DealBook Briefing: Behind Facebook’s Latest Legal Headache

Good Monday. Here’s what we’re watching:

• The trial for the Justice Department’s lawsuit over AT&T’s deal for Time Warner starts this morning.

• Mark Zuckerberg is on the hot seat following the Cambridge Analytica revelations.

• Congress is racing to complete its spending bill.

• U.S. companies warn President Trump about sweeping tariffs.

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Lawmakers want answers on Facebook’s latest controversy

Lawmakers in the U.S. and Britain want Mark Zuckerberg to explain how Cambridge Analytica, the political data firm founded by Steve Bannon and Robert Mercer, harvested private information from over 50 million user profiles.

“It’s clear these platforms can’t police themselves,” tweeted Senator Amy Klobuchar, a Democratic member of the Senate Judiciary Committee.

What happened: The NYT and The Observer of London reported how Cambridge had collected data from an outside researcher to better target Facebook users. Christopher Wylie, who oversaw Cambridge’s data collection until 2014, told the NYT of his former company, “For them, this is a war, and it’s all fair.”

Facebook argued that the incident wasn’t a data breach and that Cambridge had committed a violation. But former Federal Trade Commission officials told the WaPo that Facebook may have violated a privacy pact reached with the regulator. (The tech giant is reviewing whether one of its employees had been aware of the data leak.)

More on Cambridge Analytica: Alexander Nix, the company’s chief, is facing scrutiny over business dealings with Russian interests. Mr. Wylie said that one Russian company, the oil giant Lukoil, appeared more interested in political message targeting than commercial uses. And Cambridge is reportedly trying to block the airing of a report by Channel 4, a British television channel, in which reporters went undercover at the firm.


Today’s DealBook Briefing was written by Andrew Ross Sorkin on the road, and Michael J. de la Merced and Amie Tsang in London.


It’s budget time, and Congress is preparing to spend

Friday is the deadline for lawmakers to pass a budget, and they are considering a plan that would cost more than $1 trillion. Expect the deficit to widen to more than $800 billion, as well as a lot of pet projects.

The proposal will probably garner Democratic support, but opposition could come from: a) fiscal conservatives, and b) President Trump (if it includes funding for a New York tunnel project).

In related news: How the tax bill could make your credit card payments more expensive.

U.S. companies warn the White House on China tariffs

Forty-five trade groups, including the U.S. Chamber of Commerce, urged President Trump not to move forward with sweeping tariffs on Chinese goods.

Here’s what Thomas Donohue, the C.E.O. of the chamber, said:

Elsewhere in trade: Mr. Trump is requesting authority to unilaterally raise tariffs, power that could undermine the World Trade Organization. And Latin American countries are forging closer commercial ties with each other, and with China.

The political flyaround

• President Trump attacked Robert Mueller’s investigation, using the special counsel’s name in his tweets for the first time and drawing rebukes from some Republican lawmakers. Despite one Trump lawyer’s call for an end to the special counsel’s investigation, another says that there is no plan to fire Mr. Mueller.

• The special counsel is looking into the Trump Organization’s finances. What’s the connection to Russia? (NYT)

• Mr. Mueller’s case against Paul Manafort includes evidence from hard-to-crack jurisdictions like Cyprus and St. Vincent and the Grenadines. (WSJ)

• Attorney General Jeff Sessions fired Andrew McCabe, the F.B.I.’s deputy director. Several Democratic lawmakers offered to hire Mr. McCabe to help him qualify for his government pension. Mr. McCabe says he kept memos on Mr. Trump.

• Senior Trump administration officials were asked to sign nondisclosure agreements about their time in the White House that would extend past Mr. Trump’s tenure.

• Kushner Companies filed false paperwork with New York City to improperly remove tenants in Queens. (A.P.)

• Keep track of who has left the Trump administration. (NYT)

What does the Saudi crown prince want from his U.S. tour?

Crown Prince Mohammed bin Salman will meet with the Trump administration and tour several cities this week. Here are a few things most likely on his agenda:

• Shoring up military and political support for its bombing in Yemen, despite American lawmakers’ concerns about the U.S. role.

• Persuading American businesses to invest in Saudi Arabia as part of his Vision 2030 plan. The crown prince will meet with Apple and Google, among other companies. Also of interest: In an interview on “60 Minutes,” he said that women were “absolutely” equal to men.

Elsewhere in the Middle East: How Saudi Arabia is building a homegrown entertainment industry. The head of the broadcast conglomerate MBC touted his company’s expanding ties to the kingdom — after he was freed from detention. And here’s the fascinating tale of Qatari royalty who were kidnapped while on a falconry hunt.

