. That means these companies are looking at their reserves, looking at the price of oil and the state of the world, and saying, this is not worth nearly as much as it was before. And the economics of digging it up are changing.

BP was the first, announcing in mid-June that it expects to write down up to $17.5 billion of its oil and gas holdings in its next quarterly report, a 12 percent drop from the previous valuation. Playing into that is the expectation that oil prices, currently deeply depressed from the global economic slowdown caused by the pandemic, may never fully rebound as some countries, including the entire E.U., prioritize a “green recovery.” Previously, BP assumed its oil was worth $70 per barrel, but now the British multinational has lowered that estimate to $55.

The move renders some of BP’s assets completely worthless. Sources told Reuters the company would be writing off reserves in the Canadian oil sands and ultra-deepwater wells off Angola because they are too expensive to develop.

Shell joined the club on Tuesday, saying it would write down between $15 billion and $22 billion of its assets next quarter. The Dutch-British corporation, the world’s largest non-state owned oil and gas company, had a slightly different outlook than BP on oil prices, saying it was dropping its expectations to $35 a barrel this year, with a slight rebound to $40 next year, and a long-term recovery to $60.

Charlie Cray, political and business strategist for Greenpeace USA, which has long been a major voice in the “keep it in the ground” movement, said in an email that BP and Shell are late to the party. “Both companies are playing catch up to what activists and economists have been warning for years: the climate emergency is going to make oil worth less,” he told Grist. Cray warned that we shouldn’t rely on the oil and gas industry, which he said “is predicated on reckless and never-ending expansion,” to usher in the energy transition. “Volatility in the market is not a substitute for robust federal policy to permanently phase out fossil fuels, hold climate polluters accountable, and begin a just transition for workers and impacted communities.” A week before disclosing the write-down, BP said it would lay off 10,000 workers.

Meanwhile, ExxonMobil is resisting pressure to acknowledge economic realities and write down its own assets. Several oil and gas accounting experts have filed complaints with the Securities and Exchange Commission alleging that the American company’s inaction amounts to arrogance … and potentially accounting fraud.

The European/American divide, with BP and Shell on one side and Exxon on the other, echoes those companies’ recognition of their responsibility when it comes to climate change. Indeed, the write-downs reflect not just the current economic slowdown, but also the larger shift these companies are undergoing to make sure they are still relevant in a low-carbon economy. “Both are in this unique position of trying to figure out what is the next 20 to 30 years for our business and our business model, while also trying to navigate in a world that’s clearly heading towards a low-carbon future,” said Michelle Manion, lead senior economist at the World Resources Institute, a global research nonprofit. “But at the same time being beholden to these quarterly expectations about making profit. It’s a pretty tough spot to be in.”

Both Shell and BP pledged earlier this year to become net-zero companies by 2050. However, their plans are still light on the details and have been scrutinized for not being in line with the goals of the Paris Agreement. In a statement about BP’s write-down, CEO Bernard Looney said it was “rooted in our net zero ambition and reaffirmed by the pandemic.” BP is expected to release a clearer roadmap for reducing its emissions later this year. Manion told Grist that the World Resources Institute has been working with Shell on its greenhouse gas accounting and that the company is starting to think seriously about a portfolio that includes low-carbon assets.

The same pandemic-induced price dynamics pressuring oil majors to write down their assets are also leading to outright bankruptcies. The latest to go under is Chesapeake Energy, which led the fracking boom in the U.S. a decade ago. The New York Times estimated that roughly 20 American oil and gas producers have filed for bankruptcy so far this year.

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BP and Shell will keep (some of) it in the ground

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Harvard didn’t divest from fossil fuels. So what does its ‘net-zero’ pledge mean?

In the lead-up to Earth Day, two wealthy, world-renowned universities made historic decisions about their relationships with fossil fuel companies and commitments to tackling climate change. Oxford passed a motion to divest its endowment from fossil fuels. Harvard, meanwhile, decided to skirt divestment in favor of a plan to “set the Harvard endowment on a path to achieve net-zero greenhouse gas (GHG) emissions by 2050.”

Harvard’s announcement was both mildly celebrated and highly criticized by divestment advocates on campus and beyond, who have put increased pressure on the administration to divest over the last six months. In November, student activists joined their counterparts at Yale to storm the field in protest at the annual Harvard-Yale football game, disrupting the match for more than an hour. In February, the Faculty of Arts and Sciences voted 179-20 in favor of a resolution asking the school to stop investing in companies that are developing new fossil fuel reserves. And a student and alumni climate group collected enough signatures earlier this year to nominate five candidates to the university’s Board of Overseers, which has a say in who manages the endowment, which was valued at $40.9 billion last year.

