Evelyn Reynolds

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    Start-Up Founder Sentenced to 18 Months in Prison for Fraud

    Manish Lachwani, who founded the software start-up HeadSpin, is the latest tech entrepreneur to face time in prison in recent years.Another start-up founder is going to prison for overstating his company’s performance to investors.Manish Lachwani, who last year pleaded guilty to three counts of defrauding investors at his software start-up, HeadSpin, was sentenced to one and a half years in prison on Friday. He will also pay a fine of $1 million.Government prosecutors said Mr. Lachwani, 48, deceived investors by inflating HeadSpin’s revenue nearly fourfold, making false claims about its customers and creating fake invoices to cover it up. His misrepresentations allowed him to raise $117 million in funding from top investment firms, valuing his start-up at $1.1 billion.When HeadSpin’s board members found out about the behavior in 2020, they pushed Mr. Lachwani to resign and slashed the company’s valuation by two-thirds.Mr. Lachwani is at least the fourth start-up founder in recent years to face serious consequences after taking Silicon Valley’s culture of hype too far. Other founders currently in prison for fraud include Sam Bankman-Fried of the cryptocurrency exchange FTX and Elizabeth Holmes and Ramesh Balwani of the blood testing start-up Theranos.Trevor Milton, a founder of the electric vehicle company Nikola, was sentenced to prison in December for fraud. Michael Rothenberg, a venture capital investor who was recently convicted of 12 counts of fraud and money laundering, is set to be sentenced in June. And Changpeng Zhao, who founded the cryptocurrency exchange Binance and pleaded guilty to money laundering last year, is scheduled to be sentenced later this month.Carlos Watson, the founder of the digital media outlet Ozy Media, and Charlie Javice, founder of the financial aid start-up Frank, have pleaded not guilty to fraud charges and face trials later this year.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    in Economy

    Something strange has been happening with jobless claims numbers lately

    Most of the past several weeks have shown that first-time claims for unemployment benefits haven’t fluctuated at all — as in zero.
    A string of weekly reports showing exactly 212,000 initial claims has raised a few eyebrows on Wall Street.
    A Labor Department spokesperson noted that while the string of 212,000 prints on the jobless claims data is “uncommon,” it can be attributed to a consistent jobs picture reflected in seasonal adjustments to the data.

    A “Now Hiring” sign is displayed on a shopfront on October 21, 2022 in New York City.
    Leonardo Munoz | View Press | Corbis News | Getty Images

    Calling the state of the U.S. jobs market these days stable seems like an understatement considering the latest data coming out of the Labor Department.
    That’s because most of the past several weeks have shown that first-time claims for unemployment benefits haven’t fluctuated at all — as in zero.

    For five of the past six weeks, the level of initial jobless filings totaled exactly 212,000. Given a labor force that is 168 million strong, achieving such stasis seems at least unusual if not uncanny, yet that is what the figures released each Thursday morning since mid-March have shown.
    The consistency has raised a few eyebrows on Wall Street. The only week that varied was March 30, with 222,000.
    “How is this statistically possible? Five of the last six weeks, the exact same number,” market veteran Jim Bianco, head of Bianco Research, posted Thursday on X.
    “Initial claims for unemployment insurance are state programs, with 50 state rules, hundreds of offices, and 50 websites to file. Weather, seasonality, holidays, and economic vibrations drive the number of people filing claims from week to week,” he added. “Yet this measure is so stable that it does not vary by even 1,000 applications a week.”
    Others chimed in as well.

    “Numbers made up,” one participant on the thread opined, while another said, “Someone’s cooking the books.”
    However, others offered more analytical thoughts, attributing the uniformity in data to seasonal adjustments. Tracey Ryniec, a strategist at Zacks Investment Research, suggested: “You can go look at each state Jim. Those vary greatly.”
    Indeed, a Labor Department spokesperson noted that while the string of 212,000 prints on the jobless claims data is “uncommon,” it would not be considered anomalous.
    The streak “can be reasonably interpreted as an indication that there has been very little volatility in initial claims over this period relative to historical patterns, and that the seasonal adjustment factors are effectively removing seasonality from the aggregate figures reported by states,” the official said.
    Moreover, claims not adjusted seasonally have shown substantial fluctuation during the five-week period, registering readings of 202,722; 191,772; 193,921; 197,349; 215,265 and 208,509.

