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UBS to appeal after fined 4.5 billion euros in French tax fraud case

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PARIS (Reuters) – A French court found Swiss bank UBS AG guilty of illegally soliciting clients and laundering the proceeds of tax evasion, ordering it to pay 4.5 billion euros ($5.1 billion) in penalties.

Shares in the Swiss bank fell as much as 3.2 percent after the ruling on Wednesday. UBS, which has denied any wrongdoing, said it would launch an appeal.

“The court can only conclude that (UBS) consistently put its own financial interests over the sovereign rights of the French state,” the court’s president Christine Mee said in her ruling.

“Hence, the crimes are exceptionally serious,” she added.

The case shows how French courts are taking a hard line on financial misconduct in general, and tax fraud in particular.

The trial will be scrutinized by European bankers who have come under pressure from regulators to tighten compliance with money laundering rules since the financial crisis.

“This is a clear signal to all financial intermediaries: you will be punished severely if you don’t behave,” said banking law professor Thierry Bonneau from Paris Pantheon Assas University.

“They will have to be excessively prudent on all these questions of tax fraud.”

The penalties, which exceed the bank’s net profit last year, included a 3.7 billion euro fine and additional damages of 800 million euros to the French state. UBS last month reported a 2018 net profit of $4.9 billion.

“This decision is incomprehensible, we will appeal,” UBS general counsel Markus Diethelm told reporters outside the courtroom. “We have seen no facts and no evidence.”

An appeal could see the case drag on for years and the bank will not have to pay anything until all appeals are heard.

The combined penalties are a record for France and more than double the $2.46 billion the bank has set aside to cover potential losses from litigation and regulatory requirements.

The bank may have to increase its provisions in the coming weeks, Citi said in a note to investors and its plan to buy back as much as $1 billion worth of shares this year is at risk, it added.

“INDUSTRIAL” SCALE LAUNDERING

The French trial follows a similar case in the United States, where UBS accepted a $780 million settlement in 2009, and in Germany, where it agreed to a 300 million euro fine in 2014.

The penalty is high by European standards, although in the United States judges have levied higher fines including the $8.9 billion a U.S. court in 2015 ordered BNP Paribas to pay for violating U.S. economic sanctions against Sudan, Cuba and Iran.

The size of the penalty in the UBS case will push banks to accept settlements in future cases, a standard practice in the United States that is rare in France, Bonneau said.

The ruling marks the culmination of a seven-year investigation and aborted settlement negotiations.

French prosecutors said UBS sent Swiss bankers to golf tournaments, classical music concerts and hunting parties to solicit new clients illegally and advised them to park their money in Switzerland and offered them methods to shield activities from the French taxman.

UBS was “systematic” in its support to tax-evading customers and that the laundering of proceeds from the tax fraud was done on an “industrial” scale, the prosecutors had told the court.

UBS’s lawyers have said the prosecution failed to show material evidence of specific cases of clients advised to evade tax payments.

Under French law, those convicted of money laundering can be ordered to pay a fine totaling half the amount laundered. The prosecution estimates UBS’s customers hid billions of euros from the French tax authorities.

FILE PHOTO: The logo of Swiss bank UBS is seen in Zurich, Switzerland October 25, 2018. REUTERS/Arnd Wiegmann/File Photo

Prosecutors told the court that UBS’s bankers would hand over business cards without any logo and used computers which carried software allowing data to be quickly erased.

Lawyers for UBS have previously said the case had become politicized. The bank turned down a settlement offer of 1.1 billion euros.

UBS’s French unit was also convicted to pay 15 million euros, while five of the six former UBS executives charged were given suspended prison terms and fines ranging from 50,000 euros to 300,000 euros.

Reporting by Inti Landauro, Emmanuel Jarry and Angelika Gruber; Editing by Richard Lough, Leigh Thomas, Keith Weir

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S&P 500 posts highest close since November 8 on trade optimism

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NEW YORK (Reuters) – The S&P 500 posted its highest closing level since Nov. 8 on Friday as investors clung to signs of progress in the ongoing trade talks between the United States and China.

Investors assessed a slew of headlines on the talks, with top trade negotiators from the two countries meeting to wrap up a week of discussions on some of the thorniest issues in their trade war.

If the two sides fail to reach a deal by midnight on March 1, then their seven-month trade war could escalate.

“People are expecting some sort of positive news on trade and tariffs with China fairly soon,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“But we won’t know until the end of next week,” he said, and, “there has been a lack of specifics.”

Optimism on the trade front and dovish signals from the U.S. Federal Reserve have driven the recent gains and left indexes well above their lows of December, when the market swooned on fears of an economic slowdown. The S&P 500 is now up about 19 percent since its late-December low.

