* * * * * * WEDNESDAY, SEPTEMBER 5, 2018 ~ VOL. CCLXXII NO. 55 WSJ.com HHHH $4 .00

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When Amanda Kennedyspent a night out in July at theSugar Club restaurant in Auck-land, New Zealand, the waiterbrought out a delicate oysterand fish-egg amuse-bouche.

Served on a bed of rocks ina bowl.

“It looked like landscaping,”says Ms. Kennedy, a comedianin the city. When she askedwhy it wasn’t on a plate, thewaiter said “I dunno.”

Some other diners are like-wise befuddled as a fringe ofrestaurateurs plate food on

BY MARC VARTABEDIAN

Your Dinner Is Served—in a Glass Shoei i i

Chefs plate food on anything but plates; breakfast in a shovel

hand. “It’s challenging the no-tion of what a dinner shouldbe,” says Anna Gaidaenko, thehotel’s marketing manager andspokeswoman for the restau-rants.

The Tickethall restaurant onEngland’s Isle of Man serves its“fireman’s breakfast” in ashovel. Chefs elsewhere have of-fered food on ashtrays, stumpsand tea pots. The outlandishpresentations make for social-media-friendly postings.

Restaurants see non-plateplating as a way to attractcustomers with a creative din-

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things that aren’t plates.Fried croquettes come in a

glass shoe at Bazaar in theSimple Luxurious Stays Hotelin Beverly Hills, Calif. Anotherrestaurant in the hotel servescaviar on wood shaped like a

Soup’s on!

some of Facebook’s chal-lenges of late, units underMs. Sandberg’s control failedto respond to mounting signsof trouble, including evidencethat Russia interfered in the2016 presidential electionand the growing use of fakenews to stir violence andharm overseas, according toa number of current and for-mer employees.

Now Ms. Sandberg mustfix the mistakes. Urged by hisboard to be more proactive,Mr. Zuckerberg quietly askedher to lead the company’s ef-forts to identify and preventfuture blowups on the plat-form. The new job, insiderssay, is at least as challengingas the company’s transitionto mobile several years ago,which was late and rocky.Ms. Sandberg’s role is likely

PleaseturntopageA10

Facebook Inc. Chief Oper-ating Officer Sheryl Sandbergwas the architect of a busi-ness strategy that built thesocial network from a fast-growing but wobbly startupinto a global advertising jug-gernaut with a market valueof more than half a trilliondollars.

But during five nightmar-ish days in March, she andher communications teamcouldn’t figure out how toaddress the public’s mount-ing outrage over allegationsthat political firm CambridgeAnalytica had improperly ac-cessed data on tens of mil-lions of Facebook users.While anger grew, she andChief Executive Mark Zucker-berg remained silent.

Ms. Sandberg has toldpeople the delayed responsewas one of the company’sbiggest mistakes ever. Butnot the only one. While thetechnology platform designedand overseen by Mr. Zucker-berg is also to blame for

By Betsy Morris,Deepa Seetharamanand Robert McMillan

TheranosTo Shut DownBlood-testing firm accusedof defrauding investors willformally dissolve.................. B1

Salesforce.#1CRM.

Ranked #1 for CRMApplications based onIDC 2017Market Share RevenueWorldwide.

19.6%

6.5%

7.1%

3.2%

4.0%

salesforce.com/number1CRMCRMApplicationsmarket includes the following IDC-defined functional markets: Sales, Customer Service, ContactCenter, and Marketing Applications. © 2018 salesforce.com, inc. All rights reserved. Salesforce.com is a registeredtrademark of salesforce.com, inc., as are other names andmarks.

2013 2014 2015 2016 2017

Source: IDC, Worldwide SemiannualSoftware Tracker, April 2018.

U.S. Investigates FBI ResponseTo Gymnasts’ Sex-Abuse Claims

The Justice Department isinvestigating how the FBIhandled sexual-abuse allega-tions against former U.S.gymnastics national teamdoctor Larry Nassar, amidclaims agents failed to re-spond to complaints fromgymnasts in 2015, people fa-miliar with the matter said.

The move by the depart-ment’s Inspector General’s of-fice follows an internal Fed-eral Bureau of Investigation

review opened earlier thisyear into the bureau’s han-dling of the Nassar allega-tions. The gymnasts’ com-plaints languished for at leastnine months before an FBI of-fice opened a formal investi-gation.

Nassar pleaded guilty lastyear to federal child-pornog-raphy charges and state sex-ual-abuse charges in Michi-gan, none of which stemmedfrom national-team gymnasts’2015 allegations. In January,he was sentenced to a 60-year

sentence in federal prison. Hehasn’t faced charges on thegymnasts’ allegations.

The Justice Department in-vestigation, which hasn’t beenpreviously reported, comes asUSA Gymnastics continues toreel from the Nassar scandaland from what critics havecalled its sluggish response tosexual-abuse allegations. Theembattled organization saidon Tuesday its chief execu-tive, Kerry Perry, resigned af-ter just nine months on the

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BY REBECCA DAVIS O’BRIEN

Thrown for a LossNike shares slipped Tuesdayafter the company unveiled an adcampaign featuring unsigned NFLquarterback Colin Kaepernick.

THEWALL STREET JOURNAL.Source: SIX

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Nike

with criticism coming fromPresident Trump and fans whohave labeled them unpatriotic.

Now Nike faces questions ontwo fronts: whether its reinvig-orated partnership with one ofthe most controversial figuresin sports will prove fruitful;and how this move will affectits relationship with the NFL.While Nike is one of the NFL’sbiggest partners with a re-ported billion-dollar deal thatwas extended in the spring, theleague is engaged in a high-profile legal battle with Mr.Kaepernick, who has filed agrievance alleging that he hasbeen effectively blackballedfrom signing with a team be-cause of his political views.

“Although the company’sstand may go down well on itsnative West Coast, it will befar less welcome in manyother locations,” Neil Saun-ders, managing director ofGlobalData Retail, wrote in aresearch note, adding that thebrand “cannot afford to makebad decisions” in a highly

PleaseturntopageA8

tests in 2016 when he begankneeling on the field duringthe national anthem to call at-tention to racial injustice andsocial inequality. The playerprotests Mr. Kaepernickhelped kick-start have been acontentious issue for the NFL,

WASHINGTON—SupremeCourt nominee Brett Ka-vanaugh’s weeklong confirma-tion hearings began raucouslyTuesday, as Democrats soughtto bring the proceedings to ahalt and protesters shoutingfrom the rear were removed bypolice, leading to 70 arrests.

Republicans, holding a one-vote majority on the Senate Ju-diciary Committee, brushedaside complaints about accessto Judge Kavanaugh’s records asan aide to former PresidentGeorge W. Bush and insinua-tions that his appointmentcould abet President Trump’sgrip on power.

