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MARKETS

• Brexit: Is it just us, or does something seem a bit wonky with British politics? U.K. Prime Minister Theresa May said she will resign should her Brexit deal actually happen. And in a sign of the times, eight (8) potential Brexit options failed to win a majority in Parliament.
• Corporate profits: U.S. companies brought home $665 billion in offshore profits last year. The more than 3x increase over 2017’s figure is mostly due to the tax code revamp, though it’s short of President Trump’s pledge of $4 trillion returned to the U.S.

AVIATION

For Boeing and the FAA...How Cozy Is too Cozy?

If warm apple cider by the fire is peak hygge, Boeing’s (+1.03%) relationship with federal regulators would be like adding fuzzy socks to the equation.

That’s why lawmakers spent yesterday questioning U.S. aviation officials over their approval process for the Boeing 737 Max aircraft—the model involved in two crashes that killed 346 people in five months.

The backstory

About seven years ago, a government watchdog came to some “alarming conclusions” about how the FAA certified new Boeing planes, per the NYT.

• It found FAA employees thought their management had “too close a relationship with Boeing officials” and had not always supported efforts “to hold Boeing accountable.”
• At that time, the FAA’s Transport Airplane Directorate was led by Ali Bahrami, who soon after took a job pushing the FAA to allow manufacturers like Boeing to do more certification legwork on their own.

That's reflected the general vibe in D.C. Lawmakers had been okay with the close relationship between regulator and regulatee, since it allowed the FAA to focus its limited resources on what it considered the most critical safety projects.

But following the twin crashes that appear to be linked, the question is...did the FAA give Boeing too much leeway in regulating itself?

What we learned yesterday

While transportation officials faced questions on Capitol Hill, Boeing previewed anti-stall software fixes, cockpit alerts, and additional pilot training for 737 Max planes. It said the models will be safer and it’s working to “restore faith” in its industry.

The FAA maintained Boeing is not permitted to self-certify and that the “FAA retains strict oversight authority.” It said the certification process for the now-grounded 737 Max (Boeing’s best-selling plane) was “detailed and thorough.”

Looking ahead...the FAA is revamping its oversight approach by July with new criteria for training and self-audits. But there’s no timetable for the 737 Max’s return to the skies.

HEALTH CARE

A Big Play in Government-Backed Health Care

Health insurer Centene (-4.98%) has agreed to pay about $15.3 billion to buy its smaller competitor, WellCare Health Plans (+12.34%), and create a goliath in the world of government health setups.

• Centene is already the largest provider of plans through the Affordable Care Act’s marketplaces, and it’s also the biggest player in Medicaid managed care.

It’s already been a big week for government health plans. Monday night, the Justice Department for the first time said the entire ACA should be overturned.

Since both Centene and WellCare are focused on government business, they’ll be following the ACA debate closely. After all, Trump’s camp just moved to invalidate legislation that comprises ~40% of Centene’s earnings.

But there’s strength in numbers. Buying WellCare will give Centene an even bigger lead over the competition while fueling its expansion in the Medicare Advantage arena. Together, a newly united firm could have about 22 million members nationwide—and $97 billion in 2019 revenue.

INTERNATIONAL

Neither a Borrower Nord a Lender Be

Swedish authorities raided the headquarters of Swedbank yesterday in a probe linked to money laundering allegations. Or as they call it in the Nordic banking community, Wednesday.

Swedbank, Sweden’s oldest bank, joins Denmark’s Danske Bank in inviting probes upon probes from investigators—including those in the U.S.—for their alleged roles in a massive dirty money scandal

• Between 2007 and 2015, as much as $227 billion in suspicious transactions moved through a Danske branch in Estonia.
• What makes a transaction suspicious? When the accounts are held by high-risk nonresidents (Russians, mostly).

Give this FT "zoom out" a raise:

• The scandals could amount to the "largest money-laundering operation in history. They paint a picture of wealthy Russians and oligarchs from former Soviet states using the Baltic outposts of well-known Nordic banks to move hundreds of billions into the western banking system over the course of a decade.

+ We know you’re wondering: Here’s the difference between Scandinavian, Nordic, and Baltic countries:

COURTROOM

Salesforce Faces Some Serious Allegations

A group of 50 women has sued Salesforce (-2.69%), alleging the company knowingly supported and profited from now-defunct Backpage.com. The women say they’re survivors of sex trafficking, rape, and abuse facilitated by Backpage.

In the suit, the accusers say Salesforce provided Backpage with customized database tools to market prostitutes to “pimps, johns and traffickers.”

The claims are a stark contrast to Salesforce’s well-curated persona. The company has grown revenue ($13 billion in fiscal 2019) under CEO Marc Benioff, who’s painted his c-suite as a force for positive change.

• For example, Salesforce is helping to sponsor an anti-human-trafficking event next month. But…
• “Salesforce knew the scourge of sex trafficking because it sought publicity for trying to stop it,” the suit alleges. It was “in actuality, among the vilest of rogue companies, concerned only with their bottom line.”

This territory isn’t entirely unfamiliar for Salesforce, which has taken heat for its partnerships before. In June, 650+ employees asked Benioff to rethink a contract with U.S. Customs and Border Protection. Benioff refused to back out of the deal.

CANNABIS

From Pineapple Express to Ganjapreneurs

Despite their movies featuring virtually no cannabis use, comedian Seth Rogen and his longtime writing pal, Evan Goldberg, are launching a recreational marijuana brand called Houseplant. With branded flower, Softgel, and pre-rolled formats, Houseplant will create a trifecta of cannabis products.

The new venture is a partnership with Canopy Growth (-4.05%), a large Canadian pot company looking to capitalize on the country’s legalization of recreational weed last October. And part of that strategy includes linking up with celebrities:

• Canopy and Snoop Dogg first partnered in 2016, and Snoop helped recruit Martha Stewart to come on board in an advisory role last month.
• Now it’s got Rogen and Goldberg, who say the decision “reflects the years of education, first-hand experience, and respect we have for cannabis.”

WHAT ELSE IS BREWING

• Facebook (-1.08%) said it will start banning content that praises, supports, or represents white nationalism and white separatism.
• Aramco, the national oil company of Saudi Arabia, will buy a majority stake in Saudi petrochemicals firm Sabic worth $69.1 billion.
• Casper raised $100 million at a valuation of $1.1 billion, reports Bloomberg. The mattress unicorn is also looking for underwriters for an IPO, according to Reuters.
• The FDA proposed updates to mammography standards—the first changes to breast cancer screening regulation in more than 20 years.
• Tesla (+2.64%) CEO Elon Musk again explained his plans for store closures. He said high-traffic, high-performing stores will stay open...but customers will still have to use a phone or computer to buy cars even when in a store.

BREAKROOM

Real Estate Appraiser
Airbnb announced yesterday that it hit 500 million guest arrivals. It also mentioned that its most popular listing (for years) has been the Mushroom Dome in Aptos, California.

But while the property may resemble fungi, it’s certainly not fungible. The hosts, Kitty and Michael, have been listing their cozy cottage in the woods since 2009, and they’ve racked up almost 1,300 reviews.

So how much does it cost to spend a night?

Breakroom Answers