DealBook Briefing: The Big Problem at the Heart of Tech’s Latest Spy Scandal

DealBook Briefing: The Big Problem at the Heart of Tech’s Latest Spy Scandal


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Bloomberg Businessweek published an investigation yesterday alleging that Chinese spy chips were embedded in data center equipment used by the likes of Apple and Amazon, and that the U.S. government was investigating.

Shares in Super Micro, the company whose motherboards were reportedly compromised by Chinese subcontractors, plummeted by over 40 percent yesterday.

But the companies involved have made heated denials:

Amazon says “there are so many inaccuracies in this article” that “they’re hard to count,” adding that “at no time, past or present, have we ever found any issues relating to modified hardware or malicious chips in Super Micro motherboards.”

Apple says that it “has never found malicious chips, ‘hardware manipulations’ or vulnerabilities purposely planted in any server,” and is “not aware of any investigation by the F.B.I.” It adds that it is “deeply disappointed that in their dealings with us, Bloomberg’s reporters have not been open to the possibility that they or their sources might be wrong or misinformed.”

Super Micro says it “has never been contacted by any government agencies either domestic or foreign regarding the alleged claims.”

Bloomberg says the report is based on more than 100 interviews, “including government officials and insiders at the companies,” and that it stands behind the article.

Whoever is correct, Bloomberg Opinion’s Shira Ovide makes a good point:

“Perhaps the only surefire prevention is for Google, Apple, the U.S. government and others to build every circuit and computer chip by hand and make sure the parts and equipment never leave the sight of people they trust. This seems impossible.”

The Tesla C.E.O. agreed to have the company monitor his messages to investors as part of his recent legal settlement with the S.E.C. Did it review the tweets he sent last night?

• He appeared to call the agency “the Shortseller Enrichment Commission.”

• He again declared that short-selling — betting against a stock — should be illegal.

• He accused investment firms like BlackRock of colluding with short-sellers.

Under his settlement with the S.E.C. over fraud charges, Mr. Musk agreed that he could not deny wrongdoing. But there’s apparently nothing in it about needling the agency.

Legal experts don’t think this is wise. John Coffee of Columbia Law School told the NYT: “Everyone else knows that you let sleeping dogs lie, particularly in the case of the S.E.C.”

Earlier this week, Mr. Musk tweeted a link to a music video by Naughty by Nature. Let’s see how long Tesla lets him continue to be so.

More Tesla news: How the billionaire Mark Cuban convinced Mr. Musk to settle with the S.E.C. And the company’s first safety report on its Autopilot autonomous driving systems is light on detail.

The U.S.M.C.A. — that is, the new Nafta — provided President Trump with his first major trade win. Now, he hopes to use it as a playbook.

The underlying principle? As the WSJ points out, it’s that doing business with the U.S. is a privilege, and requires adopting policies that America wants.

Problem is, Canada and Mexico were trying to save a pact that has underpinned their economies for a quarter-century. The E.U. and Japan, both in trade talks with the U.S., won’t be so desperate. As Andre Sapir, a former E.U. economic adviser, told the WSJ: “I don’t think Europe will want to enter into such an agreement — it would want to have balanced agreement.”

The Labor Department will publish payroll data. Economists expect job growth to have slowed in September. They’ll also look for wage growth, which has been accelerating in recent months after a long sluggish period. Here’s what to watch for.

The Senate votes on Brett Kavanaugh. Today, they will decide whether to end debate on his nomination, setting up a final vote tomorrow. In a WSJ op-ed, Judge Kavanaugh defended his impartiality but regretted some of his testimony last week.

It was a year ago today that the NYT published its investigation into decades of sexual assault allegations against Harvey Weinstein. Since then, #MeToo has taken down many leading figures — Kevin Spacey, Les Moonves, Steve Wynn and Al Franken among them.

Jo Ellison of the FT describes what has changed as women become more comfortable calling out sexual misconduct:

The off-the-cuff remarks, the “handsy” office politics, the clubbable sexism are all being noted. And slowly, the penny is dropping. We don’t much care for sexist opinion. And we’re really not impressed by your Rabelaisian past.

The movement appears likely to continue transforming the workplace.

But Ms. Ellison adds that many accused men, like the comedian Louis C.K., are working again. And the debate over balancing the rights of the accused with those of the accusers is far from over, as the battle over Brett Kavanaugh’s nomination shows. For #MeToo, this may just be the beginning.