Judge Kavanaugh, who spokeat day’s end, made no referenceto the seven hours of partisandebate. He touted his judicialimpartiality at a session inwhich Democrats painted himas a servant of social conserva-

PleaseturntopageA4

BY JESS BRAVIN AND BYRON TAU

Sheryl SandbergOn the Hot SeatFor FacebookRisks

Executive must fix mistakes on dataprivacy and election interference

KavanaughHearingHasTesty StartDemocrats seek tohalt session until theysee nominee’s papersfromWhite House days

CONTENTSBanking & Finance.... B12Business News B3,5,8Crossword.............. A14Heard on Street. B14Life & Arts....... A11-13Markets............. B13-14

Opinion.............. A15-17Property Report B6-7Sports....................... A14Technology............... B4U.S. News............. A2-4Weather................... A14World News....... A6-9

s 2018 Dow Jones & Company, Inc.All Rights Reserved

>

What’sNews

� The Justice Departmenthas launched a criminalprobe into the FBI’s handlingof sexual-abuse allegationsagainst former U.S. gymnas-tics team doctor Nassar. A1� A hearing on Ka-vanaugh’s nomination tothe Supreme Court openedwith Democrats seeking tobring proceedings to a haltand police removing severalprotesters from the room. A1� The U.S. and Canadawill resume efforts onWednesday to resolve is-sues holding up a renego-tiation of Nafta. A2� American factory ac-tivity in August expandedat the strongest pace inmore than 14 years. A2� Federal disaster re-sponders were over-whelmed in 2017 by hurri-canes in close successionand wildfires in California, agovernment report said. A3� Chicago Mayor RahmEmanuel, a Democrat, said hewouldn’t seek a third term.A3� Arizona Gov. Duceychose former Sen. Jon Kylto fill the Senate seatopened byMcCain’s death.A4� Russian warplanesstruck Syria’s Idlib prov-ince ahead of an expectedregime offensive that theU.S. has said could triggera humanitarian disaster. A6� Trump and Moonagreed to meet in NewYork over their goal of de-nuclearizing North Korea. A7� Japan’s Kansai airportwas closed indefinitely bytyphoon damage. A7

Amazon became thesecond U.S. company

to reach $1 trillion in mar-ket value as its shares rosein intraday trading, re-flecting the online retailer’stransformation into a disrup-tive force of commerce. B1� Nike’s shares fell afterthe firm ventured intocharged political territoryby putting NFL quarter-back-turned activist Kaep-ernick at the center of itslatest ad campaign. A1� Theranos will formallydissolve, according to anemail to shareholders, andwill pay unsecured credi-tors its remaining cash incoming months. B1� U.S. stocks fell ahead ofa busyweek of trade talks andeconomic data. The Dow shed12.34 points to 25952.48. TheS&P 500 declined 0.17%. B13� Carney signaled he waswilling to stay on as BOEchief beyond his planned 2019departure date, offering somestability ahead of Brexit. A8�Most major auto mak-ers reported increases inU.S. sales in August, thoughvehicle demandwas expectedto cool for the rest of 2018.B2� Banking group ING hasagreed to pay a record Eu-ropean fine of $899.8 millionto settle a probe into money-laundering failings. B12� Citigroup Chief Finan-cial Officer Gerspach will re-tire next year, ending a nearly10-year run in the job. B12� Transocean has agreedto buy fellow offshore-drilling contractor OceanRig UDW in a transaction val-ued at about $2.7 billion. B5

Business&Finance

World-Wide

TASOSKATO

PODIS/EPA

/SHUTTERSTO

CK

Brett Kavanaugh sat through hours of contentious debate by the Senate Judiciary Committee before he spoke about his nomination Tuesday.

Nike Inc. ventured intocharged political territory whenit put National Football Leaguequarterback-turned activist Co-lin Kaepernick at the center ofits latest advertising campaign,risking backlash to align itselfwith a cause that has resonatedwith young consumers.

The Oregon-based shoe gi-ant saw opposition to its deci-sion in the aftermath of theannouncement when manyshoppers began calling forboycotts of its products. Im-ages of people torching Nikeshoes and cutting swooshesout of gear surfaced on Twit-ter and other social-mediasites, countered by expres-sions of support for Nike andMr. Kaepernick. Shares of thecompany fell more than 3%Tuesday, though they are stillup about 27% for the year.

The reaction laid bare theperils of Nike’s decision to fea-ture Mr. Kaepernick, whoemerged as the face of pro-

BY ANDREW BEATONAND KHADEEJA SAFDAR

Anthem Backlash StrikesNike, Hurting Share Price

� Nominee sought minorityjudges.............................................. A4

A2 | Wednesday, September 5, 2018 * * * * * * THEWALL STREET JOURNAL.

U.S.WATCHFCC

Regulators Seek toSpeed 5G Networks

Federal regulators will vote inthree weeks on a plan to accel-erate next-generation 5G wire-less networks around the U.S. byoverriding some local siting rulesthat could hold up deployment,Federal Communications Com-mission head Brendan Carr said.

The plan is expected to winapproval from the FCC at ameeting in late September.

The plan is aimed at boostingdeployment of small cellulartransmitters, backpack-sized de-vices that will be a key featureof 5G infrastructure. Siting ofsuch devices can be subjected to

Hong Kong’s Hang Seng In-dex fell 2.4% in August. A Mar-kets News article Saturdayabout Friday’s market activityended midsentence, omittingthe Hang Seng’s monthly move.

The chocolate brand Ghi-rardelli was misspelled as Ghi-radelli in a Page One articleTuesday about taffy.

CORRECTIONS �AMPLIFICATIONS

Readers can alert The Wall StreetJournal to any errors in news articlesby emailing wsjcontact@wsj.com or

by calling 888-410-2667.

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U.S. NEWS

President Trump, who haslong derided Nafta as a “disas-ter,” reiterated over the LaborDay Weekend that if the U.S.and Canada fail to reach anagreement, his administrationcould move forward on a dealthat excludes Canada. He alsowarned Congress not to inter-fere.

Canadian Prime MinisterJustin Trudeau said Mondayhis negotiating team is readyto work on a deal that benefitsall parties. “There are a num-ber of things that we abso-lutely must see in a renegoti-ated Nafta,” he said at a mediaevent in a suburb of Vancouver,British Columbia. “No Nafta isbetter than a bad Nafta deal

for Canadians, and that’s whatwe are going to stay with.”

The White House has for-mally notified Congress of anintent to sign a new version ofNafta this autumn with Mex-ico—saying Canada was free tojoin, “if willing.” The U.S. ad-ministration is widely expectedto start the process of with-drawing from the old treatywhile preparing for congressio-nal ratification of the new one.