    Federal Reserve officials watch the weekly claims numbers as part of their broader assessment of the labor market, which has shown surprising resilience as the central bank has tightened monetary policy.
    The Labor Department official also pointed out that new seasonal factors to the claims data were announced a month ago.
    “Using the new seasonal adjustment factors, initial claims have been at a fairly consistent level since around mid-September 2023 and even more so since the start of February 2024,” the spokesperson said.

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    Chinese Exports Are Threatening Biden’s Industrial Agenda

    The president is increasingly hitting back with tariffs and other measures meant to restrict imports, raising tensions with Beijing.President Biden’s trillion-dollar effort to invigorate American manufacturing and speed a transition to cleaner energy sources is colliding with a surge of cheap exports from China, threatening to wipe out the investment and jobs that are central to Mr. Biden’s economic agenda.Mr. Biden is weighing new measures to protect nascent industries like electric-vehicle production and solar-panel manufacturing from Chinese competition. On Wednesday in Pittsburgh, the president called for higher tariffs on Chinese steel and aluminum products and announced a new trade investigation into China’s heavily subsidized shipbuilding industry.“I’m not looking for a fight with China,” Mr. Biden said. “I’m looking for competition — and fair competition.”Unions, manufacturing groups and some economists say the administration may need to do much more to restrict Chinese imports if it hopes to ensure that Mr. Biden’s vast industrial initiatives are not swamped by lower-cost Chinese versions of the same emerging technologies.“It is a very clear and present danger, because the industrial policy of the Biden administration is largely focused on not the traditional low-skill, low-wage manufacturing, but new, high-tech manufacturing,” said Eswar Prasad, a Cornell University economist who specializes in trade policies.“Those are precisely the areas where China has upped its own investments,” he said.Both America and China are using large government subsidies to stoke economic growth and try to dominate what they believe will be the most important global markets of this century: the technologies meant to speed a global transition away from fossil fuels in order to avert catastrophic climate change.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    A Japanese Village Wants Tourists to Come for Heat, Soot and Steel

    This past October, I found myself in Yoshida Village standing before a tatara, a giant open-top furnace that was filled with charcoal and raging with such controlled ferocity that it could have been a set piece in Lucifer’s bedroom.Deep within the belly of those orange flames sat a growing and mangled ingot that contained some exceptionally high-quality steel called tamahagane, or jewel steel, from which Japanese swords have been made for much of the country’s history. The presence of a usable ingot seemed unlikely, and if true, downright alchemic. All we had been doing for the last 20 hours was gently shaking iron sand and fresh charcoal onto the flames at timed intervals.Yoshida is nestled back in the mountains of Shimane Prefecture in central Japan, abutting the ever-turbulent Sea of Japan. For nearly 700 years, workers around Yoshida made jewel steel in places called tatara-ba (literally “furnace spots”) on a grueling schedule — one that reshaped mountains and rivers, that seared the brows of generations of sooty men shoveling charcoal in loincloths. Then, at the start of the 20th century, production all but ceased. Other methods were cheaper and more efficient.Shimane Prefecture is perhaps best known for its Izumo Shrine, about an hour’s drive from Yoshida.At the height of its steel prowess, Yoshida swelled to nearly 15,000 people. Today, the population hovers around 1,500. As with many towns in the Japanese countryside, a mix of aging population, low birthrates and loss of industry has emptied its streets.Recently, though, in a Colonial Williamsburg sort of way, 24-hour re-enactments of the old iron-smelting traditions began to be performed in Yoshida. The firings are managed by a man named Yuji Inoue, who works for Tanabe Corp., which owns the furnace. “We consider the tatara a symbol and a pillar of town development,” he told me, standing next to the flickering furnace. Mr. Inoue and Tanabe Corp. were trying to remake Yoshida into a kind of tatara village, which he hoped would create self-sufficiency, expand the population and revitalize the town.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Biden Calls for Tariffs on Chinese Steel in Pittsburgh Pitch, Vying With Trump for Votes