The sight of Joel Kaplan, Facebook’s top Washington official, sitting behind his friend Brett Kavanaugh at last week’s Senate nomination hearing angered many at the social network. They saw it as a kind of an endorsement from the company.

Facebook’s C.E.O., Mark Zuckerberg, tried to calm concerns during a staff meeting last Friday. That didn’t work, according to Mike Isaac of the NYT:

This week, Facebook employees kept flooding internal forums with comments about Mr. Kaplan’s appearance at the hearing. In a post on Wednesday, Andrew Bosworth, a Facebook executive, appeared to dismiss the concerns when he wrote to employees that “it is your responsibility to choose a path, not that of the company you work for.” Facebook plans to hold another staff meeting on Friday to contain the damage, said the current and former employees.

The tensions compound Facebook’s problems, including its largest-ever data breach, the departures of Instagram’s co-founders and continued concerns about misinformation on its platform.

After the U.S. withdrew from the Iran nuclear deal and reimposed sanctions on the country, the E.U. — still in the pact — began trying to shield its companies from the financial penalties. There’s more at stake than one agreement.

What the Europeans devised is a “special payments entity” to let companies move money in and out of Tehran when Western banks won’t. While big multinationals have already withdrawn from Iran, others haven’t — and Europeans hope that continued trade will keep the nuclear deal alive. (American officials threatened to crack down on any such move.)

The consequences could be lasting, as Peter Eavis of DealBook explains:

The danger for the United States is that the payments mechanism gives the European Union valuable experience operating outside Washington’s financial sphere of influence and becomes a permanent part of the international payments system.

Bonus: U.S. prosecutors accused a top executive at the Chinese oil company CEFC of trying to broker arms sales to evade U.S. sanctions on Iran.

G.E.’s new C.E.O., Larry Culp, could make over $21 million a year if he succeeds in reviving the stock price.

C.E.O. tenures are growing shorter. That may not be bad.

Deals

• Campbell Soup is reportedly in talks to sell its fresh foods business to Jeff Dunn, who previously led the unit. (WSJ)

• Walgreens invested in Birchbox, the digital cosmetics subscription service. (CNBC)

• Bob Diamond, the former Barclays C.E.O., agreed to invest more than $100 million in Praxia, an online Greek lender. (Bloomberg)

• M.&A. bankers might find more success working on smaller deals. (Breakingviews)

• For European investors, I.P.O.s are currently a bargain. (Breakingviews)

Politics and policy

• Vice President Mike Pence has accused China of a campaign of “malign influence and interference” against President Trump. (Reuters)

• Larry Kudlow says President Trump isn’t trying to influence the Fed. (WSJ)

• Senator Bernie Sanders wants McDonald’s and others to follow Amazon in paying at least $15 an hour. (Bloomberg)

• President Trump will move to shore up the supply chain for military equipment. (NYT Op-Ed)

• President Emmanuel Macron of France is hoping tax cuts boost his flagging popularity. (NYT)

Trade

• Senator Lindsey Graham of South Carolina welcomed President Trump’s China tariffs — but has helped companies avoid them. (NYT)

• E.U. financial regulators are looking to limit any post-Brexit financial meltdown. (Bloomberg)

• Unilever has scrapped plans to relocate its primary headquarters to the Netherlands, and instead will stay in Britain. (NYT)

• Globalization has suddenly become very regional. (Bloomberg Opinion)

Tech

• As many as 80 percent of Twitter accounts that spread disinformation during the 2016 election reportedly remain active. Sadly, A.I. for spotting fake news still isn’t very good.

• The U.S., Britain, and the Netherlands accused Russia of a widespread hacking campaign. (WSJ)

• The White House wants Google to end its latest China projects. (WSJ)

• The Department of Transportation plans to rewrite rules so that fully driverless cars can go on public roads. (Verge)

• Instagram is reportedly testing location-driven advertising. (TechCrunch)

Best of the rest

• Tronc is dead. Long live Tribune Publishing. (WSJ)

American, European and Asian stocks tumbled after a sell-off in government bonds. But claims that the bond bull market is dead may be overstated.

• How Russians appear to have laundered nearly $10 billion through Danske Bank. (FT)

• Jeff Bezos may be raising wages, but he isn’t as generous as you might think. (Bloomberg Opinion)

Thanks for reading! We’ll see you next week.

We’d love your feedback. Please email thoughts and suggestions to bizday@nytimes.com.

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