It is unclear what the newtimetable is for reaching anaccord allowing Canada tojoin. After the two sides failedto reach an agreement lastweek, people familiar with theprocess said the new deadlinecould extend to Sept. 30. That

is when, according to U.S. law,the Trump administrationwould need to make public fi-nal text for a trade pact thathe could sign by Nov. 30, whenMexico’s leader leaves office.

“We agreed to somethingwe think the Canadians shouldsign up with, and so we’re veryvery confident that the talksare going to go well this weekand that we’re going to haveCanada on board relativelysoon,” said Kevin Hassett,chairman of the White HouseCouncil of Economic Advisers,on Fox Business Network.

Many U.S. lawmakers, busi-ness groups and labor leadershave insisted that Canada re-main part of a three-way deal,

which allows for duty-freetrade that fuels the NorthAmerican auto industry andother sectors. Mexico has alsoexpressed a preference forCanada to remain but has sig-naled willingness to move for-ward without it.

The stakes are high, as theTrump administration hassought to bring maximumpressure to bear on its closestneighbors, even imposing steeland aluminum tariffs on Can-ada and Mexico on national-security grounds.

As talks with Canada re-sume, the biggest stickingpoint is Canada’s insistence onretaining a dispute-resolutionsystem that allows member

states to challenge trade penal-ties imposed by the others. Mr.Lighthizer has proposed elimi-nating the system, containedin Nafta’s Chapter 19, and Mex-ico has agreed to that. ButCanada remains unwilling toscrap the mechanism.

“We need a dispute-resolu-tion mechanism like Chapter19, and we will hold firm onthat,” Mr. Trudeau said.

Trump administration offi-cials have complained the dis-pute process erodes U.S. sover-eignty, saying the independentpanels charged with adjudicat-ing the cases have primarilybeen used to overturn tariffsimposed by the U.S. on Cana-dian and Mexican products.

The U.S. and Canada will re-sume efforts on Wednesday toresolve issues holding up a re-negotiation of the North Amer-ican Free Trade Agreement.

Canadian Foreign MinisterChrystia Freeland is set tomeet U.S. Trade RepresentativeRobert Lighthizer in Washing-ton after the U.S. and Mexicolast week agreed to terms ontheir portion of the trilateralaccord. The focus this weekwill be on Ottawa and Wash-ington bridging differences tokeep all three countries signa-tories to an update of thequarter-century-old treaty.

BY PAUL VIEIRAAND WILLIAM MAULDIN

U.S., Canada Set to Resume Nafta Talks

2018, some analysts said therewere signs of overheating inthe manufacturing industry.

“The last time we have seensomething akin to the currentrun late in an expansion oc-curred in” the late 1980s,when the Federal Reserve hadto raise the fed-funds targetrate to almost 10% to tampdown inflation, according toStephen Stanley, chief econo-mist at Amherst Pierpont Se-curities. “If you want to con-clude from this quick historylesson that the Fed is cur-rently too easy and in the pro-

cess of making a policy mis-take, I would not object.”

Many private economistsexpect the Fed will raise inter-est rates two more times thisyear, once in September andagain in December.

Despite the headline growthin factory activity, an underly-ing gauge of new export or-ders for primary metals, trans-portation equipment andmachinery declined in August,with machinery last decliningat the beginning of 2017.

“We’re a significant ex-porter of railcars, airplanes,automobiles….Machinery isour number 6 industry sector,”said Tim Fiore, who overseesthe ISM survey of factory pur-chasing and supply managers.“If export markets are closedoff to us, orders will go down,[then] exports and produc-tion.”

WASHINGTON—Americanfactory activity in August ex-panded at the strongest pacein more than 14 years, despiterising tensions with some ofthe U.S.’s largest trade part-ners.

The Institute for SupplyManagement said Tuesdaythat its manufacturing indexrose to 61.3 in August, thehighest level since May 2004,from 58.1 in July. Sales of fac-tory-made products, or neworders, output and employ-ment all grew at a faster pacein August.

Tuesday’s data surprisedanalysts who had expected aslowdown in the industry inlight of rising trade tensionsand a typically weaker monthfor factory activity. Econo-mists surveyed by The WallStreet Journal had expected a57.5 reading for August.

“Despite concerns over U.S.protectionist policies, manu-facturing sentiment remainson a solid footing, supportedin large part by firm domesticdemand,” said Pooja Sriram,U.S. economist at Barclays.

The U.S. and Europe, Chinaand other countries are in themidst of trade battles stem-ming from steel and aluminumtariffs the Trump administra-tion enacted this year.

Mohamed A. El-Erian, chiefeconomic adviser at Allianz,tweeted, “In addition to high-lighting the strength of theU.S. #economy, this also pointsto the more general theme ofdivergence in advanced coun-tries’ economic performanceand policies.”

Though many economistshailed Tuesday’s report as asign of robust growth continu-ing into the second half of

BY SHARON NUNN

Factories RoaredAhead in August

local delays and high fees undercurrent rules.

—John D. McKinnon

NLRB

Business Groups SeekTo Block Trump Pick

Business groups are seekingto torpedo President Trump’slatest nomination to the Na-tional Labor Relations Board, thebody that referees union-man-agement disputes.

Mr. Trump renominated MarkGaston Pearce, a Democrat withclose ties to labor unions, to theboard last week, a day after theex-chairman first tapped by Pres-ident Obama saw his term expire.

Some business lobbyists are

seeking to block Mr. Pearce’s re-turn.

“It’s no secret that Pearcewas bad for American busi-nesses and their employees,”Matthew Haller, senior vice pres-ident for government relationsfor the International FranchiseAssociation, said Tuesday.

Mr. Haller said he expectsmany Senate Republicans to op-pose the nomination.

—Eric Morath

MONTANA

ACLU Sues U.S. OverOil Pipeline Protests

Civil liberties advocates suedthe U.S. government, alleging lawenforcement agencies have been

maneuvering to crack down onanticipated protests over theKeystone XL oil pipeline.

Attorneys for the AmericanCivil Liberties Union and itsMontana affiliate filed the law-suit in U.S. District Court in Mis-soula against the Defense,Homeland Security, Interior andJustice departments.

The attorneys asked thecourt to order the release of alldocuments about cooperationbetween federal, state and locallaw enforcement and private se-curity firms over the disputedpipeline. They cited confronta-tions between law enforcementand protesters that turned vio-lent during construction of theDakota Access Pipeline.

—Associated Press

Tropical Storm Gordon Makes Landfall on Gulf Coast

READY: A family in Long Beach, Miss., filled sandbags hours before Gordon came ashore late Tuesday near the border with Alabama.