In a letter explaining the net-zero portfolio plan to faculty, University President Lawrence Bacow said that divestment “paints with too broad a brush” and vowed to work with fossil fuel companies rather than demonize them. “The strategy we plan to pursue focuses on reducing the demand for fossil fuels, not just the supply,” Bacow wrote. The school says its commitment matches the decarbonization timeline set by the Paris Agreement — but it’s not yet clear what it will entail, and whether the school will be able to fulfill it.

Net-zero emissions promises can mean different things, and in many cases, the entities making the promises haven’t figured out how to make good on them. BP’s net-zero pledge accounts for the emissions from some, but not all, of the fossil fuel products it sells to the world, also known as its scope 3 emissions. Repsol, one of the first oil and gas majors to announce a net-zero target, has a plan that relies on technologies like carbon capture that the company has admitted aren’t viable yet. Even entities with more ambitious and transparent plans, like New York State, haven’t stopped letting utilities invest hundreds of millions in new natural gas infrastructure.

Despite these discrepancies, the concept of achieving net-zero for a company that sells products or a state that consumes energy is relatively tangible: They can invest in renewables, incentivize energy efficiency programs and electrification, try to pull carbon out of the atmosphere. But how do you reduce — or even measure — the carbon footprint of an endowment, which in Harvard’s case is made up of more than 13,000 different funds?

“I think the idea is, at the end of the day, all the companies in the portfolio would be net-zero,” said Georges Dyer, executive director of the Intentional Endowments Network, a nonprofit that helps endowed institutions make their investments more sustainable. While he doesn’t advocate for or against divestment or any other specific strategy, Dyer pointed out that Harvard’s net-zero target has the potential to address the climate crisis across the whole economy, including real estate and natural resources, and not just the fossil fuel sector.

A net-zero portfolio won’t be as simple as only investing in companies with net-zero pledges, since different companies have different definitions of net-zero. Indeed, in his letter to faculty, Bacow admitted that Harvard was not yet sure how it would measure or reduce the endowment’s footprint, explaining the plan would require “developing sophisticated new methods” for both. In a statement shared with Grist, the Harvard Management Company, which manages the endowment, said it would work to “understand and influence” each company’s “exposure to, and planned mitigation of, climate-related risks.” It plans to develop interim emissions targets to ensure success.

Harvard isn’t alone in trying to figure this out. The Net-Zero Asset Owner Alliance is a group of institutional investors that was formed at the United Nations Climate Summit last fall. Its members have committed to net-zero investment portfolios by 2050, promising to set interim emissions targets in five-year increments and to issue progress reports along the way. But the group is still looking for answers on how to actually accomplish these goals.

In vowing to work with fossil fuel companies, Harvard’s commitment relies, to a certain degree, on shareholder engagement, a strategy that has seen mixed results thus far. Timothy Smith, director of ESG (environmental, social, and governance) shareowner engagement at Boston Walden Trust, an investing firm, told Grist that investors have made real gains in changing companies’ behavior, attitudes, and policies around climate. He pointed to companies like BP that have not only set net-zero targets but also said they will withdraw from trade associations that have lobbied against climate policy.

“I’m not saying we’re moving far enough fast enough,” he said. “We are not.” Smith acknowledged there have been some failures, notably with Exxon, which has lagged far behind its peers in climate action. Last year, Exxon successfully blocked a shareholder resolution that would have forced it to align its greenhouse gas targets with the Paris Agreement.

Shareholder engagement is not a new tack for Harvard: In September, it joined Climate Action 100+, an investor-led initiative pressuring oil and gas companies to curb emissions and disclose climate risk. But most of Harvard’s funds are managed externally, so its ability to participate directly in shareholder initiatives is limited. Instead, it provides “proxy voting guidelines” to its financial managers. Harvard’s voting guidelines for climate change generally instruct managers to vote in support of resolutions that request that companies assess impacts and risks related to climate change. Other institutional investors have taken a more active stance — the Church of England and the New York State public pension fund, for instance, recently said they will vote against reelecting Exxon’s entire board since it has failed to take action on climate change, as well as filed a resolution asking Exxon to disclose its lobbying activities.

To be clear, no one is implying Harvard should engage with Exxon, since it’s actually unclear whether Harvard has any investment in Exxon. The school only discloses its direct investments — about 1 percent of the total endowment — as required by the Securities and Exchange Commission. The rest of the school’s portfolio, as well as how much of it is invested in fossil fuels, remains shrouded in secrecy. An analysis of Harvard’s 2019 SEC filing by the student activist group Divest Harvard found that of the $394 million disclosed, about $5.6 million was invested in companies that extract oil, gas, and coal and utilities that burn these fuels.

The Harvard Management Company told Grist that it will report its progress toward the net-zero goal annually, with the first report to be released toward the end of this year, but it did not say whether it will disclose its fossil fuel investments.

