Transcripts For KQEH Nightly Business Report 20160409

We take you one of one of the biggestever global money scandals began, panama, and the law firm that helped the rich and powerful conceal their wealth or avoid taxes. The socalled Panama Papers has prompted the Prime Minister of iceland to resign and has others in its crosshairs. Today eamon javers talking about to the money who cofounded it all, jergen mosac. Welcome to panama city, a neighborhood with a lot of law fishes, Small Businesses and bakes. Behind me are the offices of mosav fonseca, the law firm at the epicenter of the socalled Panama Papers scandal. Earlier i had an opportunity to sit down with jergen mosac, one of the founders of the firm, and i asked about the scandal, the impact on business, and whether or not he knew open important political figures had business dealings here. Did you know Vladimir Putins aides and associates were using the services of fonseca . No. When we find out names like putin or like other heads of state, it is always through the media. It means that did you know that eight members of the chinese politburo were using your services . No of course not. Did you know David Camerons family had used your services . No. Why not . Your name is on the front door, isnt that something you would want to know when youre a Business Owner . Whenever we find out that there is somebody behind or that through the media, thats how it normally happens, that could be somebody, a person, supposed person, behind a company that was formed by us for a professional intermediary, then we start investigating. Reporter one of the issues that comes up in the Panama Papers scandal is just how secret should private business dealingsing and who should have access to that business secrecy. Are you proud of business you run here . Im very proud of it. Why . Because its a business that contributes to the International Financial community in matters where people want privacy. And i think one needs to confirm one needs to know that privacy is a human right. Even for dictators . It is a human right for every person. No matter what they do. Even gangsters . Gangsters should not should be dealt with by the authorities and are being dealt with by authorities. We do not deal with gangsters, never have dealt with any, never have dealt with any as i said. We have always dealt with professional clients all over the world only. Reporter he says his firm only found out about a month ago that it had been hacked and badly penetrated all their secrets out for the entire world to see. He said they think it was cyber attack and they say they have no idea who did it. For nightly Business Report im eamon javers in panama city. British Prime Minister David Cameron late yesterday admitted he had profited from shares in a panamani panama trust set up by his late father. Camerons father was named as a client of the firm. Days after being on the defensive, when asked about his finances, cameron said the shares were sold the year he became Prime Minister and that the dividends were taxed. You may think the tax havens only exist outside the u. S. But thats not the case at all. Reporter countries like panama, luxembourg, and bermuda are known by the worlds power players as tax havens. Some states here are known for the same thing. Two of the biggest, nevada and wyoming. These two states are directly linked to the Panamanian Law Firm at the heat of the latest financial scandal. Heather lowe, Legal Counsel whose firm advises governments and tracks illicit activities around the world, explained. In the Panama Papers we see that Mosac Fonseca had offices in both nevada and wyoming and those were oneperson operations. Where they did actually register thousands of companies. Im actually a little surprised that its not more. Reporter so what makes these states so attractive for setting up businesses and storing funds . You can create Anonymous Companies pretty much anywhere in the united states. Its extremely easy to do but nevada and wyoming stand out because they dont have state Corporate Income taxes. If income can be moved to nevada or wyoming it will not face state taxation, thereby reducing the tax bill. Theres also delaware. A majority of fortune 500 companies are incorporated there. Delaware does have a state tax but that tax does not apply to income earned from intangible assets such as patents and trademarks. Delaware also has a legal system that is friendly towards businesses. Thats why Duke University accounting associate professor and coauthor of this report exploring the role delaware plays as a domestic tax haven, scott diring, said much of the appeal the states have rely on legal precedent. Nevada, delaware, wyoming have gone to greater lengths to make the business formation process convenient and quick. And companies are also comfortable going there because theyre familiar with the processes there. And the case law is strong and the courts are business friendly. The idea of having an Anonymous Company is not nefarious per se. But of course if someone can be anonymous, they might be able to use that secrecy to move income around the world and possibly to hide it in Bank Accounts so that it escapes taxation from the government authorities. A 2012 cnbc documentary showcased how some individuals use shell Companies Incorporated in nevada to hide their identities and potentially dodge taxes. Former nevada secretary of state ross miller weighed in. Any time you have a volume of filings that we see in this state, second per capita behind only delaware, youre going to have bad actors and people who are going to try to market your business statutes in a way thats inaccurate and promotes illegal activities. The trick is going after those individuals and holding them accountable. Reporter the Justice Department said it would be reviewing reports linked to the Panama Papers. But whether or not certain individuals will be punished remains unclear. I think the Justice Departments han hands are goin be somewhat tied because a lot of this is perfectly illegal. I think the Justice Department will tend to be creative in ways to charge crimes but in the end i think one of the biggest lessons we find with the Panama Papers leaks is that there is a lot out there that is happening that should be illegal but isnt illegal. According to the tax foundation, in states that do have a Corporate Tax rate, they run the range from about 4. 