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World

Pro-Western, retired general Pavel sweeps Czech presidential vote

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  • Pavel wins in runaway vote over ex-PM Babis
  • Pavel gives clear support backing Ukraine, West
  • Pledges to end divisions brought by Babis, incumbent Zeman
  • Voter turnout record high in presidential election

PRAGUE, Jan 28 (Reuters) – Former army chief and high NATO official Petr Pavel won the Czech Republic’s presidential election on Saturday with a pledge to keep the country firmly anchored in the West and bridge society’s political differences.

Pavel, a 61-year-old retired general running for office for the first time, won 58.3% of the vote with all voting districts reporting final results, defeating billionaire ex-premier Andrej Babis, a dominant but polarising force in Czech politics for a decade.

Pavel, a social liberal who had campaigned as an independent and gained the backing of the centre-right government, conveyed a message of unity when addressing his supporters and journalists at a Prague concert venue on Saturday as results showed he had won.

“Values such as truth, dignity, respect and humility won,” he said.

“I am convinced that these values are shared by the vast majority of us, it is worth us trying to make them part of our lives and also return them to the Prague Castle and our politics.”

Pavel has also fully backed continued support for Ukraine in its defence against Russia’s invasion.

Czech presidents do not have many day-to-day duties but they pick prime ministers and central bank heads, have a say in foreign policy, are powerful opinion makers, and can push the government on policies.

Pavel will take office in March, replacing outgoing Milos Zeman, a divisive figure himself during his two terms in office over the past decade who had backed Babis as his successor.

Zeman had pushed for closer ties with Beijing and also with Moscow until Russia invaded Ukraine, and Pavel’s election will mark a sharp shift.

Turnout in the runoff vote that ended on Saturday was a record high 70.2%.

The result of the election will only become official when published in a legal journal on Tuesday, but the outcome of the poll was already clear on Saturday.

Babis, 68, a combative business magnate who heads the biggest opposition party in parliament, had attacked Pavel as the government’s candidate. He sought to attract voters struggling with soaring prices by vowing to push the government do more to help them.

Babis and Prime Minister Petr Fiala congratulated Pavel on his victory. Slovakia’s liberal President Zuzana Caputova appeared at Pavel’s headquarters to congratulate him, a demonstration of their close political positions.

Ukrainian President Volodymyr Zelenskiy congratulated Pavel on his election on Twitter and said he looked forward to close cooperation.

Reuters Graphics

EU AND NATO TIES

Pavel has backed keeping the central European country of 10.5 million firmly in the European Union and NATO military alliance, and supports the government’s continued aid to Ukraine.

He supports adopting the euro, a topic that successive governments have kept on the back burner, and supports same-sex marriage and other progressive policies.

A career soldier, Pavel joined the army in Communist times, was decorated with a French military cross for valour during peacekeeping in former Yugoslavia in the 1990s, and later rose to lead the Czech general staff and become chairman of NATO’s military committee for three years before retiring in 2018.

“I voted for Mr. Pavel because he is a decent and reasonable man and I think that the young generation has a future with him,” said Abdulai Diop, 60, after voting in Prague on Saturday.

Babis had campaigned on fears of the war in Ukraine spreading, and sought to offer to broker peace talks while suggesting Pavel, as a former soldier, could drag the Czechs into a war, a claim Pavel rejected.

Reporting by Robert Muller, Jason Hovet and Jan Lopatka; Additional reporting by Jiri Skacel and Fedja Grulovic; Editing by Hugh Lawson, David Holmes and Helen Popper

Our Standards: The Thomson Reuters Trust Principles.

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US

Factbox: FACTBOX Georgia on his mind: Donald Trump troubled by more legal woes

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Jan 25 (Reuters) – Donald Trump could learn soon whether he or any associates will be charged or cleared of wrongdoing in a Georgia probe into his efforts to overturn his 2020 election defeat, one of a series of legal threats looming over the Republican former U.S. president:

GEORGIA ELECTION TAMPERING PROBE

On Tuesday, the prosecutor in the state of Georgia spoke to a judge on behalf of a special grand jury empanelled in May to investigate Trump’s alleged efforts to influence that state’s 2020 election results.

Fani Willis, the Fulton County district attorney and a Democrat who will ultimately decide whether to pursue charges against Trump or anyone else, said the grand jury had completed its task and decisions were “imminent.”

The investigation focuses in part on a phone call Trump made to Georgia Secretary of State Brad Raffensperger, a Republican, on Jan. 2, 2021. Trump asked Raffensperger to “find” enough votes needed to overturn Trump’s election loss in Georgia.

Legal experts said Trump may have violated at least three Georgia criminal election laws: conspiracy to commit election fraud, criminal solicitation to commit election fraud and intentional interference with performance of election duties.

Trump could argue that his discussions were constitutionally protected free speech.

U.S. CAPITOL ATTACK

The U.S. Justice Department has investigations under way into both Trump’s actions in the 2020 election and his retention of highly classified documents after departing the White House in 2021.

