NIGHTLY BUSINESS REPORT for May 23, 2016, PBS - Part 1

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Javers, Julia Boorstin, Kate Rogers, Steve Liesman>

(NYSE:VIA); Lawsuits; Media; Education>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Deal or no deal? It`s not quite a merger Monday, but a number of companies do want to get together, and each of the proposed deals has squeaky wheels.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Real-life reality show. Billions are at stake and so are the futures of both CBS (NYSE:CBS) and Viacom (NYSE:VIA), as the battle over Sumner Redstone`s empire escalates.

MATHISEN: Put to the test. Is your economics IQ higher than a high schooler`s? You`ll find out tonight.

All that and more on NIGHTLY BUSINESS REPORT for Monday, May 23rd.

HERERA: Good evening.

It was a day of deal news. But none of them are shaping up to be easy get- togethers. We begin with Bayer`s $62 billion offer for Monsanto (NYSE:MON) in what could be the largest merger of the year if it goes through. The acquisition, which has been speculated about would create a global giant in agriculture technology. But Monsanto (NYSE:MON) traded well below the offer price of $122 a share, a sign that shareholders are skeptical and may not be that enthusiastic about signing off on that deal.

But the CEO of Bayer says the combination makes sense and he`s not concerned about regulatory issues.

(BEGIN VIDEO CLIP)

WERNER BAUMANN, BAYER CEO: The beauty of this combination is that both businesses are highly complementary and it`s very much a growth story that is behind the combination. The products complement each other perfectly. The regional fit is really great. And while there will be at one point or another some discussions with regulators, we don`t see this as a major issue.

(END VIDEO CLIP)

HERERA: Bayer said it decided to make details of its proposal public after reports surfaced last week.

MATHISEN: Tribune once again rejected a sweetened offer from Gannett (NYSE:GCI). The board of "Tribune", which owns "The L.A. Times" and "The Orlando Sentinel", said that its turnaround plan will serve shareholders better than the proposed takeover would. Tribune now also has a billionaire investor on its side. Nant Capital took a $70 million stake in the company at $15 a share. That is the same price Gannett (NYSE:GCI) proposed in its latest offer.

Gannett (NYSE:GCI) may have had enough. It is threatening now to pull its revised bid.

Shares of Tribune tumbled 15 percent to $12.09. Gannett (NYSE:GCI) off more than 2 percent at $15.74.

HERERA: And there seems to be some friction between Anthem and Cigna, which are working on a $48 billion get-together. According to "The Wall Street Journal", behind the scenes the two companies are fighting. A key point of contention is Anthem`s lawsuit against Express (NYSE:EXPR) Scripps, which Anthem is accusing of overcharging for drugs. The two are currently seeking regulatory approval for their merger. The report says the arguing could make that tougher.

MATHISEN: A subdued start to the week, the prospect of an interest rate hike remains in focus, but it wasn`t enough to move the needle sharply in either direction. The Dow Jones Industrials off a modest eight points to 17,492. The NASDAQ declined nearly 4. The S&P 500 down about the same.

In this market, some investors feel trapped. Mike Santoli explains why.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a case to be made for stocks moving nicely higher in coming months, but investors aren`t listening. Money has been pulled from stock funds for six straight weeks. Even the stock prices have recovered from the winter sell-off.

Surveys show small investors more focused on fear of further market turbulence than excitement about the chance for gains. And even those staying in the market prefer what they see as safer stocks such as dividend-paying stocks. On one level, all this caution is understandable. The broad market has made no progress in more than a year and a half. Stocks look at least fully valued with corporate profits flat since 2014.

There`s a growing chance the economy`s doing well enough to prompt another federal reserve rate boost, but not well enough to drive fast corporate profit growth. And a noisy presidential campaign between two polarizing candidates lies ahead.

It`s worth keeping in mind market conditions could be on the verge of improving just as a majority of investors least expect it. Oil prices have rebounded, which will bolster energy companies. The U.S. dollar has dipped which should help corporate profits grow again by the third quarter. Global borrowing costs are quite low. U.S. consumers getting a pay raise. Inflation is rising, but from very low levels, which is a pretty good backdrop for companies and stocks.

And then there`s the fact that the average investor isn`t positioned for a strong market move. Temporary logic says markets often confound majority opinion. None of this means that stocks are poised to surge right here, right now. The public has correctly figured out that this is a delicate backdrop for the market.

When the consensus gets too focused on the dangers, it makes sense at least to consider the existence of upside risk to stocks as well.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

HERERA: The president of the San Francisco Fed says investors should expect the Central Bank to hike interest rates two to three times this the year. John Williams, a nonvoter at Federal Reserve, said he`s looking for growth at 2 percent and said the labor market is basically at full employment. The Fed last hiked rates in December and has stood pat. Its next meeting is mid-June.

