Alibaba IPO, FedEx Charges, Barclays Fine: ComplianceEllen Rosen and Carla Main
Alibaba Group Holding Ltd.’s planned initial public offering may face added scrutiny from U.S. regulators after accounting irregularities at its film unit, although the share sale is unlikely to be delayed.
Alibaba Pictures Group Ltd. uncovered possible accounting flaws and won’t be able to publish its midyear results on time, it said Aug. 15. The Hong Kong-listed media company appointed a new chief executive officer this month, after Alibaba acquired 60 percent of it for about $800 million.
With the Chinese company in the final stages of preparing for a U.S. IPO in September, the U.S. Securities and Exchange Commission’s primary focus will be on ensuring that Alibaba is properly disclosing irregularities. The SEC doesn’t want to get in the way of offerings and works with companies to keep them on track, said David Martin, a former head of the regulator’s corporation finance division, which oversees filings including prospectuses.
“When you file your registration statement, you hope that you sort of remain in a steady state until the process is finished, but it almost never happens,” said Martin, now a partner at Covington & Burling LLP in Washington. “You’re going to have stuff come up.”
John Nester, an SEC spokesman, declined to comment on Alibaba’s situation. In an e-mailed statement, Alibaba expressed its support for the new management of Alibaba Pictures “as they thoroughly review and rectify the possible financial noncompliance they have found.”
A spokesman for the company declined to comment beyond the statement. Sara Rich, a spokeswoman for the New York Stock Exchange, where Alibaba has chosen to list its shares, declined to comment.
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SFO Said to Probe U.K. Banks on Lending Support Abuse Claims
U.K. prosecutors are looking into allegations that the nation’s banks abused government programs aimed at encouraging lending to small businesses, a person with knowledge of the matter said.
The Serious Fraud Office hasn’t yet announced a formal probe, said the person, who asked not to be identified because the details aren’t public. The SFO is aware of the issue and monitoring developments, said a spokesman in London.
British lenders have toughened their internal controls following a series of scandals including the rigging of benchmark interest rates and misselling of insurance on consumer loans.
The SFO is reviewing the use of a government program known as the Enterprise Finance Guarantee, and its predecessor the Small Firms Loan Guarantees Scheme, set up to help boost lending to small businesses, said the person.
The EFG encourages lending to firms that “have been turned down for a normal commercial loan due to a lack of security or a proven track record,” according to the government website. While the government provides a guarantee to the lender, it’s not involved in the decision of whether a firm is eligible.
FedEx Faces Money-Laundering Charges in Revised Indictment
FedEx Corp. faces new money-laundering charges in a drug-trafficking case brought by the U.S. last month over its shipping of prescription painkillers and other controlled substances for illegal Internet pharmacies.
The allegations of a conspiracy to launder money were in a revised indictment against the company filed Aug. 15 in federal court in San Francisco. FedEx and individuals who ran the illicit pharmacies “knowingly and intentionally” schemed to launder more than $630,000 in shipping payments that were derived from drug sales, federal prosecutors said in the indictment.
The government has said that FedEx and its co-conspirators might face a fine of twice the gains from the conduct, alleged to be at least $820 million.
The company, operator of the world’s largest cargo airline, last month pleaded not guilty in San Francisco to the federal charges, saying it can’t be responsible for the contents of the 10 million packages it transports daily and that policing customers would violate their privacy.
“FedEx is innocent of these and all of the charges filed in this matter,” Patrick Fitzgerald, senior vice president for marketing at Memphis, Tennessee-based FedEx, said in an e-mail. “We will plead not guilty. We will continue to defend against this attack on the integrity of FedEx.
The case is U.S. v. FedEx Corp., 14-cr-00380, U.S. District Court, Northern District of California (San Francisco).
Barclays Said to Face Fine Over Client Asset Segregation
Barclays Plc is poised to be hit with its second fine by British regulators over failures to segregate client assets properly, a setback to Chief Executive Officer Antony Jenkins’s efforts to put the lender’s legal woes behind him, two people with knowledge of the matter said.
The fine, which is still under discussion, may come later this year and could surpass the 59.5 million-pound ($99.5 million) penalty Britain’s second-largest lender paid to the Financial Conduct Authority as part of its 290-million-pound settlement with regulators over the rigging of benchmark interest rates, said one of the people, who asked not to be identified because the talks are private.
The lender is being probed for what would be the second breach of so-called client asset segregation rules in three years, said the people. Barclays was fined 1.1 million pounds in 2011, and while clients didn’t suffer any losses, they were put at risk of loss, the regulator said at the time. The watchdog accepted the violations weren’t deliberate and Barclays had already addressed its failures.
Officials at the FCA and London-based Barclays in London declined to comment on the negotiations.
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Doral Receives SEC Subpoena for Receivables and Loss Allowances
Doral Financial Corp., the Puerto Rico bank that hasn’t posted an annual profit for almost a decade, said it received a subpoena from the Securities and Exchange Commission. Regulators are examining Puerto Rico tax receivables, the bank’s compliance with a consent order and allowances for loan and lease losses, the San Juan-based lender said Aug. 15 in a regulatory filing. The company said it’s cooperating with the SEC investigation.
Doral is deciding whether to take an impairment charge related to a $229.9 million tax refund it’s demanding from Puerto Rico’s government, the bank said in June. It asked Puerto Rico’s Department of Treasury in May to honor a 2012 accord for the tax refund, and the agency responded that the agreement was ‘‘null and that Doral has no right to a refund,” Doral said in a previous filing.
The bank is trying to sell pieces of its business to raise capital, people with knowledge of the matter said last month. It’s in the early stages of shopping the commercial real estate division, valued at more than $600 million, and is auctioning branches and loans in New York and Florida that may fetch more than $100 million combined, said the people, who asked not to be identified because the information is private.
Doral posted an $88.3 million loss last year because of mounting levels of unpaid business and home loans.