Both investigations involving Trump are being overseen by Jack Smith, a war crimes prosecutor and political independent. Trump has accused the FBI, without evidence, of launching the probes as political retribution.

A special House of Representatives committee investigating the deadly Jan. 6, 2021, assault by Trump supporters on the U.S. Capitol urged the Justice Department to charge Trump with corruption of an official proceeding, conspiracy to defraud the United States, conspiracy to make a false statement and inciting or aiding an insurrection.

The request is non-binding. Only the Justice Department can decide whether to charge Trump, who has called the Democratic-led panel’s investigation a politically motivated sham.

MISSING GOVERNMENT RECORDS

U.S. Attorney General Merrick Garland appointed Smith to investigate whether Trump improperly retained classified records at his Florida estate after he left office in 2021 and then tried to obstruct a federal investigation.

Garland also appointed former U.S. Attorney Robert Hur for Maryland to investigate the removal of classified records in President Joe Biden’s possession dating to his time as vice president.

It is unlawful to willfully remove or retain classified material.

In Trump’s case, the FBI seized 11,000 documents from the former president’s Mar-a-Lago Florida estate in a court-approved Aug. 8 search. About 100 documents were marked classified; some were designated top secret, the highest level of classification.

Trump has accused the Justice Department of engaging in a partisan witch hunt.

NEW YORK ATTORNEY GENERAL CIVIL LAWSUIT

New York Attorney General Letitia James said in a civil lawsuit filed in September that her office uncovered more than 200 examples of misleading asset valuations by Trump and the Trump Organization business between 2011 and 2021.

Former U.S. President Donald Trump speaks during a rally in Commerce, Georgia, U.S. March 26, 2022. REUTERS/Alyssa Pointer/File Photo

A Democrat, James accused Trump of inflating his net worth by billions of dollars to obtain lower interest rates on loans and get better insurance coverage.

A New York judge ordered that an independent monitor be appointed to oversee the Trump Organization before the case goes to trial in October 2023.

James seeks to permanently bar Trump and his children Donald Jr., Eric and Ivanka Trump from running companies in New York state, and to prevent them and his company from buying new properties and taking out new loans in the state for five years.

James also wants the defendants to hand over about $250 million that she says was obtained through fraud.

Trump has called the attorney general’s lawsuit a witch hunt. A lawyer for Trump has called James’ claims meritless.

James said her probe also uncovered evidence of criminal wrongdoing, which she referred to federal prosecutors and the Internal Revenue Service for investigation.

DEFAMATION CASE

E. Jean Carroll, a former Elle magazine writer, has filed two lawsuits accusing Trump of having defamed her when he denied her allegation that he raped her in New York’s Bergdorf Goodman department store dressing room in late 1995 or early 1996.

Trump accuses her of lying to drum up sales for a book.

Carroll first sued Trump after he denied the accusation in June 2019 and told a reporter at the White House that he did not know Carroll, that “she’s not my type,” and that she concocted the claim to sell her new memoir.

The second lawsuit arose from an October 2022 social media post where Trump called the rape claim a “hoax,” “lie,” “con job” and “complete scam,” and said “this can only happen to ‘Trump’!”

That lawsuit includes a battery claim under the Adult Survivors Act, which starting last Nov. 24 gave adults a one-year window to sue their alleged attackers even if statutes of limitations have expired.

A U.S. judge on Jan. 13 rejected as “absurd” Trump’s effort to dismiss the second lawsuit.

Trump and Carroll are awaiting a decision from a Washington, D.C., appeals court on whether, under local law, Trump should be immune from Carroll’s first lawsuit over his June 2019 comments.

That lawsuit would likely be dismissed if the court decided that Trump spoke within his role as president, and continue if Trump spoke in his personal capacity as Carroll argues.

Any decision would have no effect on Carroll’s second defamation and battery lawsuit. A trial in the first lawsuit is scheduled for April 10.

NEW YORK CRIMINAL PROBE

Although Trump was not charged with wrongdoing, his real estate company was found guilty on Dec. 6 of tax fraud in New York state. A judge this month sentenced Trump’s namesake real estate company to pay a $1.6 million criminal penalty, the maximum the judge could impose.

Jurors convicted the Trump Organization, which operates hotels, golf courses and other real estate around the world, of paying personal expenses for top executives including former chief financial officer Allen Weisselberg, and issuing bonus checks to them as if they were independent contractors.

Weisselberg, the company’s former chief financial officer, pleaded guilty and was required to testify against the Trump Organization as part of his plea agreement. He is also a defendant in James’ civil lawsuit.

Reporting by Joseph Ax, Luc Cohen, Karen Freifeld, Sarah N. Lynch, Jonathan Stempel and Jacqueline Thomsen; Editing by Howard Goller

Our Standards: The Thomson Reuters Trust Principles.

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Business

U.S. home sales slump to 12-year low; glimmers of hope emerging

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  • Existing home sales drop 1.5% in December
  • Sales fall 17.8% in 2022, sharpest annual decline since 2008
  • Median house price rises 2.3% from year ago

WASHINGTON, Jan 20 (Reuters) – U.S. existing home sales plunged to a 12-year low in December, but declining mortgage rates raised cautious optimism that the embattled housing market could be close to finding a floor.