MATHISEN: President Obama has fully lifted a decades-old ban on the sale of military gear to Vietnam. The president said the policy shift was part of an effort to normalize relations between the two countries

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We`ve agreed to continue deepening our defense cooperation, including patrol boats and training for Vietnam`s coast guard and to work more closely together in responding to humanitarian disasters. I can also announce that the United States is fully lifting the ban on the sale of military equipment to Vietnam that has been in place for some 50 years.

(END VIDEO CLIP)

MATHISEN: Soon after the announcement, Boeing (NYSE:BA) won an $11 billion order for 100 jets from a low-cost Vietnamese airline. And Vietnam is expected to spend billions more on military equipment. Shares of Boeing (NYSE:BA) finished the day slightly higher.

HERERA: In Washington, ruling by the Supreme Court gives federal workers more time to file employment discrimination lawsuits after quitting their jobs. The justices ruled 7-1 that workers have 45 days from when they resign to file charges. The court rejected the Justice Department`s position that the clock should start running when the alleged abuse occurs.

MATHISEN: New developments tonight in the political world. Virginia Democratic Governor Terry McAuliffe reportedly now under federal investigation pertaining to his campaign contributions. He`s a friend and political ally of the Democratic presidential front-runner Hillary Clinton.

John Harwood joins us now from Washington.

What exactly could this investigation mean, if anything, for the Clinton campaign? I believe he ran one of Bill Clinton`s presidential campaigns.

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Terry McAuliffe has been, Tyler, one of the leading fund-raisers, the leading fund-raiser for Bill Clinton for quite a long time, for Hillary Clinton as well. They raised money for her in the 2008 primary campaign that she lost. He has served on the board of Clinton Foundation.

So, if this investigation results in charges and the charges have anything whatsoever to do with Bill and Hillary Clinton`s political enterprises, including campaigns or the Clinton Foundation that would be very bad for Hillary Clinton. After all, Donald Trump has been making his campaign theme that she`s crooked Hillary.

But we`ve got to caution, there are no charges even against Terry McAuliffe yet, just an ongoing FBI investigation. Don`t know if it will result in charges, if it does if it has anything to do with Clintons.

HERERA: Speaking of Ms. Clinton, Hillary Clinton`s lead over Donald Trump in the latest NBC News/"Wall Street Journal" poll has shrunk from 11 points to 3. Why, what happened, John?

HARWOOD: What`s happened, Sue, is that Republicans have come home behind Donald Trump. That`s a very significant development. In our April "Wall Street Journal"/NBC poll, the Republicans were supporting Donald Trump at the rate of 72 percent. Now, it`s up to 86 percent. That`s more than Democrats are supporting Hillary Clinton. Of course, she`s bogged down with that fight with Bernie Sanders, which is bleeding her support right now.

MATHISEN: How worried to that point are Democrats that the infighting Clinton/Sanders is going to keep bleeding her and weighing her down?

HARWOOD: Well, rank and file Democrats don`t seem very concerned in our poll, by 2-1, they say it`s good for the party rather than bad for the party. Party leaders in Washington feel a little bit differently, though. And so does the Hillary Clinton campaign. They want this thing to be over.

MATHISEN: All right. John, thank you very much. John Harwood with breaking developments in Washington.

HERERA: And still ahead, executives on the hook. The push by the Justice Department to prosecute people enters a new phase.

(MUSIC)

MATHISEN: A win for Bank of America (NYSE:BAC), a setback for the justice department. A U.S. appeals court threw out a $1.2 billion penalty judgment against the bank in a 2013 fraud case over defective mortgages. That decision said the proof at trial was insufficient under federal fraud statutes. The mortgage program was run by Countrywide which Bank of America (NYSE:BAC) bought back in 2008.

HERERA: There`s a relatively new effort by the Justice Department to hold individuals accountable when companies behave badly. Most of the time companies are fined. As part of that effort, two former health care executives are set to stand trial in Boston.

Eamon Javers takes a look at the push to prosecute people.

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The old saying goes, you do the crime, you do the time but that hasn`t always been true for corporate crimes, where it came seemed like executives commit frauds and it`s often the shareholders stuck paying the penalties that the corporate crooks retire to enjoy their bonuses.

PROF. BRANDON GARRETT, UNIVERSITY OF VIRGINIA SCHOOL OF LAW: If you had thousands and thousands of sales employees all aggressively marketing a drug or a device off-label, who gave the orders? Are you going to prosecute all them? It really is genuinely challenging to fix accountability inside complex organizations.

