Good Tuesday morning. The big news today: Capital One’s large data breach. More on that below. (Was this email forwarded to you? Sign up here.)
How to curb corporate America’s excesses
A former corporate lawyer, Jamie Gamble, has a provocative prescription for making U.S. companies run better, Andrew writes in his latest DealBook column: Make ethics rules part of their bylaws — and face shareholder lawsuits for not living up to them.
Mr. Gamble worked with top businesses as a partner at Simpson Thacher & Bartlett, the white-shoe New York law firm. Among his biggest assignments was helping A.I.G. during the 2008 financial crisis.
He had an epiphany after retiring: Corporate chieftains are “legally obligated to act like sociopaths,” charged with acting in their companies’ best interests alone — which usually means just making money.
He has proposed enshrining ethics in corporate constitutions, including rules on how to treat employees, communities and the environment. In short, companies “will have to make a conscience.”
There are potential downsides to the idea, Andrew notes. Companies could face lawsuits over perceived failure to live up to their ethics guidelines, and corporate boards could devise toothless rules to satisfy such requirements.
Mr. Gamble thinks the proposal’s aim is worth the trouble. “The fix I propose leaves the private islands of power private,” he writes in an essay outlining his idea. “The only interference by government would be to require that the shareholders explicitly state what kind of person they want their corporation to be.”
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced in London.
Capital One’s data breach affects 100 million
A Seattle software engineer hacked a server containing customer information for the bank and stole the personal data of 100 million people, the federal authorities said yesterday. It was one of the biggest breaches for a large U.S. lender.
The F.B.I. arrested Paige Thompson, 33, who once worked for Amazon Web Services, and charged her with breaking into a Capital One system hosted by Amazon. Capital One is the nation’s third-biggest issuer of credit cards and the fifth-biggest bank.
What she’s accused of stealing:
• personal information of people who applied for credit cards from 2005 to early this year
• some credit scores, payment histories and credit card transaction data
• 140,000 U.S. Social Security numbers and one million Canadian social insurance numbers
• 80,000 bank account numbers tied to holders of secured credit cards, which require deposits and are considered financially vulnerable
Ms. Thompson boasted about her exploits online, including on Twitter and Slack, according to the F.B.I. “I’ve basically strapped myself with a bomb vest,” she wrote in a Twitter direct message to another user, “dropping capital ones dox and admitting it.” (An anonymous tipster told Capital One about the breach.)
Amazon said it wasn’t responsible for the breach, because its web services customers maintain the software that runs on top of the cloud-computing platform. Capital One said it had fixed the security vulnerability that the authorities said Ms. Thompson exploited to take the data.
Capital One said the breach would cost it up to $150 million, including paying for credit monitoring services for affected customers.
Uber, still seeking a profit, culls 400 employees
The ride-hailing giant said yesterday that it had laid off a third of its marketing employees worldwide, as the company struggles to turn a profit, Kate Conger of the NYT reports.
The company said its marketing team had grown bloated and decision-making became unclear, according to an email by its marketing head, Jill Hazelbaker. The division’s organizational charts ran to more than 388 pages, she said.
It’s the latest staffing upheaval at Uber:
• Three board members — Ryan Graves, Arianna Huffington and the investor Matt Cohler — have stepped down in recent months.
• Barney Harford was pushed out as C.O.O., and Rebecca Messina was removed as chief marketing officer.
Could more job cuts be in the offing? “Many of our teams are too big, which creates overlapping work, makes for unclear decision owners and can lead to mediocre results,” Dara Khosrowshahi, Uber’s C.E.O., wrote in a note to employees.
The bigger picture: Uber remains under pressure to show investors that it can reach profitability. Its stock price has risen above its I.P.O. level only a few times.
We’ll get a clearer picture of Uber’s financial health on Aug. 8, when it reports second-quarter results. Analysts on average expect a loss of $2.09 a share.
More: Jon McNeill will step down as Lyft’s C.O.O. after just 17 months in the role. The company says he won’t be replaced.
The Pentagon rebuked Oracle over its anti-Amazon fight
Oracle has argued for months that Amazon has an unfair advantage in the race to become the cloud-computing provider for the Defense Department. The department has finally had enough, Aaron Gregg and Jay Greene of the WaPo report.
Oracle was shut out of the bidding for the contract. The Pentagon decided to let just one company run the cloud-computing platform, known as JEDI — and only Amazon and Microsoft are in the running.
Oracle has sued over the contract bidding process, arguing that the competition is riddled with conflicts of interest and is biased toward Amazon. It has also begun a lobbying campaign that has reached President Trump’s desk, as we noted yesterday.
But the Defense Department clapped back over the weekend, denying any favoritism toward Amazon. Oracle has engaged in “poorly informed and often manipulative speculation” about the bidding, it told reporters.
From a statement the Pentagon issued on Sunday:
DOD officials directly involved in the work of this procurement along with the senior leaders charged with making the critical decisions related to JEDI have always placed the interests of the warfighter first and have acted without bias, prejudice, or self-interest. The same cannot be said of all parties to the debate over JEDI.
What’s next: A federal judge ruled that Oracle hadn’t proved that it would be materially harmed by being excluded, but questioned the Pentagon’s awarding just one contract. And Oracle hopes that the new defense secretary, Mark Esper, will consider a redo of the whole bidding process.
Your next iPhone might say ‘Made in Vietnam’
As President Trump’s trade war with China rages on, few have emerged as winners. Among them is Vietnam, which wants to be the next big home for tech manufacturing, Ray Zhong of the NYT writes.