The report from the National Association of Realtors on Friday also showed the median house price increasing at the slowest pace since early in the COVID-19 pandemic as sellers in some parts of the country resorted to offering discounts.

The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has pushed housing into recession.

“Existing home sales are somewhat lagging,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “The decline in mortgage rates could help undergird housing activity in the months ahead.”

Existing home sales, which are counted when a contract is closed, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th straight monthly decline in sales, the longest such stretch since 1999.

Reuters Graphics

Sales dropped in the Northeast, South and Midwest. They were unchanged in the West. Economists polled by Reuters had forecast home sales falling to a rate of 3.96 million units. December’s data likely reflected contracts signed some two months earlier.

Home resales, which account for a big chunk of U.S. housing sales, tumbled 34.0% on a year-on-year basis in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.

Reuters Graphics

The continued slump in sales, which meant less in broker commissions, was the latest indication that residential investment probably contracted in the fourth quarter, the seventh straight quarterly decline.

This would be the longest such streak since the collapse of the housing bubble triggered the Great Recession.

While a survey from the National Association of Home Builders this week showed confidence among single-family homebuilders improving in January, morale remained depressed.

Single-family homebuilding rebounded in December, but permits for future construction dropped to more than a 2-1/2- year low, and outside the pandemic plunge, they were the lowest since February 2016.

A “For Rent, For Sale” sign is seen outside of a home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger

Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

MORTGAGE RATES RETREATING

The worst of the housing market rout is, however, probably behind. The 30-year fixed mortgage rate retreated to an average 6.15% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.

The rate was down from 6.33% in the prior week and has declined from an average of 7.08% early in the fourth quarter, which was the highest since 2002. It, however, remains well above the 3.56% average during the same period last year.

The median existing house price increased 2.3% from a year earlier to $366,900 in December, with NAR Chief Economist Lawrence Yun noting that “markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”

The smallest price gain since May 2020, together with the pullback in mortgage rates, could help to improve affordability down the road, though much would depend on supply. Applications for loans to buy a home have increased so far this year, a sign that there are eager buyers waiting in the wings.

House prices increased 10.2% in 2022, boosted by an acute shortage of homes for sale. Housing inventory totaled 970,000 units last year. While that was an increase from the 880,000 units in 2021, supply was the second lowest on record.

“Home price growth is likely to continue to decelerate and we look for it to turn negative in 2023,” said Nancy Vanden Houten, a U.S. economist at Oxford Economics in New York. “The limited supply of homes for sale will prevent a steep decline.”

In December, there were 970,000 previously owned homes on the market, down 13.4% from November but up 10.2% from a year ago. At December’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. That is considerably lower than the 9.6 months of supply at the start of the 2007-2009 recession.

Though tight inventory remains an obstacle for buyers, the absence of excess supply means the housing market is unlikely to experience the dramatic collapse witnessed during the Great Recession.

A four-to-seven-month supply is viewed as a healthy balance between supply and demand. Properties typically remained on the market for 26 days last month, up from 24 days in November.

Fifty-seven percent of homes sold in December were on the market for less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. All-cash sales made up 28% of transactions compared to 23% a year ago. Distressed sales, foreclosures and short sales were only 1% of sales in December.

“While the stabilization of affordability will be good news for potential home buyers, a lack of available inventory could remain a constraint for home buying activity,” said Orphe Divounguy, a senior economist at Zillow.

Reporting by Lucia Mutikani;
Editing by Dan Burns and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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US

Donald Trump’s company to be sentenced for 15-year tax fraud

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NEW YORK, Jan 13 (Reuters) – Donald Trump on Friday will learn how the company that bears the former U.S. president’s name will be punished after being found guilty of scheming to defraud tax authorities for 15 years.

A New York state judge will impose the sentence after jurors in Manhattan found two Trump Organization affiliates guilty of 17 criminal charges last month.

The sentencing comes three days after Justice Juan Merchan of the Manhattan criminal court ordered Allen Weisselberg, who worked for Trump’s family for a half-century and was the company’s former chief financial officer, to jail for five months after he testified as the prosecution’s star witness.

Trump’s company faces only a maximum $1.6 million penalty, but has said it plans to appeal. No one else was charged or faces jail time in the case.

Manhattan District Attorney Alvin Bragg’s office, which brought the case, is still conducting a criminal probe into Trump’s business practices.

Bill Black, a professor at the University of Missouri-Kansas City School of Law specializing in white-collar crime, called the expected penalty a “rounding error” that offers “zero deterrence” to others, including Trump.

“This is a farce,” he said. “No one will stop committing these kinds of crimes because of this sentence.”

The case has long been a thorn in the side of the Republican former president, who calls it part of a witch hunt by Democrats who dislike him and his politics.