JAVERS: University of Virginia professor Brandon Garrett examined 303 non- prosecution and deferred prosecutions involving corporate fraud that resulted in fines and other sanctions. He found that individuals, the actual people who committed the crimes, were only charged in 34 percent of the cases. But now, the Department of Justice is trying to change all that. And the "The Wall Street Journal" reports that a former division president of drugmaker Allergan`s Warner Chilcott (NASDAQ:WCRX) unit will stand trial on the charge of paying kickbacks to doctors so they`ll prescribe more of the company`s medicines.

And separately, two former senior officer of Johnson & Johnson`s medical device unit Acclarent are charged with marketing a medical device for a use the FDA did not approve. The executives all say they did nothing wrong, but the trials will be a test of the new push at the Department of Justice to make sure actual people are held accountable for corporate wrongdoing. The department said in September that it would focus on individuals.

GARRETT: I think corporate America really is watching these developments. It has certainly changed the way that white collar defense lawyers approach executives.

JAVERS: But even if the Department of Justice is getting serious about prosecuting individuals instead of corporations, the Obama administration is heading into the last half of its last year in office. And whoever takes the White House next year might have different priorities.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.

(END VIDEOTAPE)

MATHISEN: General Electric (NYSE:GE) is betting big on Saudi Arabia. And that is where we begin tonight`s "Market Focus."

The company will build a $400 million manufacturing facility for its marine and energy industries. The plant will create 2,000 jobs in that country. G.E. will also invest a billion dollars in other businesses there. Shares of the Dow component were off a fraction to $29.49.

IBM has reportedly laid off more employees as part of its restructuring as it transitions to a predominantly cloud and analytics business. "Wall Street Journal" says IBM declined to say how many jobs would be cut but overall estimates top 14,000. Meanwhile, "The Journal" says the company could hire 14,000 workers. It has more than 20,000 open positions. Shares of Big Blue down fractionally to $146.77.

And Freeport-McMoRan pulling its plans for an initial public offering of its oil and gas business. The company announced last year its intentions to spin off the unit but since then, it has been hit hard by falling commodity prices and has cut its workforce. Shares of the mining giant up more than 2.5 percent to $11.38.

HERERA: Finance company Ares Capital (NASDAQ:ARCC) (NYSE:ARY) is buying rival American capital for nearly $3.5 billion. Activist investing group Elliot Management took a large stake in American Capital (NASDAQ:ACAS) back in the fall and urged the company to take some steps to explore strategic options, including a possible sale. Shares of Ares Capital (NASDAQ:ARCC) (NYSE:ARY) down slightly to $14.81. Shares of American Capital (NASDAQ:ACAS) ended up marginally to $15.72.

Staples (NASDAQ:SPLS) is reportedly looking to sell its European assets. This is according to the "London Sunday Times." The company`s recent plan to merge with Office Depot (NYSE:ODP) was called off over opposition from federal regulators. Bank of America (NYSE:BAC) also upgrading the company to a buy rating. Shares of Staples (NASDAQ:SPLS) up more than 2 percent today to $8.28.

MATHISEN: A real-life reality show, that is what the board room drama at Viacom (NYSE:VIA) resembles these days. The battle over control of Sumner Redstone`s empire is escalating. The future of CBS (NYSE:CBS) and Viacom (NYSE:VIA) are at stake.

Julia Boorstin unravels the latest twists and turns.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Viacom (NYSE:VIA) CEO Philippe Dauman and Viacom`s controlling shareholder Sumner Redstone were friends for three decades. But now, the two have turned on each other, and they`re battling over the future of Redstone`s $40 billion media empire, CBS (NYSE:CBS) and Viacom (NYSE:VIA).

The rift started Friday when Redstone shocked his long-time friend, removing Dauman, along with fellow board member George Abrams, from Redstone`s trust which controls 80 percent of CBS (NYSE:CBS) and Viacom (NYSE:VIA) voting shares, and kicking them off the board of theater and holding company, National Amusements.

MICHAEL MORRIS, GUGGENHEIM ANALYST: The interesting thing to me here is the checkmate move that Sumner Redstone played. Earlier this year, he kicks out his girlfriend, takes her off the will, out of the trust. Dauman supports him in that. She`s arguing mental incapacity.

Two months later, he kicks out Dauman, neutering his ability to apply the mental incapacity issues.

BOORSTIN: But today, Dauman and Abrams sued to challenge their unexpected removal and they did indeed cite Redstone`s diminished mental capacity, saying he has a neurological condition that`s characterized by dementia, impaired cognition, and slowness of mental processing.