5 in north dakota to a high of 12 in iowa. On wall street today, a rocky end to a rocky week. A rise in oil prices along with comments from the head of the new york fed that a gradual approach to rate hikes was appropriate helped lift stocks but gains pared on concerns regarding global growth. The Dow Jones Industrial average rose 35 to 17,536. The nasdaq added 2. The s p 500 gained 5. For the week, all of the major averages lost more than 1 . It was the worst week for stocks since february. There was a gettogether late yesterday of some of the mostpowerful people in economics. Together they soothed any fears of potential recession hitting the u. S. Steve leishman has the story. Reporter it was the first time that the three former and current fed chairs appeared at the same event. Call it fed allstar night as current chair yellen was joined by ben bernanke and paul volcker on stage and Alan Greenspan via satellite from washington. They gave a qualified but generally healthy outlook to the u. S. Economy, yellen rejecting the charge the u. S. Is in a bubble. We think its partly transitory influences, namely declining oil prices and the strong dollar, that are responsible for pulling inflation am below the 2 level we think is most desirable. Were making progress there as we. And this is an economy on a solid course, not a bubble economy. Reporter you can only hope this doesnt end up in a jeopardy question, famous last word busy a fed chair for 100. Alan greenspan spoke about how difficult it is to forecast. Monetary policy is very largely economic forecasting. And our ability to forecast is significantly limited. And we have to keep the context of what we say in the context of what we know. Reporter greenspan famously warned about the dangers of irrational exuberance in stock prices in december 1996, only to see prices soar 75 over the next three years. Bernanke suggested at the beginning of 07 subprime problems wouldnt hurt the broader economy or financial markets. We all know how that ended up. Still, heres what bernanke said about the u. S. Economy right now. Domestic u. S. Economy is moving forward. Households are pretty strong, financially speaking. Housing sector is continuing to expand, so on. I dont see any particular reason to think that a recession is any more likely in 2016 than it was in 2015 or 2014. Reporter all the fed chairs agree with the recent emphasis of fed policy on global risks. While yellen said rates would be rising she was clear the fed would be gradual and cautious in hiking those rates. For nightly Business Report, im steve liesman. Still ahead, texas, north dakota. Two states feeling the pressure of Falling Crude prices. Theres another one you may not be aware of. Oil prices rose sharply helped by expectations. Production will continue to decline and renewed optimism about the u. S. Economy. Prices today gained more than 6 and maintained those gains after Oil Fields Services Firm Baker Hughes said the number of oil rigs fell for a Third Straight week. To put it into perspective, over the past two years the price of domestic crude has fallen more than 60 . When you think of big oilproducing states, probably texas, alaska, north dakota come to mind. But one of the nations Top Oil Producers is also new mexico which has relied on oil and natural gas for as much as onethird of the states renews. Not so easy when the price of oil has fallen so sharply. Scott cullen reports on new mexicos state of pain and what it is trying to do to transform itself. Reporter its a weekday in hobbs, new mexico. And it is painfully quiet. At the Martin Boot Company store on broadway theres a trickle of customers but not like a couple of years ago when oil workers and their families were flush with cash. The worst thing during the peak of the economy is that they didnt have the time to spend it. And now . Now theyve got the time, they may not necessarily have the money. Reporter locationed just over the texas border in southeast new mexico, hobbs, population a little over 45,000, is a classic oil town. Mayor sam cobb says the boom was something to behold. You couldnt get a hotel room. If you could get one, theyd be 250 a night. People were much like youve heard in north dakota area, people were living in their cars. Reporter now these hotels, newly built, are discounting rooms. Not far away, a fleet of oil trucks and equipment that would have been hard at work a couple of years ago sits idle. Its easy to see why. At this oil field just outside of town, manager mike hanigan says theyve quit drilling new wells because the prices are so low. You dont want to give your oil away at this rate. So we laid our rig down about a month ago. Reporter unemployment in the county as low as 3. 