Trump also faces a $250 million civil lawsuit by state Attorney General Letitia James accusing him and his adult children Donald Trump Jr., Ivanka Trump and Eric Trump of inflating his net worth and the value of his company’s assets to save money on loans and insurance.

Bragg and James are Democrats, as is Bragg’s predecessor Cyrus Vance, who brought the criminal case. Trump is seeking the presidency in 2024, after losing his re-election bid in 2020.

At a four-week trial, prosecutors offered evidence that Trump’s company covered personal expenses such as rent and car leases for executives without reporting them as income, and pretended that Christmas bonuses were non-employee compensation.

Trump himself signed bonus checks, prosecutors said, as well as the lease on Weisselberg’s luxury Manhattan apartment and private school tuition for the CFO’s grandchildren.

“The whole narrative that Donald Trump was blissfully ignorant is just not real,” Assistant District Attorney Joshua Steinglass told jurors in his closing argument.

Weisselberg’s testimony helped convict the company, though he said Trump was not part of the fraud scheme. He also refused to help Bragg in his broader investigation into Trump.

The Trump Organization had put Weisselberg on paid leave until they severed ties this week. His lawyer said the split, announced on Tuesday, was amicable.

Weisselberg, 75, is serving his sentence in New York City’s notorious Rikers Island jail.

State law limits the penalties that Justice Merchan can impose on Trump’s company. A corporation can be fined up to $250,000 for each tax-related count and $10,000 for each non-tax count.

Trump faces several other legal woes, including probes related to the Jan. 6, 2021, attack on the U.S. Capitol, his retention of classified documents after leaving the White House, and efforts to overturn his 2020 election loss in Georgia.

Reporting by Karen Freifeld and Jonathan Stempel; editing by Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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US

Trump executive Weisselberg prepares for jail on Rikers Island

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NEW YORK, Jan 10 (Reuters) – A longtime executive for Donald Trump is expected to be sent to New York’s notorious Rikers Island jail after being sentenced on Tuesday for helping engineer a 15-year tax fraud scheme at the former president’s real estate company.

Allen Weisselberg, the Trump Organization’s former chief financial officer, pleaded guilty in August, admitting that from 2005 to 2017 he and other executives received bonuses and perks that saved the company and themselves money.

Weisselberg is expected to be sentenced to five months behind bars, after paying nearly $2 million in taxes, penalties and interest and testifying at the criminal trial of the Trump Organization, which was convicted on all counts it faced.

The sentence will be imposed by Justice Juan Merchan, who oversaw the trial in a New York state court in Manhattan. Weisselberg would likely serve 100 days with time off for good behavior.

Those days will probably not be easy for Weisselberg, 75, at a jail known for violence, drugs and corruption. Nineteen inmates there died last year.

“You’re going into a byzantine black hole,” said Craig Rothfeld, a prison consultant helping Weisselberg prepare for lockup.

50-YEAR RELATIONSHIP

Many convicts in New York City facing one year or less behind bars head to Rikers Island, which lies between the New York City boroughs of Queens and the Bronx and houses more than 5,900 inmates.

Rothfeld spent more than five weeks at Rikers in 2015 and 2016 as part of an 18-month sentence for defrauding investors and tax authorities when he was chief executive of the now-defunct WJB Capital Group Inc.

He now runs Inside Outside Ltd, which advises people facing incarceration. Another client is Harvey Weinstein, the former Hollywood movie producer convicted twice of rape.

After being sentenced, Weisselberg will likely be driven to Rikers and trade his street clothes for a uniform and sneakers with velcro straps.

Rothfeld said he hopes Weisselberg will be segregated from the general population, and not placed in a dorm with inmates who may not know him but will know his boss, who is seeking the presidency in 2024.

“Certainly Mr. Weisselberg’s 50-year relationship with the former president is on all our minds,” Rothfeld said.

A spokesman for the city’s Department of Correction said the agency’s mission is “to create a safe and supportive environment for everyone who enters our custody.”

Rikers is scheduled to close in 2027.

STAR WITNESS

Weisselberg was the star government witness against his employer.

He told jurors that Trump signed bonus and tuition checks, and other documents at the heart of prosecutors’ case, but was not in on the tax fraud scheme.

Though no longer CFO, Weisselberg remains on paid leave from the Trump Organization. He testified in November that he hoped to get a $500,000 bonus this month.

Weisselberg testified that the company is paying his lawyers. It is paying Rothfeld as well, a person familiar with the matter said. Rothfeld declined to comment.

Trump was not charged and has denied wrongdoing. The Manhattan District Attorney’s office is still investigating his business practices.

Merchan will also sentence the Trump Organization on Friday. Penalties are limited to $1.6 million.

Weisselberg remains a defendant in New York Attorney General Letitia James’ $250 million civil lawsuit alleging that Trump and his company inflated asset values and Trump’s net worth.

Rothfeld said he advised Weisselberg not to go outside at Rikers because of the risk of violence in courtyards, and not to interject himself into conversations between other inmates.

“The goal is to keep to yourself,” Rothfeld said.

Reporting by Karen Freifeld; Editing by Richard Chang

Our Standards: The Thomson Reuters Trust Principles.