Redstone responded to the suit by filing a petition asking the court to confirm the validity of his actions, removing Dauman and Abrams as trustees. Redstone`s attorney noting this is the first time Dauman is raising questions about Redstone`s mental capacity, after calling him, quote, "engaged and attentive" just months ago. With Viacom (NYSE:VIA) shares down about 40 percent in the past year, Dauman`s CEO job is at stake. If he loses his suit, Redstone`s daughter Shari could push him out, which analysts say could be a good thing.

TERRY KAWAJA, LUMA PARTNERS CEO: In our opinion, the only path for shareholder appreciation at this point is a change in management. The current management team`s been in place over ten years now. The shares have been consistent underperformers, both operationally and financially.

BOORSTIN: The strategic battle under way now between Redstone and Dauman is focused on Viacom (NYSE:VIA) studio. Redstone challenging Dauman`s plan to sell a stake in Paramount which he`s been pursuing for months. Redstone said it`s in the best interests of Viacom (NYSE:VIA) to maintain its full ownership of the studio.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And the drama that is playing out in the Viacom (NYSE:VIA) board room is one that affects many families and small business owners every year -- the squabble over who should control your estate and your business if you`re incompetent or no longer here.

Lazetta Rainey Braxton, founder and CEO of her own wealth advisory firm Financial Fountains joins us with estate planning tips that could prevent end of life squabbling over your estate.

Welcome back. Good to see you again.

LAZETTA RAINEY BRAXTON, FINANCIAL FOUNTAINS FOUNDER & CEO: Good to see you, Sue. Thank you.

HERERA: Let`s start, first of all, with the incompetency issue, because that`s kind of at the heart of what`s at the heart of the Viacom (NYSE:VIA) issue.

How does a declaration of incompetency -- how is that applied? Who can do that? Who can declare someone incompetent?

BRAXTON: A medical professional such as a doctor can declare someone as medically incompetent. If you have a certain document that also specifies another professional such as a psychiatrist, that`s an option as well too. But we`re looking for doctors.

MATHISEN: In these kinds of fights, though, it`s whose doctor gets to make the final call? Who appoints that doctor? Who pays for that doctor? In this case, Lazetta, it seems to me that they had a lot of the structures in place. They had medical directives. They had trusts and so forth.

But the squabbling took place anyway.

BRAXTON: Unfortunately, sometimes the best-laid plans do unravel. That`s why the courts come into play. So, the courts are going to look very closely at the documents, how clearly they were defined in terms of who they should consult, and make the best judgment with the basis of those documents.

HERERA: So, let`s take it down to the individual`s point of view or the business` point of view. You say you have to have all your documents in order. What are the most important documents that they should have in place?

BRAXTON: While you`re living, power of attorney for both your financial affairs and your medical affairs. This really comes into play when you`re alive and in the case that we`re talking about, just not able to make decisions on your behalf. So, having the power of attorney certainly very important.

And then upon your death, what`s going to come into play is your will. Your will directs where your assets will go. Keeping in mind that there are some accounts that do not follow a will, such as those of life insurance, retirement accounts. They follow by beneficiary designation.

HERERA: So you have to have those up to date.

MATHISEN: In this case --

BRAXTON: They have to be up to date, yes.

MATHISEN: In this case, certainly in lots of family businesses, you want to set up trusts and name trustees to manage that business in the event that you -- the principal become incapacitated.

BRAXTON: Well, let`s talk about who owns the business. Sometimes, it`s not family members. If that`s the case, you want first to have a buy/sell agreement. That would lay out upon the death of a partner who has the right to buy that ownership. Whether it`s a family member or another partner or you could also discount a partner that you don`t want to have purchase your portion.

Another thing to keep in mind, that even though you`ve laid out who you want to buy your portion, do they have the funds to take care of that? And that`s where life insurance comes into play.

So, a buy/sell agreement, you can establish those terms and then for trust documents, that really comes into play if it`s a family-opened business as well.

HERERA: All right. Lazetta, we have to leave it there, thank you so much. Lazetta Braxton with Financial Fountains.

BRAXTON: Thank you.

MATHISEN: Coming up, we have a winner. The best and brightest high schoolers go head to head to test their knowledge of a topic dear to all of us. Economics.

(MUSIC)

MATHISEN: When you think of startups, you probably think of Silicon Valley. But there`s another California city that`s attracting some promising young companies.

Kate Rogers (NYSE:ROG) reports from San Diego.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While Silicon Valley may grab headlines for its billion-dollar startup scene, in southern California, San Diego has emerged as a powerful alternative for technology ventures. It`s what made Jeff Winkler want to cultivate and keep local talent in the area.