Harvard’s success will depend, to a large extent, on transparent reporting from the companies it invests in. As part of its new commitment, Harvard announced its support for the Task Force on Climate-related Financial Disclosures, a financial industry group that makes recommendations for how companies should report their climate-related risks to investors.

This piece is significant, as navigating the financial risks of the impending energy transition is likely a key motivating factor in Harvard’s decision to go “net-zero.” Bob Litterman, a financial risk expert and carbon tax advocate, said this means distinguishing between companies that are well-positioned for the rapid transition to a low-carbon economy — aka a world where policy decisions make emitting carbon a costly endeavor — and those that are not.

“I have heard a number of investors talk about aligning their portfolios with net-zero emissions by 2050,” said Litterman. “You know, it’s not entirely clear what that means, but if what it means is that they’re trying to position their portfolio to do well in that scenario, that makes sense to me.”

But for divestment advocates, maximizing returns is beside the point. In an op-ed for the Crimson, the campus paper, alumnus Craig S. Altemose criticized Harvard’s net-zero plan for ignoring the question of responsibility for the climate crisis and the fossil fuel industry’s track record of spreading disinformation and lobbying against climate policies. He also argued that the plan is not aggressive enough to meaningfully help the world avoid the worst effects of climate change.

In a Medium post, the group Divest Harvard argued that “a good-faith effort to reach carbon neutrality would have acknowledged that divestment is the logical first step.” Oxford University ran with that concept: After its initial announcement to divest, Oxford instructed its endowment managers work toward net-zero across the rest of its portfolio.

Across the spectrum, divestment advocates and sustainable investing experts agree that Harvard’s net-zero endowment pledge represents a step forward. But how big a step? In an interview with the Harvard Gazette, Bacow framed the entire initiative in dubious terms, saying, “If we are successful, we will reduce the carbon footprint of our entire investment portfolio and achieve net-zero greenhouse-gas emissions.” Harvard has a lot of questions left to answer if it wants to turn that “if” into a “when.”

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Harvard didn’t divest from fossil fuels. So what does its ‘net-zero’ pledge mean?

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Elizabeth Warren’s new climate plan can go the distance, even if her campaign can’t

Elizabeth Warren once again trailed her top competitors in Saturday’s South Carolina primary. Another poor showing on Super Tuesday — the day when the greatest number of Democrats can go to the polls — could spell the end of her presidential aspirations.

But regardless of what happens to the Massachusetts senator this week, her climate plans, some of the most detailed and thoughtful in the primary, could live on — much like those of Jay Inslee, the campaign’s original climate candidate, who left the race last August. (Warren, among others, adopted elements of the Washington State governor’s climate platform upon his exit.)

That’s especially true of her latest proposal, aimed at stopping Wall Street from continuing to finance the climate crisis. As far as Warren’s climate plans go, this one is as on-brand as they come. Evoking the 2008 financial crisis, she writes in the plan, posted to Medium Sunday morning: “Once again, as we face the existential threat of our time –– climate change –– Wall Street is refusing to listen, let alone take real action.” (Larry Fink over at BlackRock might disagree, nevertheless, Warren persists.)

Many other candidates, including Warren herself, have previously unveiled climate risk-disclosure plans, designed to compel corporations to reveal to stockholders and the public potential climate-related liabilities to their business — ranging from fossil fuel investments on their books to parts of their operations with exposure to, say, sea-level rise. But this plan, introduced as the stock market continues to plunge amid coronavirus fears, is different in that it is aimed directly at Wall Street banks.

Climate change, she says in the Medium post, destabilizes the American financial system in two major ways: physical property damage (think the wreckage of coastal cities in the wake of catastrophic hurricanes or Western towns post-wildfires) and so-called “transition risks.” For those of you without a degree in economics, transition risks in the context of climate change means, for instance, investments in the fossil fuel industry that could suddenly lose value as the nation switches to a green economy. Theoretically, such a shift could create conditions for a financial meltdown.

“We will not defeat the climate crisis if we have to wait for the financial industry to self-regulate or come forward with piecemeal voluntary commitments,” Warren writes. So she suggests taking aggressive steps to reign in Wall Street and avoid financial collapse by using a number of levers at a president’s disposal — some old, some new.

First, she says, if elected, she’ll use the regulatory tools in the Dodd-Frank Act — enacted in the wake of the 2008 crash — to address climate risks. Specifically, she would ask a group created by that legislation — the Financial Stability Oversight Council, comprised of heads of regulatory agencies — to assess financial institutions based on their climate risk and label them “systemically important” where appropriate.