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US

Trump Organization found guilty of tax fraud scheme

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NEW YORK, Dec 6 (Reuters) – Donald Trump’s real estate company was convicted on Tuesday of carrying out a 15-year-long criminal scheme to defraud tax authorities, adding to the legal woes facing the former U.S. president as he campaigns for the office again in 2024.

The Trump Organization – which operates hotels, golf courses, and other real estate around the world – was found guilty of paying personal expenses for top executives including former chief financial officer Allen Weisselberg, and issuing bonus checks to them as if they were independent contractors.

The company faces up to $1.6 million in fines after being convicted on all charges, including scheming to defraud tax authorities, conspiracy and falsifying business records. Trump was not charged in the case.

Justice Juan Merchan, who presided over the trial in state court in New York, set a sentencing date for Jan. 13.

While the fine is not expected to be material for a company of the Trump Organization’s size, the conviction could complicate its ability to do business.

Weisselberg, 75, testified as the government’s star witness as part of a plea deal that calls for a sentence of five months in jail.

Manhattan District Attorney Alvin Bragg, whose office prosecuted the case, called the verdict “very just.”

“The former president’s companies now stand convicted of crimes,” Bragg said in the New York courthouse after the verdict, speaking of the Trump Corporation and Trump Payroll Corporation, the two units of the Trump Organization which were convicted.

Asked if he regretted not charging Trump in the case, Bragg did not respond.

He has said that the office’s investigation into Trump is continuing.

APPEAL

Alan Futerfas, a lawyer for the Trump Organization, said the company would appeal and that the criminal law governing corporate liability was vague.

“It was central to the case,” he told reporters after the verdict.

The jury deliberated for about 12 hours over two days.

[1/6] Former U.S. President Donald Trump attends a rally to support Republican candidates ahead of midterm elections, in Dayton, Ohio, U.S. November 7, 2022. REUTERS/Gaelen Morse/File Photo

The case centered on charges that the company paid personal expenses like free rent and car leases for executives including Weisselberg without reporting the income, and gave them bonuses as non-employee compensation from other Trump entities like the Mar-a-lago Club, without deducting taxes.

According to testimony during the four-week trial, Trump himself signed the bonus checks annually, paid private school tuition for Weisselberg’s grandchildren, authorized the lease for his luxury Manhattan apartment and approved a salary deduction for another executive.

“The whole narrative that Donald Trump was blissfully ignorant is just not real, prosecutor Joshua Steinglass told jurors during his closing argument on Friday.

He said the “smorgasbord of benefits” was designed to keep top executives “happy and loyal.”

Republican Trump, who on Nov. 15 announced his third campaign for the presidency, said in a statement he was “disappointed” by the verdict but called the case a “Manhattan witch hunt.” Both Bragg and his predecessor who brought the charges, Cyrus Vance, are Democrats.

SEPARATE LAWSUIT

The Trump Organization separately faces a fraud lawsuit brought by New York state Attorney General Letitia James.

Trump himself is being investigated by the U.S. Department of Justice over his handling of sensitive government documents after he left office in January 2021 and attempts to overturn the November 2020 election, which he lost to Democrat Joe Biden.

Lawyers for the Trump Organization argued that Weisselberg carried out the scheme to benefit himself, not the company. They tried to paint him as a rogue employee. Weisselberg is currently on paid leave and testified that he hopes to get another $500,000 bonus in January

Trump wrote on his Truth Social platform on Nov. 19. that his family got “no economic gain from the acts done by the executive.”

Weisselberg, who pleaded guilty in August to concealing $1.76 million in income from tax authorities, testified that although Trump signed checks involved, he did not conspire with him.

He said that the company saved money by paying for his rent, utilities, Mercedes-Benz car leases for him and his wife and other personal expenses rather than raising his salary, because a wage hike would have had to account for taxes.

He said Trump’s two sons – who took over the company’s operations in 2017 – gave him a raise after they knew about his tax dodge scheme.

By then, Trump was president, and the company was preparing for greater scrutiny.

“We were going through an entire cleanup process of the company to make sure that since Mr. Trump is now president everything was being done properly,” Weisselberg testified.

Reporting by Luc Cohen and Karen Freifeld in New York; additional reporting by Andrew Hofstetter in New York; Editing by Noeleen Walder and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

Luc Cohen

Thomson Reuters

Reports on the New York federal courts. Previously worked as a correspondent in Venezuela and Argentina.

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Business

Blackstone’s $69 bln REIT curbs redemptions in blow to property empire

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NEW YORK, Dec 1 (Reuters) – Blackstone Inc (BX.N) limited withdrawals from its $69 billion unlisted real estate income trust (REIT) on Thursday after a surge in redemption requests, an unprecedented blow to a franchise that helped it turn into an asset management behemoth.

The curbs came because redemptions hit pre-set limits, rather than Blackstone setting the limits on the day. Nonetheless, they fueled investor concerns about the future of the REIT, which makes up about 17% of Blackstone’s earnings. Blackstone shares ended trading down 7.1% on the news.