Winkler wanted his business, Origin Code Academy, in September 2015, after realizing there was only one other coding school in the area. He wants his students to get jobs. So, he goes out and talks to the big employers like Microsoft (NASDAQ:MSFT) and Qualcomm (NASDAQ:QCOM) to see what they want from entry-level coders, then tailors his curriculum to fit.

JEFF WINKLER, ORIGIN CODE ACADEMY FOUNDER: When we had conversations with employers and heard how frustrate they were because they couldn`t find talent in San Diego, because it was all leaving for the bay area, that was really when we decided we had to be here.

ROGERS: The school costs $12,000 for 12 weeks and so far has a 100 percent job placement rate.

Nearby at the cyber incubator, startups like Daniel Magy`s Citadel Drone Defense Systems are working on cyber security, robotics and more. Magy`s company have a drone hacking and takedown technology. He says the place to be is San Diego, thanks to its military and defense background, as well as the quality and affordability of local talent.

DANIEL MAGY, CITADEL DRONE DEFENSE SYSTEM: It is one of the only places in the country where you have cheap, affordable talent that is as good as you can find in Silicon Valley, right? My team is made of three PhDs and former defense contractors.

ROGERS: Entrepreneurs are realizing there`s no need to jet off to the Bay Area. In fact, San Diego is ranked a top ten startup metro the past two years, according to the Coffman foundation, and venture capital money is flowing in at its highest level since 2007. Last year, $1.28 billion was invested in San Diego startups, according to the National Venture Capital Association.

The San Diego Regional Chamber of Commerce says there are 27 incubator in the city with about 400 startups launching in the metro annually.

Flash and Melani Gordon relied on a local incubator The Vine when launching their startup Tap Hunter in 2012. The industry tool builds on San Diego`s world-class craft beer industry, helping bar and restaurant owners automatically update their inventory on social, web menus, and displays.

So what would you guys suggest?

And their app helps beer lovers find local businesses serving their favorite drinks.

MELANI GORDON, TAPHUNTER CEO: It`s local and quality. So a lot of the movement around farm to table and quality ingredients, most Americans live within walking distance of a craft brewer or distiller that are making great quality product and I think that resonates.

ROGERS: And while San Diego`s craft brewing industry served as inspiration, Tap Hunter proves the power of a good idea can grow beyond its home base. The company now operates across the U.S. and around the world in 20 countries.

For NIGHTLY BUSINESS REPORT in San Diego, I`m Kate Rogers (NYSE:ROG).

GORDON: Cheers.

(END VIDEOTAPE)

MATHISEN: Nice assignment for Kate there.

To read more about the startup hub in San Diego, head to our website, NBR.com.

HERERA: Think you know all there is to know about the economy? A handful of high school students probably know more. And today, they showed off their knowledge at the National Economics Challenge where Steve Liesman got to award one team the championship trophy.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: They prepped for months.

UNIDENTIFIED FEMALE: The index most commonly used to measure inflation is?

UNIDENTIFIED FEMALE: Consumer price index --

LIESMAN: And it all came down to this. These students beat out more than 10,000 high schoolers in what`s become the spelling bee for economics, the National Economics Challenge, where smart is cool but it takes really, really smart to get a trophy.

In the finals, it was Lexington high school from Massachusetts going head to head against WWP high school north from New Jersey.

UNIDENTIFIED MALE: Five trillion.

UNIDENTIFIED MALE: That is correct.

(APPLAUSE)

UNIDENTIFIED MALE: And congratulations to Lexington High School. You are this year`s champion --

LIESMAN: In the advanced division, it was Bel Air from Texas and Mountains View High School from Minnesota. Bel Air High School showed their economic acumen and got out to a comfortable lead.

UNIDENTIFIED MALE: Bel air is leading by a score of 11-2.

LIESMAN: And never looked back.

It also received a flat 10 percent royalty on the total revenue from her book. If the book distributor`s a monopolist, at what value of marginal revenue would the author prefer the distributor sell the book if marginal revenue equals marginal cost at $4?

UNIDENTIFIED FEMALE: Marginal revenue equals zero?

UNIDENTIFIED FEMALE: Yes, correct.

(APPLAUSE)

UNIDENTIFIED MALE: That means that Bel Air is our national champion.

LIESMAN: Wow.

(APPLAUSE)

LIESMAN: Nan Morrison, CEO of Council for Economic Education, explained why the competition is more than just a game.

NAN MORRISON, COUNCIL FOR ECONOMIC EDUCATION CEO: It`s about team- building, it`s about having fun, it`s about coming to New York, and it`s about the 10,000 other kids that are learning grade skills.

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