AMANDAMCCOY/THESUNHERALD/ASSOCIATEDPRESS

job.The FBI’s role in the Nas-

sar scandal is also underscrutiny by Congress, includ-ing the Senate Judiciary andSenate Commerce commit-tees, which in July wrote aletter to the FBI’s director,Christopher Wray, seeking in-formation and materials re-lated to the FBI’s handling ofthe matter.

In July, Sen. Chuck Grass-ley (R., Iowa) said in a hear-ing on sexual abuse in Olym-pic sports that his office hadbeen advised by the FBI thatthe investigation had been re-ferred to the Inspector Gen-eral’s office.

In their probe of the bu-reau’s handling of the matter,Justice Department investiga-tors have conducted inter-views with several people, in-cluding athletes andgymnastics officials, two ofthe people said. The investi-gation could lead to disciplin-ary action and criminalcharges.

A spokesman for the In-spector General’s office de-clined to comment. The FBIhas previously said it was“reviewing our role in the in-vestigation” of Nassar and de-clined to comment further.

The Justice Department is

ContinuedfromPageOne

scrutinizing how multiple FBIfield offices acted on—orfailed to act on—gymnasts’claims against Nassar, start-ing in late July 2015, whenUSA Gymnastics leadershipreported the athletes’ con-cerns to the FBI’s Indianapo-lis field office.

The FBI didn’t open a for-mal investigation into Nassaruntil the spring of 2016, inLos Angeles.

In particular, investigatorsare interested in the India-napolis FBI office’s 2015 deal-ings with the gymnasts, aperson familiar with the mat-ter said. Around September2015, an agent in the field of-fice spoke with former Olym-pian McKayla Maroney over

the phone—rather than inperson—to discuss her allega-tions of abuse by Nassar. Thatconversation didn’t lead to aninvestigation.

Investigators are also look-ing into correspondence be-tween former USA Gymnas-tics Chief Executive Steve

Penny and officials at FBIfield offices in Indianapolisand Los Angeles, the peoplefamiliar with the matter said.

In particular, they havescrutinized Mr. Penny’s com-munications with the formerspecial agent in charge of theIndianapolis office, W. JayAbbott, the people said.

By the fall of 2015, the In-dianapolis office had referredthe matter to the FBI office inDetroit, where Nassar lived,but neither field officeopened a formal investigationinto Nassar, and no furtherinvestigative steps weretaken. At least eight monthslater, FBI agents in Los Ange-les opened an investigation.

Mr. Abbott, who retired in

January, couldn’t be reachedfor comment on Tuesday. Ear-lier this year, he told the NewYork Times that the Nassarcase was complicated becauseof the inherent sensitivity ofchild sexual-abuse allegationsand because “there was a vig-orous debate about whether”Nassar’s techniques consti-tuted “a legitimate medicalprocedure,” as Nassar himselfhad claimed.

The Wall Street Journal inFebruary 2017 first reportedthe FBI’s delay in investigat-ing the case and earlier thisyear reported that the FBI’sinternal inspection divisionwas looking into its handlingof the matter.

At the time, federal law-enforcement officials declinedto provide an official explana-tion for the bureau’s apparentinaction, telling the Journalthat neither office ever ob-tained enough information toprove a federal crime.

But behind the scenes, sev-eral of the officials said at thetime and since, the FBI wastrying to determine why itsown agents didn't investigatethe allegations for so long.

In June 2015, the coach ofnational-team gymnast Mag-gie Nichols told USA Gymnas-tics’ leadership that the gym-nast had concerns aboutNassar’s medical care.

Five weeks later, after ahired investigator uncoveredwhat she called likely crimi-nal sexual abuse, Mr. Pennyreported the matter to theFBI in Indianapolis, whereUSA Gymnastics is based.

—Rachel Bachmancontributed to this article.

U.S. LooksAt GymnastAllegations

A gym at Karolyi Ranch in Texas, which was used for USA Gymnastics training. USA Gymnastics saidTuesday that its chief executive, Kerry Perry, below, resigned after nine months on the job.

FROM

TOP:DAVID

J.PHILLIP/ASSOCIATEDPRESS;ALEXWONG/GETTYIMAGES

ISM’s manufacturingindex climbed to thehighest level sinceMay 2004.

THEWALL STREET JOURNAL. * * * * * * Wednesday, September 5, 2018 | A3

U.S. NEWS

Chicago Mayor Rahm Emanuel, appearing with his wife, Amy Rule, announced on Tuesday that he won’t run for a third term.

STACEYWESCO

TT/CHICAGOTR

IBUNE/ASSOCIATEDPRESS

staffed when Harvey hit,” saidChris Currie, director of emer-gency-management issues atthe Government AccountabilityOffice, which wrote Tuesday’sreport. “By the time Maria hitPuerto Rico, they were down tothe bottom of the barrel.”

Workers were most chal-lenged in Puerto Rico. The U.S.territory’s stock of emergencysupplies had already been de-pleted in responding to Irmathere and in the U.S. Virgin Is-lands when Maria hit, takingout cellphone towers and de-stroying the power grid.

Compounding the difficulty

was the island’s lack of experi-ence with storms as powerfulas Maria, the strongest hurri-cane to make landfall theresince a Category 5 recorded in1928, the GAO report said. Theisland’s distance from the U.S.mainland also didn’t help.

Those factors created logis-tical issues for aid workers. Asof April, FEMA had marked$12 billion in disaster aid re-lated to Maria. The report, aFEMA representative said,“captures the complexity ofthe disasters” while also not-ing “concerns about work-force, housing programs and

logistical complications in thesupport of, and response to,the island territories.”

In a letter appended to theGAO report, the Department ofHomeland Security acknowl-edged the challenges of re-sponding to so many disastersin quick succession. “Theseevents came at a time whenFEMA was already supporting692 federally declared disastersand tested the nation’s abilityto respond and recover frommultiple concurrent disasters,”an official wrote.

Mr. Currie said the GAO hasaudits pending that will analyze

issues such as the handling ofdisaster debris and the restora-tion of power in Puerto Rico.

Harvey inundated parts ofthe greater Houston area withas much as 51 inches of rain,causing record-setting floodsin August 2017. Irma sweptthrough the Caribbean andFlorida next, followed by Ma-ria, which hit Puerto Rico onSept. 20.

The GAO report follows anacademic study commissionedby Puerto Rico’s governor andreleased last week that put thedeath toll on the island fromMaria at nearly 3,000.

The devastation of hurri-canes Harvey, Irma and Maria,followed by catastrophic wild-fires in California, over-whelmed federal disaster re-sponders in 2017, according toa government report releasedTuesday.

The unprecedented sequenceof storms and fires forced Fed-eral Emergency ManagementAgency staff to jump from onedisaster to another and in somecases use uncertified workersto fill key roles.