Vietnamese factories have swelled with orders as U.S. tariffs prompt American businesses to move supply chains out of China. Tech companies like Apple, Nintendo and Foxconn have settled on Vietnam as an important new manufacturing hub.
A huge part of that success story is Samsung, which opened a plant in Bac Ninh over a decade ago to reduce its dependence on China. Now Samsung assembles half of its smartphones in Vietnam.
But expect some bumps in Vietnam’s journey. Mr. Zhong writes: “Land here can be expensive, and ready-to-use factories and warehouses are in short supply. Recruiting enough trained workers and managers is another potential challenge.”
And the Trump administration is taking aim at Vietnam as well. Its top trade official, Bob Lighthizer, said that the country must reduce its growing trade surplus with the U.S. That includes importing more American goods and eliminating barriers to its markets.
Alan Dershowitz is taking heat for links to Jeffrey Epstein
The retired Harvard law professor has gained prominence in recent years for his defenses of the Trump administration. But his ties to Mr. Epstein, the financier accused of abusing underage girls, has cast a harsh light on Mr. Dershowitz, Connie Bruck of the New Yorker writes.
• Mr. Dershowitz was introduced to Mr. Epstein in 1996 and began attending parties that the financier threw at his Manhattan mansion and elsewhere.
• When Mr. Epstein faced accusations of abusing underage girls in the 2000s, he asked Mr. Dershowitz to coordinate his defense. Mr. Dershowitz helped broker a plea agreement with prosecutors in 2008 that let the financier escape federal charges.
• One woman who accused Mr. Epstein of sexual assault while she was underage, Virginia Roberts Giuffre, also said Mr. Dershowitz had abused her. Mr. Dershowitz has denied the claim, and the two sides settled in 2016. (Ms. Giuffre sued Mr. Dershowitz for defamation in April.)
• Mr. Dershowitz told The New Yorker that he regretted taking up Mr. Epstein’s case, but insists on his own innocence. Ms. Bruck writes that there were discrepancies in Mr. Dershowitz’s defenses.
Citigroup reportedly plans to cut hundreds of jobs in its trading division.
Newell Brands has hired Ravi Saligram, the former chief of OfficeMax, as C.E.O.
The British upstart bank Revolut has hired David MacLean, a senior finance executive at Metro Bank, as its C.F.O.
The South African government named Jabu Mabuza, the chairman of the embattled state power utility Eskom, to also serve as the company’s acting C.E.O.
The speed read
• The Chinese parent company of Grindr said yesterday that it was reviving plans to hold an I.P.O. for the dating app. (Reuters)
• Takeaway.com, a Dutch restaurant delivery company, has offered 5 billion pounds, around $6 billion, to buy a British rival, Just Eat. (FT)
• The diagnostics company Exact Sciences agreed to buy a rival, Genomic Health, for $2.8 billion. (Reuters)
• BlackRock is reportedly in talks to buy the 47 percent stake in the cybersecurity company Cofense held by Pamplona Capital Management, after a U.S. national security panel ordered the sale. (Reuters)
• The parent company of Chuck E. Cheese called off plans for a merger that would have it returned to the public markets. (Reuters)
Politics and policy
• The federal government expects to borrow more than $1 trillion in 2019, the second year in a row. (WSJ)
• The financier Tom Barrack sought a job in the Trump administration as he pushed the White House to let American companies, including his own, build nuclear power plants in Saudi Arabia. (NYT)
• The Trump administration unveiled a proposed rule yesterday that would force hospitals to reveal the discounted prices that insurers pay for medical services. (NYT)
• Many Democratic presidential contenders favor a public option for Medicaid, but some experts say that such a proposal could threaten the survival of Obamacare. (NYT)
• The British pound is falling as Prime Minister Boris Johnson refuses to meet with European leaders face to face unless they agree to concessions on Brexit. (WSJ)
• Britain’s business community likes the appointment of Sajid Javid, a former Deutsche Bank executive, as chancellor of the Exchequer. But it’s wary of his embrace of a no-deal Brexit. (FT)
• Treasury Secretary Steven Mnuchin has reportedly told colleagues that Speaker Nancy Pelosi has committed to a vote on the new NAFTA trade deal by October, something she denies. (Axios)
• Senator Elizabeth Warren called for an overhaul of American trade negotiating rules, and would include consumer representatives in discussions. (CNBC)
• Lawmakers fear that the Trump administration has delayed the sale of F-16 fighter jets to Taiwan in hopes of securing a trade deal with China. (NYT)
• Google had been working on a smart speaker with Huawei weeks before the Trump administration cracked down on the Chinese tech giant. (Information)
• Tesla agreed to pay China $323 million a year in taxes for a new electric car plant outside Shanghai. (Bloomberg)
• The Chinese tech giant ByteDance said it was working on its own smartphone, which would be loaded with the social media app TikTok and other services. (Reuters)
• Over 2,000 Chinese-made surveillance cameras are still in U.S. government buildings, according to a new report. (FT)
Best of the rest
• How Saudi Arabian dissidents have “disappeared.” (Vanity Fair)
• “Developer” has become a bad word in housing. (Upshot)
• U.S. airline executives thought President Trump would back them in their fight against Middle Eastern airlines. But the president instead criticized them. (NBC News)
• The agricultural giant Cargill won praise for conservation efforts — then blowback for not meeting its goals fast enough. (NYT)
• “Old Town Road” has set a record for sitting atop the Billboard charts. (WSJ)
Thanks for reading! We’ll see you tomorrow.
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