    President Biden on Wednesday called for major increases to some tariffs on steel and aluminum products from China, speaking to members of a national steelworkers union in Pittsburgh as he vies with former President Donald J. Trump for votes in Northern industrial states.“These are strategic and targeted actions that are going to protect American workers and ensure fair competition,” Mr. Biden told a crowd of about 100 union members at the United Steelworkers, which endorsed him last month. “Meanwhile, my predecessor and the MAGA Republicans want across-the-board tariffs on all imports, from all countries, that could badly hurt American consumers.”The Biden administration has argued that a flood of low-cost exports from China is undermining American-made products — jeopardizing Mr. Biden’s push to expand U.S. manufacturing, a central focus of his economic agenda.In his speech, Mr. Biden said he would ask the U.S. trade representative, Katherine Tai, to increase tariffs to what White House officials said would be 25 percent on certain Chinese products that now face tariffs of 7.5 percent, or none at all, pending the outcome of an administration review of the China tariffs initially imposed under Mr. Trump.“I want fair competition with China, not conflict,” Mr. Biden said, flanked by supporters and signs that read, “President Joe Biden: Standing With Workers.” “And we’re in a stronger competition to win the economic competition of the 21st century with China or anyone else because we’re investing in America, and American workers, again.”The move is another effort by Mr. Biden to put up new barriers to trade with China in some industries. It could help him compete with Mr. Trump in a “tough on China” context with swing voters, though administration officials said elections did not motivate the move. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Risk of a global recession is minimal, IMF economist says — would take ‘a lot to derail’

    The risk of a global recession is “fairly minimal,” Pierre-Olivier Gourinchas, the International Monetary Fund’s economic counsellor, told CNBC.
    Good news include strong economic performance by the U.S. and several emerging market economies, along with inflation falling faster than expected until recently, despite weaker growth in Europe.
    However, threats to economic growth remain from escalating tensions in the Middle East.

    One of the International Monetary Fund’s top economists signals little risk of a global recession, despite the ongoing rumblings of geopolitical uncertainty.
    The Washington DC-based institute this week nudged its global growth outlook slightly higher to 3.2% in 2024 and projects the same rate in 2025.

    “When we do the risk assessment around that baseline, the chances that we would have something like a global recession is fairly minimal. At this point, it will take a lot to derail this economy. So there has been tremendous resilience in terms of growth prospects,” Pierre-Olivier Gourinchas, economic counsellor and director of the research department at the IMF, told CNBC’s Karen Tso on Tuesday at the group’s meeting in New York.
    The “set of good news” includes strong economic performance by the U.S. and several emerging market economies, along with inflation falling faster than expected until recently despite weaker growth in Europe, Gourinchas said.

    There is divergence within Europe, he added, with the IMF downgrading its growth forecasts for Germany, France and Italy, but taking them higher for Spain, Portugal, Belgium and the U.K.
    Growth forecasts since fall last year have had to factor in increased geopolitical instability, with tensions in the Middle East looming over the oil market, while Israel’s war with Palestinian militant group Hamas in the Gaza Strip led to disruptions in shipping routes in the Red Sea, by way of maritime attacks from Yemeni Houthis. That has all combined with the ongoing Russia-Ukraine war, which had its biggest wider impact on energy prices in Europe in 2022.
    Oil prices increasing significantly and persistently throughout 2024 and further disruption to shipments between Asia and Europe would fuel inflation in 2024, Gourinchas noted, which would then cause central banks to hold rates higher for longer and weigh on global growth.

    By the IMF’s estimate, a consistent rise in oil prices of around 15% in 2024 would push up global inflation by around 0.7%, though the value of the commodity has so far proved relatively stable even through the recent spike in Israel-Iran tensions.
    Despite the positivity of the latest forecast, Gita Gopinath, the IMF’s deputy managing director, told CNBC on Tuesday she assessed geopolitical risks as a “big concern.”
    “We have somehow managed the situation so far, and we’re not seeing big spillovers from the Middle East. But that is not a given. And that’s one of the big risks that we do see, the implications that could have for oil prices could be substantial. If the conflict were to escalate, become much bigger conflict,” she said. More

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    High company valuations a ‘worry,’ IMF’s capital markets chief says

    High corporate valuations could pose a significant risk to financial stability, the IMF’s director of monetary and capital markets said Tuesday.
    Market “optimism” has stretched company valuations to a point where that could become vulnerable to an economic shock, Tobias Adrian told CNBC.
    “There’s always this question, if a negative shock were to hit to what extent do we see a readjustment of pricing,” he said.