5 in 2014 has more than doubled. And the jobs that remain are not what the oil workers were used to. Normally a Truck Drivers making 100,000, now making 40,000. Reporter taking a huge bite out of tax revenues here in hobbs. God bless new mexico. Reporter and in santa fe where the governor and legislators had to cut spending and dip into reserves to balance the state budget. New mexico has seen oil busts before. After all, theyve been producing oil here since the 1920s. So officials like to think they were ready for this one. In hobbs, they say they socked money away during the boom. So now with construction more affordable, theyre spending millions on projects like a new wellness center. The state is using the downturn as a push to diversify an economy thats historically relied on oil and the federal government. Any state, any political jurisdiction, cant put all of its eggs in one or two baskets. Like new mexico has done for the last several decades. Reporter but out in the oil fields they say, dont count them out. I think were going to see 60 this year. I wouldnt be at all surprised to see 70 next year. Reporter thats double the price now. Here in new mexico, they know booms can go bust. But they also know they can boom again. Scott cohn, nightly Business Report, hobbs, new mexico. To learn more about hobbs, new mexico, and how its dealing with the decline in crude prices, head to our website, nbr. Com. A fire erupts at liondale basil refinery in houston, texas. Market focus. The fire began at the plants coker unit but has been extinguished, no injuries reported as a result of that fire. The company had to cut its production rate by 25 and it expects it will take up to a month to repair the damage. That refinery produces more than 260,000 barrels per day. Shares of liondale basil were off a fraction to 83. 87. Starboard value plans on nominating new directors to depo meds board. The activist investor says the drugmaker isnt doing enough to improve shareholder value. Starboard recently revealed it has a nearly 10 stake in depo med. Shares rose 13 to 16. 95. Chipmaker qualcomm increased its Quarterly Dividend by 10 to 53 cents per share, up from 48 cents. The yield on the stock is now 4. 24 . Shares of qualcomm up 1 to 50. 56. Shares of the gap took a big hit today after the clothing retailer posted march Sales Results that came in below estimates. Gap attributed those results to slow traffic and easters earlier arrival. Shares of the gap down nearly 14 to 23. 85. Now to our market monitor who is finding opportunity in some large cap stocks he says are the best of the breed and should be in your portfolio longterm. This is his first time joining us on the program. He is kevin norris, president of univest wealth management, nice to have you here. Thanks for having me, appreciate it. Lets start overall with what youre watching in this market. A lot of people have very low earnings expectations. I think youre running a little counter to that . Yeah, well, if you take a look at the last 11 quarters, i think the expectations entering the season, the earnings season, earnings have actually outpaced them all. So i think sometimes we shoot for the downside too far. And the results ar little bit better than expectations. But we could get that too this time around with Oil Prices Stabilizing and the dollar stabilizing. All right. You picked out some companies that you think are the best of breed. If investors want to put their money, theres places to do that. Visa is the first stock. Why do you like it . So probably the average investor would think of this as a credit play but its really not a credit play. Its a transaction play. I think the second they have 50 of the credit card marketplace in transaction in three quarters in the debit card marketplace. They make their revenue and earnings through the revenue from the transactions. So its not a traditional credit play. The other thing is thematic, in that the consumer feels better about the economy, wages start rising. Theoretically were going to see more transactions on credit cards as the consumer starts spending. Price line is your next pick. You partially like it because of the big network they have . Big network, love the big network, theyre in reservations for hotels, cruise lines, cars, automobiles. Love that. Another theme, though, the consumers not necessarily spend as weve talked about in the past on couches and tvs and things like that. But they do seem to be spending on experiences. Now price lines been knocked down by the brussels terrorist attack of late. But we think as a longterm play this is a good place to be for a growth company. Doesnt pay any dividend but its an attractive holding right now. And finally, mckesson, why do you like that stock in particular . Yeah, largest distributor of pharmaceuticals by revenue. They compete against Amerisource Bergen and Cardinal Health so the best of breed theme were following. Mckesson pays a small dividend, not too much, i think the forward p e is a little under 11 so its attractive from a valuation perspective, even though its more of a growth company. Theyre expanding overseas where theyve acquired the largest distributors which will give them more scale to put some pressure on the Drug Companies for better prices because this is an industry which is very razorthin when it comes to margins. Exactly. Kevin, well leave it there, thank you so much. We look forward to talking to you again very soon, kevin norris, univest wealth management. Why location, location, location is so important for a fastgrowing part of the Fitness Industry heres a look at what to watch for next week. On wednesday, jpmorgan reports earnings kicking off a big week of results by some of