“They were 30% under-

BY ERIN AILWORTH

Hurricanes, Wildfires Taxed FEMA Response in 2017

group. “I think by most objec-tive standards, the city is bet-ter off than when he tookover.”

But the building boom isn’tevenly spread. Rather, it isconcentrated in the city’sdowntown area known as theLoop and in its prosperous—and mostly white—North Side.That disparity has fueled polit-ical tensions as well as an out-migration from the largelyblack South and West Sides.

The population of African-American residents in Chicagodecreased by nearly 80,000 be-tween 2010 and 2016, accord-ing to Census Bureau data.

“The story of populationchange [in Chicago] is a storyof black change, which tellsyou a lot about Chicago,” saidRob Paral, a demographer atthe Chicago Council on GlobalAffairs. “We have this healthyand wealthy central city, andthen especially African-Ameri-can neighborhoods have notjoined in the party, have notjoined in the prosperity.”

In 2013, in an effort to bal-ance a schools budget, Mr.Emanuel closed 50 under-en-rolled schools, enraging neigh-borhoods whose residentsjoined teachers unions in pro-testing the closures.

Mr. Emanuel seemed poisedto weather those divisions un-til 2015, when the city wasforced by a court to releasevideo of a Chicago police offi-cer fatally shooting a blackteenager 16 times. The videosparked outrage and allega-tions of a police coverup,which led to a federal civil-rights investigation of the po-lice department.

Mr. Emanuel fired his policechief, Garry McCarthy, and in-stituted the use of body cam-eras on officers while alsoequipping them with Tasers.

In 2016, fueled by a surge ingang-related gun violence, Chi-

cago’s number of murders sur-passed 700 for the first timesince the crack cocaine wars inthe 1990s, even as most otherbig U.S. cities enjoy two-de-cade lows in violent crime. Themurder rate has subsided in2017 and 2018.

Despite more than $10 mil-lion raised by Mr. Emanuel’scampaign this year, the num-ber of his opponents for nextyear’s election grew to 12. Oneof the first to throw his hatinto the ring was Mr. McCar-thy, the ex-police chief.

—Heather Gillersand Joe Barrett

contributed to this article.

in-state tuition at flagshippublic universities in thehome states of students witha GPA of at least 3.5 and mini-mum 1250 SAT or 26 ACTscore.

President Lawrence Schallsaid the aim was to dispelmyths about the affordabilityof a private-school educationand appeal to more high-achieving students. Ogle-thorpe’s published tuition andfees are $39,830 this year, butscholarship programs meanstudents generally pay farless. The average net price fortuition and fees is $13,700.

“It is about growing thetop of the class,” Dr. Schallsaid. The school now enrollsabout 25% of all students itadmits, but its yield hoversbetween 10% and 15% forthose in the top academicranks.

Oglethorpe, whose overalltuition revenue already hasbeen rising, is also trying toincrease enrollment faster,

across the board. Most of itsstudents come from Georgia,Tennessee and Florida; thecurrent first-year class hailsfrom 17 states.

Listed in-state tuition andfees at the University ofGeorgia and University ofFlorida—$11,830 and $6,380,respectively—are below Ogle-

thorpe’s net-price figure so ifenrollment from those statescontinues to dominate, theschool’s budget could take ahit. If more new studentscome from New Hampshire,where flagship tuition andfees run $18,499, it could be aboon.

Enrollment gains that fol-low big announcementsaren’t always sustained, saidNathan Mueller, a principal atEAB, a consulting firm thathelps schools assess enroll-ment strategy. “The interestseems to cool” once schoolssee analyses about the pro-grams’ potential success, hesaid.

The University of Nebraskaat Kearney started offeringin-state tuition to studentsfrom Colorado and Kansasthis year, trying to offset asteady 1% to 2% annual un-dergraduate enrollment de-cline since 2012.

As a high-school senior inDenver, Brandon Williams fig-ured he would stay in stateunless he got a scholarship.But when he heard about theNebraska school’s price-match program, he jumped atthe opportunity.

The 18-year-old, familiarwith the school through itsbasketball team, recently ar-rived in Kearney to start hisfreshman year.

“Being able to broaden myhorizon without staying in-state caught my eye,” he said.

Last year, Southern IllinoisUniversity Edwardsville, nearSt. Louis, extended in-statetuition to all domestic under-graduates. Since offering therate to Missouri students in2014, enrollment from thatstate nearly doubled, to 1,464last fall; in the same period,enrollment by Illinois resi-dents fell by 868.

Escalating the battle forstudents, some private col-leges are offering to matchpublic in-state tuition.

Oglethorpe University nearAtlanta will match the tuitionof any state flagship univer-sity for high-achieving stu-dents. Robert Morris Univer-sity near Pittsburgh said lastweek it would charge Pennsyl-vania residents the sameprice as local public universi-ties, and give them a $3,000scholarship to boot.

The discounts aren’t lim-ited to private schools. Publicuniversities in Michigan,South Dakota and Nebraskanow let students from otherstates pay as if they were lo-cals. Public schools regularlycharge out-of-state studentstwo or three times as much aslocals, or even more.

Some colleges, facing dwin-dling populations of localhigh-school graduates, aremotivated to attract studentsfrom across the country. Oth-ers are battling the percep-tion they aren’t affordable orlooking to boost their aca-demic profiles. Schools aregetting the word out via bill-boards and social-media cam-paigns.

The price-match guarantee,a sales tactic borrowed fromretailers, illustrates howfiercely competitive highereducation has become. It alsoadds to the confusion overhow much college really costs,especially at private schools.Although the pricing cam-paigns suggest major savings,already generous financial-aidpackages mean the net pricefor many students won’tchange by much.

Beginning in the fall of2019, Oglethorpe will match

BY MELISSA KORN

Colleges Offer Price Matches on Tuition

Oglethorpe University is matching the tuition of any state flagship university for high achievers.

DUSTINCH

AMBERSFO

RTH

EWALL

STR

EETJOURNAL

Deal or No DealPrivate colleges’ list prices have soared, but net costs for tuition, fees,room and board aren’t much higher than list prices for public schools.

THEWALL STREET JOURNAL.Source: College BoardNote: Years marked represent beginning of academic year

50,000

0

$

10,000

20,000

30,000

40,000

1990 2000’95 ’05 ’10 ’15

List prices, public, in-state

List prices, private, nonprofit

Net costs, private, nonprofit

Net costs, public, in-state

raise the money to rebuild thecity’s riverfront and two of itstrain lines.

Between 2011 and 2016, thecity added 300,000 jobs anddozens of corporate headquar-ters including Conagra Brands,McDonald’s and Archer DanielsMidland. Today, dozens ofcranes dot the skyline as de-velopers race to add moredowntown office space andhigh-rise housing.