Next, she’d require American banks to self-report how much fossil-fuel equity and debt they acquire yearly, in addition to the assets they hold in that sector. She’d also mandate insurance companies disclose premiums they derived from insuring coal, oil, and gas concerns. She’d ask the Securities and Exchange Commission and Department of Labor, the two agencies in charge of regulating pensions, to identify carbon-intensive investments. Current pension systems, she writes, are “leaving all the risk of fossil fuel investments in hard working Americans’ retirement accounts.” In addition, she’d staff federal financial agencies with regulators who understand the connection between financial markets and climate change, “unlike Steven Mnuchin,” she says (seemingly unable to pass up the opportunity to drag Trump’s unpopular Treasury secretary).

Perhaps the most important piece of Warren’s plan concerns international cooperation, which echoes a theme in previous climate plans she’s introduced. She’d join other world powers in making climate change a factor in monetary policymaking, and prompt the Federal Reserve to join the Network on Greening the Financial System, a global coalition of central banks. And she’d make implementation of the Paris Agreement a prerequisite for future trade agreements with the U.S. “Addressing the financial risks of the climate crisis is an international issue,” Warren writes on Medium.

As is her calling card, Warren’s latest plan is designed to protect consumers from a potential financial bubble that could burst on the horizon. And if she’s unable to continue campaigning after this week, her competitors might be smart to heed her warning and give this plan a good look, particularly the international components. As John Donne famously wrote, no market is an island.

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Elizabeth Warren’s new climate plan can go the distance, even if her campaign can’t

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How to Responsibly Dispose of Old Electronics

Let’s try something. Quick! How many electronic products do you own? Cell phones, computers, tablets, televisions…gaming consoles, fitness trackers, thermostats, security systems…they add up don’t they?

If you find that?total?creeping toward numbers in the teens or higher, you certainly aren’t the only one. According to a study conducted by the Consumer Technology Association in 2013, the average American household owns 24 consumer electronic products. And according to the U.S. Environmental Protection Agency (EPA), they’re the fastest-growing slice of what Americans are throwing away.

In a world in which a new gadget comes out seemingly every week, it’s no wonder American households are drowning in tech. Throw in a capitalist system that rewards built-in obsolescence and you have an electronics industry that thrives on the quick turnover of new products and a society that can’t get enough. Our?waste management system just can’t keep up, and it’s putting us and our environment at risk.

So what?should we be doing with broken or unwanted electronics? Let’s take a look.

Protect?your data

Before you send those broken electronics to your local recycling facility, make sure you erase all of your personal information. Donate without wiping your data?and your credit cards, social security numbers, family photos and banking information could be out there for the taking.

Recycling required

Electronic products contain toxic substances like lead and mercury that must be disposed of carefully. These materials can be?so dangerous that, so far, 25 states have passed laws requiring that old electronics be recycled. Don’t abide and you’ll be fined.

One company, Call2Recycle, has drop-off locations for rechargeable batteries and cell phones all over the United States. Additionally, many cities have started sponsoring collection days for old electronics. Visit TIA E-cycling Central for a list of events by state!

Keep reading: Do You Know Where Your Electronic Waste is Going?

Give it away

If your electronic device still works, there is a market for it! Start by checking out Habitat for Humanity’s ReStore if you have one near you, or call around to senior organizations and recreation centers.

Here are a few more programs that can?use or repurpose your old electronics:

  1. Dell Reconnect by Goodwill
  2. The World Computer Exchange
  3. eBay for Charity
  4. AmericanCellPhoneDrive.org
  5. Apple GiveBack
  6. Amazon
  7. Office Depot

Keep reading: Top 10 Most Important Items to Recycle

Whether you recycle your device completely or simply find it a new home, giving your old electronics new life is a great way to help curb the waste problem we’re experiencing today. Thanks for doing your part!

Disclaimer: The views expressed above are solely those of the author and may not reflect those of Care2, Inc., its employees or advertisers.

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How to Responsibly Dispose of Old Electronics

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Tom Price Intervened on Rule That Would Hurt Drug Profits, the Same Day He Acquired Drug Stock

Mother Jones

This story originally appeared on ProPublica.

On the same day the stockbroker for then-Georgia Congressman Tom Price bought him up to $90,000 of stock in six pharmaceutical companies last year, Price arranged to call a top U.S. health official, seeking to scuttle a controversial rule that could have hurt the firms’ profits and driven down their share prices, records obtained by ProPublica show.

Stock trades made by Price while he served in Congress came under scrutiny at his confirmation hearings to become President Trump’s secretary of health and human services. The lawmaker, a physician, traded hundreds of thousands of dollars’ worth of shares in health-related companies while he voted on and sponsored legislation affecting the industry, but Price has said his broker acted on his behalf without his involvement or knowledge. ProPublica previously reported that his trading is said to have been under investigation by federal prosecutors.