the naons biggest banks. Thursday the cpi of closely watched gauge of consumer inflation is due out. And also thursday, china publishes firstquarter Economic Growth figures amid concerns about the pace of its growth. And thats what to watch for next week. The battle between apple and the fbi shifts to new york and to boston. Late today a boston judge ordered apple to help Law Enforcement examine an iphone of an alleged gang member. In a separate case in new york the Justice Department says it will appeal a court ruling that blocked the government from enforcing apple to unlock an iphone as part of a drug case. Yesterday fbi director james comey said the method used to open the iphone used by one of the San Bernardino shooters will not work on other models. Uber will pay at least 10 million to settle allegations by california prosecutors that it misled passengers about the quality of its drivers background checks. In 2014 prosecutors sued uber saying that the companys screening process was inferior to what taxi drivers had to undergo. Earlier this year we reported on concerns surrounding those checks. Two cofounders of soul cycle have resigned from the boutique cycling chain. Elizabeth cutler and julie rice will continue to serve on the board of directors. Soul cycle filed for ipo last year and has been expanding nationally. Equinox now owns 90 of that firm. Active millennials as well as active baby boomers are pumping more iron more often and pumping more dollars into the Fitness Industry. Fitness revenue, in fact, is rising fast and so are the numbers of socalled boutique fitness studios. Higher priced and cropping up in some of the nations hottest neighborhoods. Diana olick has our first sweat equity story. Reporter its hard to tell which is more powerful. The beat from the 8 00 a. M. Highintensity circuit class at the fitting room on manhattans west 19th street, or the pounding of jackhammers just six blocks north in what will be the new pent house Corporate Headquarters of peloton, a Live Streaming Indoor Cycling startup. Whichever the winner, boutique fitness is winning the workout wars in manhattan and across the anything. Business companies are one of the two or three biggest tenants in new york city in this area. Theres tons of boutique fitness all up and down not just downtown but all of manhattan. Reporter not just fitness. As he said, boutique fitness. What exactly makes something boutiq boutique . Interesting question. For us specifically, boutique, we really take the best aspects of a personal Training Session and we combine that with the best aspects of a Group Exercise class. Reporter boutique is code for personal attention. Classes often catering to the schedules of a working clientele, with all the added amenities, even private shower rooms. Because we are boutique and we focus only on highintensity training and our specific types of exercises, we can build a studio to support what were doing. So youll notice that and charging more. Right. Reporter a single class at the fitting room is 38. Compare that to around 20 a month at a big chain gym. In manhattan alone, studios are multiplying monthly. Nationally, of the 54 million americans who claim to have fitness memberships last year, 42 said they go boutique. Thats up from 22 barely three years ago. And location is key. We wanted to be here. Theres a complementary studio offering. Theres a lot of Athletic Apparel shops, letter wear brands, healthy eateries. Youre essentially feeding off each other . Absolutely. Reporter you can see that in the menu offerings. Classes before and after work. And at lunchtime. So the three martini lunch is now a workout and a juice . Absolutely. I work in media, i bring clients here, come from work with friends, we make it a weekly thing. Reporter not only are boutique studios eating up new york real estate, soar the companies behind them. Peloton spending 7 million to trick out its new Corporate Headquarters right in the heart of the fitness district. This floor rear on right now is going to be allemployee common area. Standup shuffle board, pingpong, foos. Ball, beer kegs, whiskey kegs, coffee kegs kind of like google . But better, because were a fitness company. Reporter at least half a dozen Fitness Companies looked into space in this building alone which peloton will anchor. Were seeing fillness as a theme for almost every user. Whether its a boutique fitness story like barrys boot camps of the world or peloton, it literally is coming to your living room. Its part what was these users want to talk about. Were two blocks away from our tetion streaming studio where we stream 12 hours of Live Television content around the world every day. This headquarters is part of our story of being one of the special Technology Companies that is going to be defining the future of our category. Reporter a category that takes fitness to new levels and new heights. For nightnightly breport im Diana Oel Nick new york. To read more about the big business of boutique fitness, head to nbr. Com. Heres another look at the day and the week also on wall street. The dow is up 35 points to 17,576. The nasdaq added 2. The s p 500 gained 5. But for the week, all the major averages lost more than 1 . And that does it for nightly Business Report for tonight. Im sue herera. Thanks for joining us. Have a grade weekend, well see you here monday. Its all right its ok doesnt really matter if youre old and grey its all right i say its ok listen to what i say its all right doing fine doesnt really matter if the sun dont shine its all right i say its ok were getting to the end of the day whoa stay back