“He promoted an aura ofeconomic growth that was re-ally significant,” said LaurenceMsall, director of the CivicFederation, a business-spon-sored government watchdog

CHICAGO—Rahm Emanuelsaid he won’t seek re-electionas mayor of Chicago after twoterms marked by downtowndevelopment but also a waveof gun violence that returnedthe city’s murder rate to1990s levels.

The announcement was anabrupt reversal for Mr. Eman-uel, who raised a substantialcampaign war chest and formonths had been laying thegroundwork to run for a thirdterm. But slipping popularityleft him facing headwinds forre-election early next year, witha crowded field of opponents.

“This has been the job of alifetime, but it is not a job fora lifetime,” Mr. Emanuel, 58years old, said in a statementTuesday.

Mr. Emanuel, a former WhiteHouse chief of staff and Demo-cratic congressman, took overin 2011 from a predecessor ofmore than two decades, Demo-crat Richard M. Daley, who hadpapered over the city’s finan-cial problems and left four ofthe main pensions underfundedby nearly $30 billion. Mr.Emanuel addressed those prob-lems by raising property taxesand extricating the city from aseries of derivative deals linkedto the city’s bond debt. Withsome deft political and fiscalfootwork he was also able to

BY DOUGLAS BELKINAND SHAYNDI RAICE

EmanuelWon’t SeekRe-Election

Through Aug. 31Total

Crime StoryMurders in Chicago havedropped after peaking in 2016

THEWALL STREET JOURNAL.

Source: Chicago Police Department

800

0

200

400

600

2011 ’15 ’18

In the latest upset amongDemocrats, Ayanna Pressley, aBoston city councilor who ranas a progressive activist, beat10-term Democratic Rep. Mi-chael Capuano on Tuesday in aMassachusetts House primary.

Ms. Pressley becomes thesecond Democrat to defeat anincumbent House member in a2018 primary. She rode energyfrom the party’s resistance toPresident Trump to topple Mr.Capuano, who Federal ElectionCommission records showraised about twice as muchmoney as she did.

Ms. Pressley’s victory in-stantly thrusts her into theranks of the new Democratic

stars of 2018, alongside NewYork’s Alexandria Ocasio-Cor-tez, the only other Democratto defeat an incumbent mem-ber of Congress this year, andAndrew Gillum, who last weekwon an upset victory to be-come the Democratic nomineefor governor of Florida.

Like Ms. Ocasio-Cortez andMr. Gillum, Ms. Pressley is aminority candidate who waslifted by the progressive en-ergy powering the DemocraticParty in the Trump era.

With no Republican or mi-nor-party candidates on thedistrict’s general election bal-lot, she will enter Congress inJanuary as the first African-American House member fromMassachusetts.

Ms. Pressley, 44 years old,said the congressional district,where racial minorities makeup 58% of residents, deserveda candidate who better re-flected the population of thedistrict.

Mr. Capuano, 66 years old,was an early target for pro-gressive activists looking todefeat incumbent Democratsfrom safe congressional seats.He hadn’t faced a seriousDemocratic or Republicanchallenger since he first wonelection in 1998.

BY REID J. EPSTEIN

ActivistDefeatsIncumbentDemocrat

AyannaPressley beatRep. MichaelCapuano ofMassachusettsin a primaryon Tuesday.

A4 | Wednesday, September 5, 2018 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X * * * * THEWALL STREET JOURNAL.

U.S. NEWS

documents provided by Mr.Bush’s attorney to the Senate Ju-diciary Committee.

Throughout Judge Ka-vanaugh’s career, people close tohim say he has lamented the sys-temic disabilities racism has in-flicted upon African-Americans,yet has been dubious that theConstitution permits aggressivegovernment intervention. He hascriticized “special legislation”for minorities.

But as a student at Yale LawSchool, Judge Kavanaughwrotea law review article recommend-ing procedures to counter the“conscious or unconscious rac-ism” of prosecutors and judgesduring jury selection. As a judge,he has built relationships withblack student groups at the Yaleand Harvard law schools andtaken pride in recruiting theirmembers for clerkships.

Where Chief Justice JohnRoberts saw somuch progress inrace relations that in 2013 he de-

clared tough enforcement provi-sions in the Voting Rights Act of1965 no longerwere justifiable, ayear earlier Judge Kavanaughhad used an elections case tomake a different point.

“Racial insensitivity, racialbias, and indeed outright racismare still problems throughout theUnited States,” he wrote. “Thelongmarch for equality for Afri-can-Americans is not finished.”

That came from a unanimousdecision temporarily blocking aSouth Carolina voter identifica-tion law. In a concurring opinion,the two other judges said thecase “demonstrates the continu-ing utility of Section 5 of theVoting Rights Act”—the provi-sion Chief Justice Roberts’sopinion would mothball a yearlater—in countering discrimina-tory election laws. Judge Ka-vanaugh declined to join thatconcurrence.

As an appellate judge whoheard relatively few civil-rights

results in a select number of [le-gal] cases,” Sen. Mike Lee (R.,Utah) told the nominee.

To Democrats, Judge Ka-vanaugh’s nomination comes an-chored to a presidency thatmany on their side consider ille-gitimate, and they attacked Re-publicans for moving towardconfirmation without the re-lease of millions of pages ofemails and other records relatedto the nominee’s time in theBush White House.

Their choreographed objec-tions began when Sen. KamalaHarris (D., Calif.) interruptedthe committee chairman, Sen.Chuck Grassley (R., Iowa). Shemoved to postpone the hearingbecause there hadn’t been timeto review 42,000 pages of Ka-vanaugh materials releasedMonday evening.

Rather than allowing Mr.Grassley to begin with an open-ing statement, Democratschimed in. “This is not a normalconfirmation hearing,” Sen.Amy Klobuchar (D., Minn.) saidlater. “Foundational elements ofour government, including therule of law, have been chal-lenged and undermined,” nearlyall of which lead directly toPresident Trump, she said.

Republicans said the Demo-crats’ behavior, including inter-ruptions and demands for ad-journment, were inappropriatewhatever their views of thenominee. “If this were a court oflaw, every member on that sideof the dais would be held incontempt of court,” said Sen.John Cornyn (R., Texas). “Thiswhole process is supposed to bea civil one.”

At least one Republicanechoed Democratic concernsabout Mr. Trump. Sen. JeffFlake of Arizona raised thepresident’s Monday tweet at-tacking Attorney General JeffSessions for permitting federalprosecutors to file corruptioncharges against two GOP con-gressmen. “That is why a lot ofpeople are concerned about thisadministration and why theywant to ensure that our institu-tions hold,” he said.