On March 17, 2016, Price’s broker purchased shares worth between $1,000 and $15,000 each in Eli Lilly, Amgen, Bristol-Meyers Squibb, McKesson, Pfizer and Biogen. Previous reports have noted that, a month later, Price was among lawmakers from both parties who signed onto a bill that would have blocked a rule proposed by the Obama administration, which was intended to remove the incentive for doctors to prescribe expensive drugs that don’t necessarily improve patient outcomes.

What hasn’t been previously known is Price’s personal appeal to the Centers for Medicare & Medicaid Services about the rule, called the Medicare Part B Drug Payment Model.

The same day as the stock trade, Price’s legislative aide, Carla DiBlasio, emailed health officials to follow up on a request she had made to set up a call with Patrick Conway, the agency’s chief medical officer. In her earlier emails, DiBlasio said the call would focus on payments for joint replacement procedures. But that day, she mentioned a new issue.

“Chairman Price may briefly bring up … his concerns about the new Part B drug demo, as well,” she wrote. “Congressman Price really appreciates the opportunity to have an open conversation with Dr. Conway, so we really appreciate you keeping the lines of communication open.”

The call was scheduled for the following week, according to the emails.

An HHS spokesman didn’t respond to a request for comment from Price. DiBlasio and Conway didn’t respond to questions about the phone call.

The proposed rule drew wide opposition from members of both parties as well as industry lobbyists and some patient advocacy groups. It was meant to change a system under which the government reimburses doctors the average sales price for drugs administered in their offices or inside clinics, along with a 6 percent bonus. Some health analysts say that bonus encourages doctors to pad their profits by selecting more expensive treatments.

Critics argued that the rule might cause Medicare enrollees to lose access to lifesaving drugs. Lawmakers worried the federal government was potentially endangering patients and turning them into guinea pigs in a wide-scale experiment in cost savings.

However, supporters of the rule said the experiment in payments was the kind of drastic action needed to rein in soaring health costs. “We are actively reforming every other aspect of our health-care system to pay for value except pharmaceuticals,” Rep. Jan Schakowsky, D-Ill., said at the time. “Drug manufacturers are the only entity that can charge Medicare anything they want.”

The six companies that Price invested in were steadfastly opposed to the rule. McKesson formally warned investors in a Securities and Exchange Commission filing that such a change could hurt share prices. The firms lobbied the government to kill the plan.

And at two of the six companies Price invested in, people who used to work for the congressman were part of the lobbying effort.

Price’s former chief of staff, Matt McGinley, lobbied House members for Amgen, disclosure records show. Another former Price aide, Keagan Lenihan, lobbied on behalf of McKesson, where she was director of government relations at the time. Lenihan has since reunited with Price, returning to government to work as a senior adviser to her old boss at HHS.

Neither McGinley nor Lenihan responded to requests for comment.

Although Price said he wasn’t aware of his broker’s trades at the time they were made, he would have learned of his holdings no later than April 2016 when he signed and filed his latest financial disclosure forms. In earlier disclosures, Price signed forms listing his other health-related holdings, which included some drug stocks.

Price’s personal intervention raises more questions about the overlap between his investments and his work as a member of Congress.

According to House ethics guidelines, “contacting an executive branch agency” represents “a degree of advocacy above and beyond that involved in voting” on legislation where a financial conflict of interest may exist.

“Such actions may implicate the rules and standards … that prohibit the use of one‘s official position for personal gain,” the guidelines state. “Whenever a Member is considering taking any such action on a matter that may affect his or her personal financial interests, the Member should first contact the Standards Committee for guidance.”

Tom Rust, chief counsel for the House Ethics Committee, declined to comment, saying any consultations with members of Congress are confidential.

In December, after Trump was elected and named Price as his choice to lead HHS, Obama administration health officials scrapped their plan to change the drug reimbursement system. “The complexity of the issues and the limited time available led to the decision not to finalize the rule at this time,” a spokesman said.


Tom Price Intervened on Rule That Would Hurt Drug Profits, the Same Day He Acquired Drug Stock

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Your Morning in Tweets

Mother Jones

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It’s been one of those mornings. My best source to capture the flavor of the news today is my Twitter feed. In no particular order:

Um, sure, except that Nunes won’t show us the substance of the leak and misled everyone about where it came from. Other than that, spot on. And as long as we’re on the subject of Nunes:

Back to the White House now. Here is April Ryan, Washington Bureau Chief for American Urban Radio Networks:

Huh? What’s that about? Oh:

Got anything else for us today, Sean?

Roger that. Let’s move on to someone else in the White House:

So they’ve moved on from denying climate change, and are now denying that they’re even aware of what scientists say about climate change. Where are they going to be by 2020?

Finally, on a completely different subject:

Unfortunately, yes, I think it is.