Many investors in the REIT are concerned that Blackstone has been slow to adjust the vehicle’s valuation to that of publicly traded REITs that have taken a hit amid rising interest rates, a source close to the fund said. Rising interest rates weigh on real estate values because they make financing properties more expensive.

Blackstone has reported a 9.3% year-to-date return for its REIT, net of fees, a contrast to the publicly traded Dow Jones U.S. Select REIT Total Return Index (.DWRTFT) 22.19% decline over the same period.

That outperformance has some investors questioning how Blackstone comes up with the valuation of its REIT, said Alex Snyder, a portfolio manager at CenterSquare Investment Management LLC in Philadelphia.

“People are taking profits at the value Blackstone says their REIT shares are at,” said Snyder.

A Blackstone spokesperson declined to comment on how the New York-based firm calculates the valuation of its REIT, but said its portfolio was concentrated in rental housing and logistics in the southern and western United States that have short duration leases and rents outpacing inflation.

The spokesperson added that the REIT relied on a long-term fixed rate debt structure, making it resilient.

“Our business is built on performance, not fund flows, and performance is rock solid,” the spokesperson said.

The REIT is marketed to wealthy individual investors. Two sources familiar with the matter said turmoil in Asian markets, fueled by concerns about China’s economic prospects and political stability, contributed to the redemptions. The majority of investors redeeming were from Asia and needed the liquidity, they said.

Blackstone told investors in a letter it would curb withdrawals from its REIT after it received redemption requests in November greater than 2% of its monthly net asset value and 5% of its quarterly net asset value. As a result, the REIT allowed investors in November to redeem $1.3 billion, equivalent to approximately 43% of investors’ repurchase requests.

Some analysts said Blackstone’s REIT runs the risk of getting caught in a spiral of selling assets to meet redemptions if it cannot regain the trust of its investors. On Thursday, the firm said the REIT had agreed to sell its 49.9% interest in two Las Vegas casinos for $1.27 billion.

“The impact on Blackstone depends on whether the REIT is able to stabilize its net asset value over time, or is forced to enter an extended run-off scenario, with significant asset sales and ongoing redemption backlog — too early to tell, in our view,” BMO Capital Markets analysts wrote in a note.

BLOW TO BLACKSTONE’S PLANS

The REIT turmoil is a setback for two of Blackstone’s strategies that helped it become the world’s biggest alternative asset manager with $951 billion in assets: real estate investing and attracting high net-worth individuals.

Blackstone launched the REIT in 2017, piggybacking off the success of its real estate empire, which had by then outgrown its private equity business. Its president Jonathan Gray was elevated and made successor to Chief Executive Stephen Schwarzman as a result of his success in property investing.

The REIT also represented a bid to win over high net-worth investors clamoring for private market products, which they believe perform better than those that are publicly traded.

Blackstone has been seeking to diversify its investor base after tapping institutional investors, such as public pension funds, insurance firms and sovereign wealth funds, for its products for decades.

Blackstone managed a total of $236 billion of wealth held by individuals as of the end of September, up 43% year-on-year.

Credit Suisse analysts wrote in a note that they expected the REIT’s woes to weigh on Blackstone’s fee-related earnings and assets under management. “These all will continue put pressure on Blackstone’s premium valuation,” they wrote.

On Blackstone’s third-quarter earnings call in October, Gray blamed REIT redemptions on market volatility, which he said had driven away individual investors from active equity and fixed income funds.

He added that the REIT had ample cash reserves to “weather pretty much any storm.” These cash reserves totaled $2.7 billion as of the end of October, according to its prospectus.

“It’s not a surprise that you would see a deceleration in flows from individual investors when you’ve had this kind of market decline,” Gray said.

Reporting by Chibuike Oguh and Herb Lash in New York; Editing by Rosalba O’Brien and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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Business

Sam Bankman-Fried says he ‘didn’t ever try to commit fraud’

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NEW YORK, Nov 30 (Reuters) – Sam Bankman-Fried, the founder and former CEO of now-bankrupt crypto exchange FTX, attempted to distance himself from suggestions of fraud in his first public appearance since his company’s collapse stunned investors and left creditors facing losses totaling billions of dollars.

Speaking via video link at the New York Times’ Dealbook Summit with Andrew Ross Sorkin on Wednesday, Bankman-Fried said he did not knowingly commingle customer funds on FTX with funds at his proprietary trading firm, Alameda Research.

“I didn’t ever try to commit fraud,” Bankman-Fried said in the hour-long interview, adding that he doesn’t personally think he has any criminal liability.

He also denied knowing the full scale of Alameda’s position on FTX, claiming that it caught him by surprise.

The liquidity crunch at FTX came after Bankman-Fried secretly moved $10 billion of FTX customer funds to Alameda Research, Reuters reported, citing two people familiar with the matter. At least $1 billion in customer funds had vanished, the people said.

Bankman-Fried told Reuters in November the company did not “secretly transfer” but rather misread its “confusing internal labeling.”