Judge Kavanaugh’s nomina-tion to succeed retired JusticeAnthony Kennedy is expected totilt the ideological balance ofthe court to the right. Demo-crats warned that he would pro-vide a key vote to expand execu-tive power and curtail abortionrights, while Republicans saidhe was exceptionally qualified

and would be a model justice.Supreme Court confirmation

battles have become hard-hit-ting affairs, but even in thatcontext Tuesday’s session wasunusual. “This is something I’venever gone through before in 15Supreme Court nominations,”Mr. Grassley said as he strug-gled to maintain order.

Democrats, recalling thatSenate Republicans held open aSupreme Court seat for a yearrather than consider Judge Gar-land, said they were entitled tomore time to review Judge Ka-vanaugh’s records. “What is therush?” asked Sen. Cory Booker(D., N.J.).

Sen. Lindsey Graham (R.,S.C.), said judicial nominationswere the spoils of Mr. Trump’svictory. “You can’t lose the elec-tion and pick judges,” he said.

cases, it is unclear how thoseviews would add up if he is con-firmed to the Supreme Court.

But it may not take long tofind out. New challenges to affir-mative action—including a suitagainst Harvard College’s admis-sion policy, backed by the Trumpadministration—are in the pipe-line. Race-conscious college ad-missions survived its last testtwo years ago—by one vote, castby Justice Anthony Kennedy,whose seat Judge Kavanaughwould take.

The Senate Judiciary Com-mittee’s top Democrat, Sen. Di-anne Feinstein of California,shares those concerns. “Whileonly a small portion of docu-ments related to Brett Ka-vanaugh’s beliefs about race anddiversity have been provided,even those few documents indi-cate he believes the Constitutiondoes not allow efforts to remedythe effects of racial discrimina-tion,” she said.

Judge Kavanaugh, currentlyserving on the U.S. Court of Ap-peals for the District of ColumbiaCircuit,made race-consciousnesspart of his narrative when Presi-dent Trump announced the nom-ination in July.

His mother, Martha Ka-vanaugh, retired as a state judgein Rockville, Md. But “in the1960s and ’70s, she taught his-tory at two largely African-American public high schools inWashington, D.C….Her exampletaught me the importance ofequality for all Americans,”Judge Kavanaugh said.

WASHINGTON—Assigned inearly 2001 to help remake thefederal benchwith fresh conser-vative faces, Brett Kavanaugh,then an associate counsel toPresident George W. Bush,sought out minority candidatesto produce a slate the WhiteHouse could tout for racial andgender diversity.

The result: Of 11 judicial nomi-nees the president introduced inMay 2001, six wereminorities orwomen.

Two years later, Judge Ka-vanaugh had a different task, onethe future Supreme Court nomi-nee pursued with equal zeal: tocoordinate the administration’sopposition to affirmative actionin cases challenging admissionspolicies at the University ofMichigan.

By a 5-4 ruling the high courtultimately rejected the adminis-tration’s position, upholding theMichigan law school’s use of raceas a “plus” factor within a holis-tic process to promote classroomdiversity.

Judge Kavanaugh said hedidn’t find the two assignmentsinconsistent.

“I continue to see no contra-diction,” hewrote inMarch 2003to a journalist questioning howthe White House could boastaboutminority judicial nomineeswhile fighting affirmative action.“Diversity is a permissible goalbut a statemust use race-neutralcriteria when available,” headded. The email is among the

BY JESS BRAVIN

Kavanaugh Sought Minority Judges

Judicial nominees Brett Kavanaugh helped select in 2001

CNP/DPA

/ZUMAPRESS

end of this congressional ses-sion is because when I left theSenate almost six years ago Ihad no intention of returning,”Mr. Kyl said. “I needed to bewith my family,” he said, add-ing that “in that spirit I amwilling to serve certainlythrough the end of this ses-sion at least in order to makesure that the business thatis…ongoing is taken care of.”

The current session endswhen the Senate adjourns forthe year, meaning the seatcould be open again in a fewmonths. Mr. Ducey, who faceshis own tough general-electionfight in November, said hehopes he can persuade Mr. Kylto stay longer. The appoint-ment technically runs until the2020 special election.

Mr. Kyl, 76 years old,served in the U.S. Senate from1995 to 2013, rising to Repub-

lican whip, the No. 2 spot inthe chamber’s GOP leader-ship. Currently working atlaw firm Covington & BurlingLLP, he had earlier served inthe U.S. House. In the Senate,

Mr. Kyl was seen as an impor-tant voice on defense and for-eign policy, and he traveledon overseas trips with Mr.McCain.

President Trump cheeredthe selection of Mr. Kyl, as didSenate Majority Leader MitchMcConnell (R., Ky.). “Jon Kyl

will be an extraordinary Sena-tor representing an extraordi-nary state,” Mr. Trump said onTwitter. Mr. McConnell calledMr. Kyl an “excellent choice.”

A big order of business forSenate Republicans for the re-mainder of the year is con-firming Supreme Court pickBrett Kavanaugh, whose nomi-nation Mr. Kyl is helping steerthrough the chamber. WhenMr. Kyl is sworn in, Republi-cans will have a narrow 51-49majority. The party also wantsto ensure the government isfunded beyond September,when current funding expires.

The pick of Mr. Kyl, who iswidely respected within theGOP, could help minimize ten-sions within Arizona’s Repub-lican Party, which has splin-tered into two factions: onemore strongly aligned withMr. Trump and one more tra-

ditionally Republican. Bothwings had pushed Mr. Duceyto select a successor whowould reflect their own per-spective.

“This is a very high-quality,consensus pick as Gov. Duceytries to appease the Trumpand McCain factions of the Ar-izona GOP,” said Dan Eberhart,a Republican donor and chiefexecutive of oil-services com-pany Canary LLC.

Mr. Kyl built a record thatmany in the state said servedArizona’s priorities. He alsoplayed a role in immigrationdebates, including pushing aproposal to offer visas toyoung immigrants who ar-rived in the country illegallybut who served in the mili-tary or pursued a college ortechnical degree.

—Natalie Andrewscontributed to this article.

Arizona Gov. Doug Duceychose former Sen. Jon Kyl tofill the Senate seat thatopened up with the death ofSen. John McCain, though itwasn’t clear how long the Re-publican would remain in theposition.

“I am picking him becausehe is the best possible person,”Mr. Ducey said, adding that“no one in the state of Arizonahas the stature of Jon Kyl.”

But in selecting Mr. Kyl, theGOP governor also chose aman who has agreed to as-sume only a caretaker role.Mr. Kyl declined to commit toserving into 2020, when a spe-cial election is to be held tofill the remaining two years ofMr. McCain’s term.