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Your Morning in Tweets

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This Insider Trading Case Raises Troubling Questions About Trump’s Commerce Secretary Nominee

Mother Jones

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Wilbur Ross, Donald Trump’s pick for commerce secretary, is a legendary corporate raider who made billions of dollars buying failing companies and flipping them for a profit. But as he built his $2.5 billion fortune, Ross and his private equity firm, WL Ross & Co., have faced several lawsuits and regulatory actions accusing them of financial misconduct, including breach of fiduciary duty and fraud. His controversial business record received some scrutiny during his confirmation process. But one recent lawsuit involving Ross has garnered little attention. And it raises serious ethical questions about the business dealings of the billionaire who, if confirmed by the Senate, will be in charge of promoting job creation and economic growth.

The case, filed in a Florida federal court, involved a publicly traded mortgage company called Ocwen Financial. Ross served as a board member for the firm. In 2013 and 2014, state and federal regulators targeted the company over allegations that it engaged in a variety of improper practices. Ocwen’s stock plummeted, and shareholders suffered major losses. Its stock peaked in 2013 at about $56 per share, and the company is currently trading at about $5. But Ross managed to avoid millions in losses by off-loading his holdings in the company in two curiously timed trades that came shortly before damaging news was revealed that sent Ocwen shares into a tailspin. In the suit, shareholders accused Ross and other company directors of using inside information to enrich themselves and of leaving “ethics, integrity, and fair dealing by the wayside in their quest for ever higher revenues and thus, higher compensation and ever more lucrative incentives for themselves.”

The White House press office and Invesco (which is a corporate parent of WL Ross) did not respond to multiple requests for comment. Ocwen spokesman John Lovallo declined to respond to questions from Mother Jones, but he provided a statement about the company’s corporate governance practices. “Today, the composition, structure, experience and diversity of Ocwen’s Board, which consists of eight members, seven of whom are independent directors, is as strong as any comparable financial services company,” Lovallo wrote. “Ocwen is recognized as the industry leader in responsible home retention through foreclosure prevention.”

Ross’ ties to Ocwen date back to October 2012, when the Atlanta-based company announced plans to acquire mortgage-servicing firm Homeward Residential Holdings from WL Ross & Co. for $766 million in cash and preferred stock. Six months later, Ross joined Ocwen’s board.

The Homeward deal came during an Ocwen buying spree, as the company rapidly scooped up the mortgage-servicing units of big banks and other financial firms following the housing crisis. (Mortgage services are not lenders, but they collect loan payments and initiate foreclosure proceedings if homeowners default.) Ocwen’s business practices—including allegations that it had prematurely foreclosed on homeowners and mishandled loan modifications—placed the company on the radar of regulators, including the New York Department of Financial Services (NYDFS). The agency held up the Homeward sale until December 2012, when Ocwen agreed to two years of independent monitoring to ensure that “reforms are implemented and homeowners have a real chance to avoid foreclosure,” according to the agency’s head, Benjamin Lawsky.

In their lawsuit—a consolidated version of several previously initiated lawsuits was filed in federal court in March 2016—the Ocwen shareholders presented a timeline that they claimed supported their allegations. Through the sale of Homeward, Ross and his firm had received $162 million in Ocwen shares. In September 2013, Ross, on behalf of his private equity firm, sold more than 3.1 million Ocwen shares, at $50.19 a share, netting almost $158 million. Three months later, in December, the Consumer Financial Protection Bureau announced that Ocwen had agreed to pay $2.1 billion to settle charges of mortgage-servicing misconduct dating back to 2009, including hitting homeowners with unauthorized fees and deceiving consumers about foreclosure alternatives and loan modifications. As part of the settlement, Ocwen did not admit to or deny the CFPB’s allegations. Soon afterward, Ocwen’s stock had dropped to $44.14 per share, and it continued its downward slide from there.

The following year, WL Ross sold another large block of Ocwen stock. Once again, the sale came shortly before negative news was announced that sharply affected Ocwen’s stock. On July 14, 2014, WL Ross sold nearly 2 million Ocwen shares back to the company at about $37 a share, netting $72.1 million. On July 31, the company reported poor quarterly returns and within days its shares fell in value by more than 20 percent. Ocwen blamed its subpar earnings on the rising costs of complying with NYDFS’ required monitoring. On August 4, the NYDFS announced it was probing Ocwen for requiring homeowners to pay for “forced-placed insurance”—insurance that is taken out by the lender. By the end of December, Ocwen stock had sunk to about $15 per share. Due to the timing of his trade, Ross and his company avoided $18 million in losses. (The NYDFS investigation led to a broader December 2014 settlement, in which Ocwen agreed to pay a $150 million fine.)