FTX filed for bankruptcy and Bankman-Fried stepped down as chief executive on Nov. 11, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

“That week, so much happened,” he said.

Bankman-Fried said he was speaking from the Bahamas and that the interview was against the advice of his lawyers. He was seen in the video link talking from a room, dressed in a black T-shirt and occasionally drinking from a mug.

FTX faces a flurry of investigations. The U.S. Attorney’s Office in Manhattan in mid-November began investigating how FTX handled customer funds, a source with knowledge of the probe told Reuters. The Securities and Exchange Commission and Commodity Futures Trading Commission have also opened probes.

When asked if he could come to the United States, Bankman-Fried replied that to his knowledge he could, and that he wouldn’t be surprised if he traveled to Washington for upcoming congressional hearings on the company’s collapse.

The implosion of FTX marked a stunning fall from grace for the 30-year-old entrepreneur who rode a cryptocurrency boom to a net worth that Forbes pegged a year ago at $26.5 billion. After launching FTX in 2019, he became an influential political donor and pledged to donate most of his earnings to charities.

He said Wednesday that he now has “close to nothing” left and is down to one working credit card with “maybe $100,000 in that bank account.”

Since FTX filed for bankruptcy, Bankman-Fried has distanced himself from the image he projected in media interviews and on Capitol Hill, telling a Vox reporter his advocacy for a crypto regulatory framework was “just PR” and his discussions on ethics within the industry were at least partly a front.

Bankman-Fried said he was “confused” as to why FTX’s U.S. entity, which was included in the bankruptcy filing, is not processing customer withdrawals. Redemptions are currently paused for both U.S. and international customers.

“To my knowledge all American customers and all American regulated businesses here are, I think at least in terms of client assets, are okay,” he said, adding that derivatives contracts at one of its U.S. subsidiaries were “fully collateralized.”

WHAT HAPPENED

Bankman-Fried said that Alameda had built up a substantial position on FTX and that as digital asset prices plummeted this year, Alameda became increasingly more levered to the point of no return earlier this month.

“Realistically speaking, (there was) no ability for FTX to be able to liquidate that position and generate everything that was owed,” he said.

He added that he “wasn’t trying to commingle funds,” but said that when FTX didn’t have a bank account, some customers wired money to Alameda and were credited on FTX, which likely led to discrepancies.

Bankman-Fried stepped down as CEO of Alameda in October 2021, four years after founding the company, and ceded the role to Caroline Ellison and Sam Trabucco, who acted as co-CEOs until Trabucco departed the firm in August.

For his part, Bankman-Fried said he regretted focusing on the bigger picture at FTX at the expense of risk management, which he said he paid less attention to over “the last year or two.”

His companies “completely failed” on risk management, he said.

“There was no person who was chiefly in charge of positional risk of customers on FTX, and that feels pretty embarrassing in retrospect.”

Reporting by Carolina Mandl and Lananh Nguyen in New York and Manya Saini in Bengaluru; writing by Hannah Lang in Washington; editing by Megan Davies, Deepa Babington and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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US

Trump rebuffed by judge in New York fraud lawsuit, trial date set

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NEW YORK, Nov 22 (Reuters) – A New York judge has scheduled an October 2023 trial for former U.S. President Donald Trump, three of his adult children and the Trump Organization in a lawsuit brought by New York Attorney General Letitia James accusing them of fraudulently overvaluing the real estate company’s assets and Trump’s net worth.

Justice Arthur Engoron of the state Supreme Court in Manhattan set the trial date during a contentious hearing on Tuesday following motions by the Trumps the night before to have the civil lawsuit dismissed.

“I ruled on all these issues. It seems to me the facts are the same. The law is the same. Parties are the same,” Engoron told Alina Habba, Trump’s lawyer. “You can’t keep making the same argument after you’ve already lost.”

Habba had accused the judge of bias. Trump, a Republican, has accused James, a Democrat, of suing him because she dislikes him and his politics.

In her lawsuit filed on Sept. 21, James accused Trump, his company, his children Donald Jr, Eric and Ivanka and others of inflating Trump’s assets by billions of dollars in a decade of lies to banks and insurers. James called the fraud “staggering.”

The complaint seeks $250 million in damages. It also seeks to stop the Trumps from running businesses in the state and ban Trump and his company from acquiring New York real estate for five years.

Engoron is expected to rule on the motions to dismiss by early January. Trump is already appealing Engoron’s order requiring an independent watchdog to monitor his company.

The trial, scheduled for Oct. 2, 2023, and other legal issues could complicate Trump’s campaign, announced last week, for the presidency in 2024.

The Trump Organization is now on trial in another Manhattan courtroom on criminal tax fraud charges.

In addition, U.S. Attorney General Merrick Garland last week named a special counsel to oversee two criminal investigations, one related to the FBI’s seizure of government documents from Trump’s Florida home and the other examining Trump’s role in efforts to overturn the 2020 presidential election.

Trump also faces a criminal investigation in Georgia into whether he interfered with the 2020 election results in that state.