Your Spotify must-read

Bill Gurley of Benchmark asked in a tweet storm whether the streaming giant was better off pursuing profitability instead of growth. Mr. Gurley argues no — and points out that the company is now more valuable takeover bait.

How realistic is Paul Jacobs’s quest to buy Qualcomm?

The son of the company’s founder wants to take the chip maker private, à la Michael Dell and his eponymous computer empire. But it would be a herculean task. Consider:

• Mr. Jacobs would probably have to pay more than the $117 billion that Broadcom offered.

• He only owns about 1 percent of the company. Mr. Dell owned 14 percent of his.

• He would have to bring in significant equity partners, since there is no way he could finance a takeover with debt alone. But it’s not clear where they might come from (SoftBank has shown little interest so far) and whether any foreign backers could pass a national security review.

Critics’ corner: Shira Ovide of Gadfly writes, “It’s unwise for the company’s former C.E.O. to chase after a dream that can’t possibly come true.” And John Foley of Breakingviews asserts that Qualcomm’s biggest issue is mending fences with Apple.

Elsewhere in deals: Newell Brands revamped its board to settle a fight with Carl Icahn. HNA plans to sell $2.2 billion worth of property across China. CACI has bid $7.2 billion for the tech services contractor CSRA to try to spoil CSRA’s impending sale to General Dynamics.

The tech flyaround

• SoftBank is considering taking ARM Holdings public again, though it’s not clear when. (FT)

• Dropbox has reached a new low for corporate governance, John Plender of the FT writes. (FT)

• Bitcoin is at $8,353 after another wild weekend. And Mastercard says it would be “very happy to look at” digital money issued by central banks. And Twitter will ban many virtual currency ads.

• Ola, the Indian ride-hailing company, is expanding in Australia and challenging Uber there. (NYT)

• Foreign smugglers are trying to ship advanced American military technologies to China, Russia and other adversaries at rates that outpace the Cold War. (NYT)

• FedEx has found that while robots may take your role, they might not take your job. (NYT)

• Apple is designing and producing its own device displays for the first time, unnamed sources said. (Bloomberg)

• Google wants a cut of the purchases made through user searches. (Reuters)

• Pricing ever-more-popular cybersecurity insurance is difficult. (FT)

Point72’s president quits amid gender bias accusations

Douglas D. Haynes, who was named as a defendant in a suit that accuses Point72 Asset Management of underpaying women and fostering a hostile work environment, resigned on Friday, the NYT reported. Two sources said the move wasn’t related to the litigation, but it still creates another headache for Steven Cohen’s investment firm as it prepares to become a full-fledged hedge fund.

The misconduct flyaround

• A lawyer for Steve Wynn reported a woman to the F.B.I. after she threatened to go public with allegations of the casino mogul’s misconduct toward her. (WSJ)

• An Alaska Airlines pilot sued the company, alleging she was drugged and raped by another pilot during a layover last year. (NYT)

• James Levine, former music director at the Metropolitan Opera, is suing the company after he was fired following an internal inquiry that said it had found evidence of sexual misconduct. (NYT)

• Few law firms are choosing to include partners in their gender pay gap reporting in Britain, a move that would likely widen the pay gap significantly. (FT)

Revolving door

• Alex Wilmot-Sitwell, the head of Bank of America Merrill Lynch’s European operations, has left amid frustration with Brexit. (FT)

• Ann Gronowski, a professor of pathology at the Washington University School of Medicine, has resigned from Theranos’s board. (FT)

The speed read

• The activist investor Edward Bramson has acquired just over 5 percent of Barclays, increasing pressure on the British bank to turn around its performance. (FT)

• Hillhouse Capital Management is raising a fund that could be the largest ever devoted to the China region, surpassing the $9.3 billion raised by K.K.R. last year. (FT)

• BBL Commodities, one of the biggest energy-focused hedge funds, is looking to raise $1 billion for a new fund that will wager on macroeconomic trends. (WSJ)

• China plans to name Yi Gang, an American-educated economist, to lead its central bank in a move signaling that Beijing will continue an ambitious — and, some say, much needed — financial shake-up to get the country’s debt under control and keep its economy growing. China’s president also handed the reins of the country’s financial system to a close ally, Liu He.

• Blackstone guaranteed Stephen Schwarzman new rewards for his contribution to the firm as a founder when he chooses to retire — and even after his death. (WSJ)

• Christian Bittar, once a star banker for Deutsche Bank, pleaded guilty to conspiring to rig the interest-rate benchmark known as Euribor. (Bloomberg)

• An influential committee of lawmakers in Britain says the country should seek to postpone its exit from the European Union if talks drag on. (NYT)

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