Other Ocwen shareholders were not as lucky as Ross and his firm. Three Ocwen shareholders subsequently filed lawsuits against Ross and other company directors. The subsequently consolidated lawsuit alleged that Ross and two other members of the board of directors ignored “systemic and ongoing” wrongdoing by Ocwen. It claimed that the misconduct had ultimately cost the company more than $2 billion, and that Ross and his co-defendants “sold their personal holdings of Ocwen stock…while having knowledge of material, adverse inside information, in violation of state and federal law and in breach of their fiduciary duties to the Company.” And the suit charged that Ross, his firm, and its related funds “profited handsomely at the Company’s expense and thereby unjustly enriched themselves.” Ross, the suit maintained, was in a particular position to know about Ocwen’s mounting regulatory issues because he was not just a company director but a member of the board’s compliance committee.

Ross and fellow members of this committee had “total access to all documents and information bearing upon the Company’s operations,” the complaint alleged. And they were “personally aware or should have been aware that the Company was not in compliance with legal and regulatory requirements, including…applicable state and federal consumer protection laws and regulations and the multiple agreements and consent decrees made with Ocwen’s regulators, which were regularly breached by the company.”

Despite their knowledge of the company’s financial condition, mortgage-servicing misconduct, and ongoing regulatory actions, Ross and other company directors signed their names to a Securities and Exchange Commission filing in March 2014 affirming that Ocwen was successfully managing its regulatory obligations and reiterating the company’s “previously-announced financial results and financial positions,” according to the complaint.

Ocwen settled the suit in December on behalf of Ross and the other directors, agreeing to pay up to $2.2 million in attorney’s fees and other expenses and to institute a range of corporate governance reforms. As part of the settlement, Ross and the other defendants did not deny or acknowledge wrongdoing.

Lawrence Harris, one of the Securities and Exchange Commission’s chief economists during the George W. Bush administration and now a finance professor at the University of Southern California’s Marshall business school, said that because the Ocwen case was settled instead of going to trial, it is unclear what Ross knew at the time that he made his trades. “When confronted with the fortuitous timing of his sale, careful observers will certainly ask themselves whether Ross had knowledge as to what was going to happen,” Harris says. “If his knowledge was obtained through his insight, then he’s simply a disciplined investor. But if his knowledge was obtained through his position as director of the firm, of course there would be substantial concerns of the ethics of his subsequent sale.”

Harris says Ross’ combined history leaves lingering questions.

“If you had two otherwise identical candidates for commerce secretary, one has this record, the other one doesn’t, there’s no question that you would prefer the candidate who doesn’t have the record,” he says. “At some point you have to ask yourself, if you have a candidate with this type of record, who exactly are we dealing with?”

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This Insider Trading Case Raises Troubling Questions About Trump’s Commerce Secretary Nominee

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The Investment Firm Started by Trump’s Commerce Secretary Pick Was Accused in Fraud Case

Mother Jones

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During the presidential campaign, Donald Trump repeatedly cast himself as an anti-Wall Street populist and blasted an international cabal of bankers for supposedly screwing American workers. Yet, since being elected, he has turned to Big Finance titans to run his administration, and one of them—Wilbur Ross, Trump’s pick for secretary of commerce—founded a giant private equity firm that was accused of committing fraud and deceit in a case the firm settled by paying a multimillion-dollar fine.

In 2000, Ross founded WL Ross & Co., a private equity firm that specialized in taking over troubled companies. In August this year, the firm settled a case with the Securities and Exchange Commission regarding the firm not accurately disclosing fees it was charging investors, resulting in them paying excessive fees for nearly a decade. Ross had sold the firm in 2006, but the failure to properly disclose fees began in 2001 and continued until 2011. The settlement was part of a much larger crackdown by the SEC on how private equity firms charged fees to their investors.

According to SEC documents in the case, WL Ross & Co. advised investment funds in exchange for management fees, but those fees were supposed to be offset by special “transaction fees” paid by some of the companies that were being invested in. But millions in those transaction fees were allocated to other funds, and investors ended up overpaying their management fees to WL Ross & Co. The SEC determined the firm had violated the law prohibiting firms from engaging “in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.” In August, the firm agreed to pay back $11.9 million in fees and a $2.3 million civil penalty, although it did not admit any wrongdoing.

Under Wilbur Ross’ management, the firm helped engineer the purchase and combining of a number of American steel companies, including the iconic Bethlehem Steel, which Ross united as the International Steel Group. Ross sold the collection of American steel companies to Indian billionaire Lakshmi Mittal, who folded the companies into the international steel conglomerate ArcelorMittal.

Ross, who made his name and billions of dollars as a specialist in buyouts and restructuring troubled and bankrupt companies, has a long history of working with Trump. In the early 1990s when Trump’s Atlantic City casinos were floundering, Trump managed to stave off lenders and keep the businesses afloat with the help of Ross, who at the time ran the Rothschild Inc. investment firm’s bankruptcy practice.