He has called these cases and investigations politically motivated, and has labeled Engoron a “puppet judge” for James.

In seeking to dismiss the case filed by James, Trump maintained that the attorney general lacked authority to pursue a lawsuit designed to “get” him when neither the public nor the marketplace was harmed.

“Who stands to gain from this highly-politicized farse [sic], aside from the politically-compromised Attorney General of the State of New York?” Trump’s filing said.

Other defendants also urged dismissals.

Lawyers for Trump’s sons called the lawsuit a “textbook example of throwing everything at the wall to see what sticks.” Ivanka Trump’s lawyers said there were no allegations that she lied to or defrauded anyone.

The Trump Organization’s former longtime Chief Financial Officer Allen Weisselberg and its Controller Jeffrey McConney also sought dismissals of claims against them. Both testified as prosecution witnesses in the Manhattan criminal trial in which prosecutors accused the company of engaging in tax fraud spanning 15 years.

Reporting by Karen Freifeld and Jonathan Stempel in New York; Editing by Will Dunham

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Business

Exclusive: Bankman-Fried’s FTX, parents bought Bahamas property worth $121 million

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  • FTX unit bought 7 condos in high-end resort for “key personnel”
  • Bankman-Fried’s parents named owners of $16.4 mln vacation home
  • Bankman and Fried tell Reuters: Seeking to return deed to FTX

NEW PROVIDENCE, Bahamas, Nov 22 (Reuters) – Sam Bankman-Fried’s FTX, his parents and senior executives of the failed cryptocurrency exchange bought at least 19 properties worth nearly $121 million in the Bahamas over the past two years, official property records show.

Most of FTX’s purchases were luxury beachfront homes, including seven condominiums in an expensive resort community called Albany, costing almost $72 million. The deeds show these properties, bought by a unit of FTX, were to be used as “residence for key personnel” of the company. Reuters could not determine who lived in the apartments.

The documents for another home with beach access in Old Fort Bay — a gated community that was once home to a British colonial fort built in the 1700s to protect against pirates — show Bankman-Fried’s parents, Stanford University law professors Joseph Bankman and Barbara Fried, as signatories. The property, one of the documents dated June 15 said, is for use as a “vacation home.”

When asked by Reuters why the couple decided to buy a vacation home in the Bahamas and how it was paid for — whether in cash, with a mortgage or by a third party such as FTX — a spokesman for the professors said only that Bankman and Fried had been trying to return the property to FTX.

“Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions,” the spokesperson said, declining to elaborate.

While it is known that FTX and its employees bought real estate in the Bahamas, where it established its headquarters in September last year, the property records seen by Reuters show for the first time the scale of their buying spree and the intended use of some of the real estate.

FTX, which filed for bankruptcy earlier this month after a rush of customer withdrawals, did not respond to a request for comment. Bankman-Fried did not respond to requests for comment.

Bankman-Fried has told Reuters he lived in a house with nine other colleagues. For his employees, he said FTX provided free meals and an “in-house Uber-like” service around the island.

The collapse of FTX, one of the world’s largest crypto currency exchanges, has left an estimated 1 million creditors facing losses totalling billions of dollars. Reuters has reported Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business, and that at least $1 billion of those deposits had vanished.

In a U.S. court filing with the District of Delaware bankruptcy court earlier this month, John Ray, FTX’s new chief executive, said he understood that corporate funds of the FTX Group were used to “purchase homes and other personal items for employees and advisors.”

Reuters could not determine the source of funds that FTX and its executives used to buy these properties.

PROPERTY PURCHASES

Reuters searched property records at the Bahamas Registrar General’s Department for FTX, Bankman-Fried, his parents and some of the company’s key executives.

FTX Property Holdings Ltd, an FTX unit, bought 15 properties worth nearly $100 million in 2021 and 2022.

Its most expensive purchase was a $30 million penthouse at the Albany, a resort where Tiger Woods hosts a golf tournament every year. The property records for the penthouse, dated March 17, were signed by Ryan Salame, the president of FTX Property, and showed it was intended as “residence for key personnel.”

Salame did not respond to a request for comment.

Other high-end real estate purchases include three condominiums at One Cable Beach, a beachfront residence in New Providence. Records showed the condominiums cost between $950,000 and $2 million and were bought by Nishad Singh, the former head of engineering at FTX, Gary Wang, an FTX co-founder, and Bankman-Fried for residential use.

Singh and Wang did not respond to requests for comment.

Two of FTX Property’s real estate holdings were marked for commercial use – an $8.55 million cluster of houses that served as FTX’s headquarters, and a 4.95-acre plot of land on the coastline overlooking cyan waters that was also meant to be developed into office space for the crypto exchange.

The FTX headquarters is now unoccupied, with furniture pushed against some windows. Its signage has been removed. The plot of land, which cost $4.5 million, also lies empty.

A security guard said employees did not return to the headquarters after leaving earlier this month.

Reporting by Koh Gui Qing; editing by Paritosh Bansal and Claudia Parsons

Our Standards: The Thomson Reuters Trust Principles.

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