The S&P 500 technology index was up 1.3 percent, leading gains among the 11 major S&P sectors, while the trade-exposed industrials index climbed 0.6 percent.

The Dow Jones Industrial Average rose 181.18 points, or 0.7 percent, to 26,031.81, the S&P 500 gained 17.79 points, or 0.64 percent, to 2,792.67 and the Nasdaq Composite added 67.84 points, or 0.91 percent, to 7,527.55.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 22, 2019. REUTERS/Brendan McDermid

All three indexes registered gains for the week, with both the Dow and Nasdaq posting a ninth week of increases.

The number of New York Stock Exchange and Nasdaq stocks hitting 52-week highs hit 367, the most since mid-September and outnumbered those hitting year lows by the widest margin in six months.

Stocks briefly pared gains after U.S. officials briefed on the negotiations said more time is likely needed in the talks given China’s resistance this week to American demands for specific steps by Beijing to end forced transfers of U.S. technology and certain other policies.

Afterward, President Donald Trump said there was a very good chance the United States would strike a deal with China to end the trade war, and that he was inclined to extend his March 1 deadline to reach an agreement.

“Right now the downside risk has been not as steep, but there’s always a concern that something happens last-minute,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“Having a Chinese economy that stabilizes is constructive for global markets,” she said. “That’s what is key in terms of the market looking at the results.”

Kraft Heinz Co tumbled 27.5 percent, and was the biggest drag on the S&P along with a 1.7 percent fall in Class B shares of the company’s controlling stakeholder, Berkshire Hathaway Inc.

The packaged food company posted a quarterly loss, disclosed a Securities and Exchange Commission probe and wrote down the value of its iconic Kraft and Oscar Mayer brands.

Slideshow (2 Images)

Advancing issues outnumbered declining ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.

The S&P 500 posted 64 new 52-week highs and three new lows; the Nasdaq Composite recorded 112 new highs and 21 new lows.

About 6.9 billion shares changed hands on U.S. exchanges. That compares with the 7.3 billion-share daily average for the past 20 trading days.

Additional reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Jonathan Oatis

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FCA sets $14 million annual target compensation for CEO Manley: filing

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FILE PHOTO: Fiat Chrysler Automobiles (FCA) CEO Mike Manley arrives at the memorial service held in honor of former CEO Sergio Marchionne in Turin, Italy, September 14, 2018. REUTERS/Massimo Pinca/File Photo

DETROIT (Reuters) – Fiat Chrysler Automobiles NV (FCA) has set an annual compensation target for Chief Executive Officer Mike Manley consisting of pay, cash and equity bonuses of $14 million, the automaker said in a regulatory filing on Friday.

Manley took over as the head of FCA last July after the abrupt departure of his predecessor Sergio Marchionne. The company paid its new CEO 600,442 euros ($680,240) for 2018 and he will receive a bonus for 2018 of $367,000 to be paid this year.

Manley also was granted FCA 180,364 shares for his work in 2018, which will vest in 2019 if the company meets certain targets. The fair value per share on the date those were granted was $16.61, FCA said.

His target annual compensation consists of a base salary of $1.6 million, and a bonus of $2.4 million and an equity award valued at $10 million, both linked to the company hitting certain performance targets.

Former CEO Marchionne received 6.6 million euros in compensation for 2018, which consisted of nearly 2 million euros in base pay and an annual bonus for 2017 of just over 4.6 million euros.

For the 2014 to 2017 time period, Marchionne also received 2.8 million FCA shares. The fair value per share was $14.84, FCA said.

FCA chairman John Elkann received a base salary of 1.7 million euros and no annual bonus.

Reporting by Nick Carey; Editing by Sonya Hepinstall

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Flattening U.S. yield curve in late 2018 ‘flashing red’ on economy: Fed’s Williams

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President and Chief Executive Officer of the U.S. Federal Reserve Bank of San Francisco, John Williams, addresses a news conference in Zurich, Switzerland September 22, 2017. REUTERS/Arnd Wiegmann/File Photo

NEW YORK (Reuters) – A flattening U.S. yield curve in December, which was close to being inverted, was “flashing red” about a deceleration in U.S. economic growth heading into 2019, despite some solid data at the time, New York Federal Reserve President John Williams said on Friday.

The yield curve flattens as the gap between short and long-dated yields narrow, suggesting investors’ worries about a slowing economy.

The yield curve inverts when shorter-dated yields rise above longer-dated ones. An inverted yield curve has preceded all U.S. recessions in the past 50 years.

Williams was giving closing remarks at a conference about quantitative tools, jointly sponsored by the New York Fed and the Atlanta Federal Reserve.

Reporting by Richard Leong; editing by Diane Craft

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