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The Investment Firm Started by Trump’s Commerce Secretary Pick Was Accused in Fraud Case

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Trump Once Called for Sending US Ground Troops to Fight ISIS and "Take That Oil"

Mother Jones

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GOP presidential nominee Donald Trump has repeatedly said he has a secret and “foolproof” plan for defeating ISIS. This is not to be confused with his “detailed” public plan for crushing ISIS released by his campaign. In that public plan, Trump states, “My administration will aggressively pursue joint and coalition military operations to crush and destroy ISIS.” (That happens to be President Barack Obama’s current plan.) Trump’s public plan does not say anything about sending US combat troops into Iraq and Syria to engage ISIS. In fact, it includes no proposals related to the level of US troops in the region. But in a 2015 interview with Fox News host Bill O’Reilly on the day Trump entered the Republican presidential contest, the celebrity mogul indicated that he would deploy US combat forces to battle ISIS directly in order to grab oil fields that would then be handed over to US companies.

During this conversation, which was filmed in Trump’s office, O’Reilly asked the reality television star what he would do to beat back ISIS. Trump first answered with rhetoric: “I would hit them so hard your head would spin.” And he claimed, “I said in ’04, we should not go in and do that whole thing with Iraq.” (That was inaccurate—and the invasion of Iraq was in 2003.)

Then O’Reilly asked if Trump would send American ground troops into Syria. Trump replied with a vague statement: “I have a way that would be very effective with respect to ISIS.” O’Reilly pushed him on this: “You’d put American ground troops in to chase them around?” This exchange ensued:

Trump: Take back the oil. Once you go over and take back that oil, they have nothing.

O’Reilly: But how do you take it back?

Trump: You have to go in. You have to go in.

O’Reilly: With ground troops?

Trump: Well, you bomb the hell out of them, and then you encircle it, and then you go in.

This was a clear signal that Trump favored sending in US ground troops to fight ISIS to gain control of oil facilities. After that, he said, US oil companies could move in and seize the oil. “Once you take that oil,” Trump noted, “they have nothing left.” It seems obvious, though, that US oil companies—which actually are transnational companies—would only be able to “take that oil” if large areas of the region were secured by a great number of US ground troops.

Throughout the campaign, Trump has insisted that the United States should “take the oil” from Iraq and areas controlled by ISIS—an idea widely derided by military, international law, and energy experts—without ever explaining how this could happen. The idea of deploying US combat troops (after a bombing campaign) to fight ISIS and then win and control territory with oil facilities in Syria and Iraq—essentially, a US invasion—does not appear in Trump’s public plan. But it’s what Trump had in mind during his O’Reilly interview. Perhaps this is the big secret Trump has steadfastly refused to share with American voters before the election.

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Trump Once Called for Sending US Ground Troops to Fight ISIS and "Take That Oil"

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Newt Gingrich Refuses to Discuss His Attack on Megyn Kelly

Mother Jones

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On Tuesday night, Newt Gingrich, the Republican who was forced to resign as House speaker in the late ’90s and who now is a top Donald Trump surrogate, got into a row with Fox News host Megyn Kelly. Toward the end of a segment on the presidential election, the often combative Gingrich started grousing about the media paying too much attention to all the women who have accused Trump of sexual assault (after a video emerged of Trump bragging about committing sexual assault). Kelly defended the media’s handling of this story: “We have to cover that story, sir.” What about a Hillary Clinton speech in which she referred to open borders? Gingrich retorted. “That is worth covering,” Kelly said.

Gingrich then angrily exploded: “Do you want to go back to the tapes of your shows recently? You are fascinated with sex and you don’t care about public policy. That’s what I get out of watching you tonight.” Kelly shot back: “I am not fascinated by sex. But I am fascinated by the protection of women.” Gingrich became irate and dared Kelly to say “Bill Clinton” and “sexual predator.” She did not take the bait, and shortly after that, Kelly said goodbye to Gingrich and asked him to “spend some time” working on his “anger issues.”

The exchange blew up Twitter and was the talk of the politerati. On Wednesday morning, as Trump was holding an event in Washington, DC, to promote his new hotel, with Gingrich one of the few notable GOPers in attendance, he congratulated Gingrich for tangling with Kelly (with whom Trump once feuded).

Following the ribbon-cutting ceremony in the hotel lobby, Mother Jones asked Gingrich about his emotional face-off with Kelly. “Do you really think that Megyn Kelly was overly fascinated with sex by asking about the sexual-assault accusations regarding Trump?” we inquired. Waving his hand, Gingrich replied, “I’m not going to talk about that.”

We followed up: “But given that you guys impeached a president” about a matter involving sex—Gingrich interrupted, “It speaks for itself. It speaks for itself.” He and his (third) wife then walked away to eat lunch at the hotel restaurant.


Newt Gingrich Refuses to Discuss His Attack on Megyn Kelly

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