    Financial Counsellor and Director of the Monetary and Capital Markets Department Tobias Adrian hold the press briefing of the Global Financial Stability Report at the International Monetary Fund during the 2024 Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group in Washington DC, United States on April 16, 2024.
    Anadolu | Anadolu | Getty Images

    High corporate valuations could pose a significant risk to financial stability as market optimism becomes untethered from fundamentals, the IMF’s director of the Monetary and Capital Markets Department said Tuesday.
    Financial markets have been on a tear for much of this year, buoyed by falling inflation and hopes of forthcoming interest rate cuts. But that “optimism” has stretched company valuations to a point where that could become vulnerable to an economic shock, Tobias Adrian said.

    “We do worry in some segments where valuations have become quite stretched,” Adrian told CNBC’s Karen Tso Tuesday.
    “It was led by tech last year, but at this point, it’s really across the board that we have seen a run up in valuations. There’s always this question, if a negative shock were to hit to what extent do we see a readjustment of pricing,” he said.
    Adrian, who was speaking on the side lines of the IMF’s Spring Meeting in Washington, said that credit markets were a particular area of concern.

    “I would point to credit markets, where spreads are very tight even though borrower fundamentals are deteriorating, at least in some segments,” he said.
    “Even riskier borrowers are able to issue new debt, and that’s at very favourable prices,” he added.

    Real estate risks

    The IMF’s financing concerns also extend to the property market, and chiefly commercial real estate, which Adrian said had grown “somewhat worrisome.”
    Medium and small-sized lenders in particular could be vulnerable to commercial real estate shocks as the sector has come under pressure from a shift to remote work and online shopping, he said.
    “There’s really a nexus between exposure of some banks, particularly middle sized and smaller banks, to commercial real estate that also tend to have [a] fragile funding base. Sort of the combination of having a risk exposure to commercial real estate, and this fragile funding that could in some scenarios, reignite some instability,” Adrian said.

    The IMF on Tuesday released its World Economic Outlook, in which it upgraded its global growth forecast slightly, saying the economy had proven “surprisingly resilient.”
    It now sees global growth at 3.2% in 2024, however it noted that downside risks remain, including regarding inflation and the increasingly uncertain path forward for interest rates.
    Federal Reserve Chair Jerome Powell said Tuesday that the U.S. economy has not seen inflation come back to target, adding to the unlikelihood that it will cut rates in the near-term.
    “We do see risks in terms of inflation persistence. Some of that has realized already, but of course we could see further surprises,” Adrian said.
    “We’ve [cited] risks as broadly balanced around the globe. But in some countries, there’s a little bit more upside and others a little bit more downside. So certainly, interest rate risk is a key factor we’re looking at,” he added. More

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    VW Workers in Tennessee Start Vote on U.A.W., Testing Union Ambitions

    The United Automobile Workers hopes contract gains at the Big Three carmakers will provide momentum in a broad effort to organize nonunion plants.Last fall the United Automobile Workers union won big pay increases from the Detroit automakers, and the impact rippled quickly through the nonunion auto plants scattered across the South.Afterward, Toyota, Honda, Volkswagen, Nissan, Hyundai and Tesla raised wages for their own hourly workers in the United States, none of whom are unionized. On production lines in Alabama, Tennessee, Kentucky and elsewhere, those pay increases have been referred to as the “U.A.W. bump.”Now 4,300 workers at Volkswagen’s plant in Chattanooga, Tenn., will test whether the union can achieve an even greater bump. On Wednesday, they begin voting on whether to join the U.A.W., and the prospects of a union victory appear high. About 70 percent of the workers pledged to vote yes before the union asked for a vote, according to the U.A.W.“I think our chances are excellent,” said Kelcey Smith, 48, who has worked in the VW plant’s paint department for a year and is a member of a committee working to build support for the U.A.W. “The energy is high. I think we are going to nail it.”Volkswagen has presented reasons it believes a union is not needed at the plant, including pay that is above average for the Chattanooga region. But it has also said it encourages all workers to vote in the election, which is to conclude on Friday, and decide for themselves. “No one will lose their job for voting for or against the union,” a company spokesman said.The stakes go beyond the Tennessee plant, Volkswagen’s only U.S. factory. A victory there would add fuel to the U.A.W.’s push to extend its presence to the more than two dozen nonunion auto plants in the United States, mostly clustered in Southern states where union resistance has been strong historically, and where right-to-work laws make it hard for unions to organize workers.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More