“The reason that I did notwant to commit beyond the

BY SIOBHAN HUGHES

Former Senator to Fill McCain Seat

tives and business interests.“I don’t decide cases based on

personal or policy preferences. Iam not a pro-plaintiff or pro-de-fendant judge. I am not a pro-prosecution or pro-defensejudge. I am a pro-law judge,” hesaid. “If confirmed to the court,I would be part of a team of nine,committed to deciding cases ac-cording to the Constitution andlaws of the United States.”

Mr. Kavanaugh, speakingpublicly for the first time sincehis nomination on July 9, alsooffered gestures in all direc-tions. He thanked Mr. Trump, aRepublican, for his “thoroughconsideration of potential nomi-nees.” And he praised a col-league on his current court, theU.S. Court of Appeals for theDistrict of Columbia Circuit,“our superb chief judge, MerrickGarland”—the 2016 Obama Su-preme Court nominee whom Re-publicans declined to consider.

With midterm congressionalelections approaching, the hear-ing offered a nationally tele-vised forum for Republicans andDemocrats to present theirstarkly different visions of theKavanaugh nomination.

Republicans, stressing thenominee’s elite credentials andprofessional attainments, ac-cused Democrats of politicizingwhat they contended should bea routine confirmation hearing.They barely mentioned Mr.Trump, who selected Judge Ka-vanaugh from a list of potentialnominees recommended by con-servative legal activists.

“This process should beabout your qualifications, yourcharacter and your approach tojudging. It should not be about

ContinuedfromPageOne

DemocratsPush BackAt Hearing

CAMPAIGNWIREMISSOURI

Poll Shows SenateRace a Dead Heat

Sen. Claire McCaskill (D., Mo.)is locked in a dead heat with herGOP challenger in one of themarquee Senate races of 2018,according to a new NBC News/Marist poll. Ms. McCaskill andJosh Hawley, the Missouri attor-ney general, each poll with 47%support, though she has a 4-per-centage-point lead when thefield is expanded to include Lib-ertarian and Green Party candi-dates. Ms. McCaskill is one of 10Senate Democrats running instates President Trump won in2016. How those candidates farewill determine if Republicans canhold on to or expand their ma-jority in the Senate.

—Andrew Duehren

CONGRESS

Pelosi Spells OutHer Party’s Priorities

House Minority Leader NancyPelosi (D., Calif.) sent a letter toall House Democratic lawmakersTuesday outlining three legisla-tive priorities for Democrats tofocus on if they win control inthe midterms: lowering health-care costs and prescription-drugprices; increasing wages andbuilding infrastructure; and“cleaning up corruption”—whichaides say means more oversightof the Trump administration.

The No. 2 House Democrat,Steny Hoyer (D., Md.) said he was“confident” the Democrats willtake the majority in November.Asked who would lead the caucusin that agenda, he deflected.

—Natalie Andrews

FLORIDA

Democrat Leads inBid for Governor: Poll

A Quinnipiac University pollout Tuesday shows DemocratAndrew Gillum leading Republi-can Rep. Ron DeSantis (R., Fla.)50% to 47% in the Florida guber-natorial race. Mr. Gillum, the 39-year-old mayor of Tallahassee,won the Democratic primary lastweek on a progressive platform,defeating better funded candi-dates favored by the state’sDemocratic establishment. Mr.DeSantis, also 39, shot to vic-tory in the Republican primaryon the back of an endorsementfrom President Trump.

—Andrew Duehren

2020 RACE

Kerry Unlikely to Run

John Kerry “doubts verymuch” that he will run forelected office again, he saidTuesday on CBS. Mr. Kerry—aformer senator, secretary ofstate and 2004 presidential nom-inee—is one of more than adozen Democrats who are thesubject of speculation about a2020 Democratic presidential bid.

How longformer Sen.Jon Kyl willremain in thepost isunknown.

Activists wearing costumes inspired by ‘The Handmaid’s Tale’ protest at Brett Kavanaugh’s Supreme Court nomination hearing.JIM

WATSON/AGENCE

FRANCE-PRESSE/GETTYIMAGES

Travel tip: comfortable feet make everythingmore fun. The Un-Sneaker combines the comfortof a sneaker with the style of a shoe. Travel well!

FIRST CLASSTRAVEL FORYOUR FEET

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A6 | Wednesday, September 5, 2018 * * THEWALL STREET JOURNAL.

chemical weapons.“If they want to continue to

go the route of taking overSyria, they can do that, butthey cannot do it with chemicalweapons,” Ms. Haley told re-porters at the United Nations.

Chief U.S. concerns in Syriaare the presence of IslamicState fighters and Iranian-backed military units. The U.S.has around 2,000 troops innortheastern Syria to help

fight the extremist group.The U.N. and other interna-

tional bodies have warned thatan all-out assault could lead toa humanitarian disaster akinto the fall of Aleppo. In con-trast with Aleppo, Idlib’s dis-placed will have few places torun, as Turkey has denied en-try to Syrian refugees and theregime has gained ground.

“Civilians had been anx-iously hoping for world pow-

ers to agree [on] a diplomaticsolution that could avoid anassault that would put thou-sands of innocent lives atrisk,” said Lorraine Bramwell,the International Rescue Com-mittee’s Syria country director.

As the airstrikes intensified,Mr. Trump warned on Tuesdaythat an attack on Idlib “wouldbe a reckless escalation of analready tragic conflict thatwould risk the lives of hun-

dreds of thousands of people.”Mr. Trump warned that the

U.S. would “respond swiftlyand appropriately” if SyrianPresident Bashar al-Assadused chemical weapons.

U.S. officials said they havepicked up indications that Syriais preparing to use such weap-ons, as it did in Idlib provincetwo years ago and last year in aDamascus suburb. In both cases,the U.S. launched limited air-strikes on Syrian regime targets.

The Assad regime is tighten-ing its grip on the entire coun-try, retaking in recent monthsthe Damascus suburb of EasternGhouta and most of the south-ern provinces. It left the northfor last as the battle there iscomplicated by diverging inter-ests of several foreign powersand the largest presence of an-tigovernment fighters.

Leaders of Russia and Iran,Mr. Assad’s main backers,along with Turkey’s presidentare set to meet in Tehran onFriday for talks on what is ex-pected to be the last chapter inthe war. Northwestern Syria isunder a trilateral cease-firedeal brokered last year amongthe three countries, but thathasn’t prevented the regimeand Russia from regularlylaunching strikes in the area.

Idlib is home to nearlythree million people, accord-ing to some estimates, abouthalf of whom have alreadybeen displaced from otherparts of Syria. There is no ex-act information on rebels, butWestern officials estimate thenumber to be at least 20,000.

The drumbeat for what willlikely be the final major battleof Syria’s conflict has beengrowing for weeks.

A commander for the Ahraral-Sham militant group said lastweek that rebels in Idlib weremaking preparations to defendthe province against an attack.“The battle for the north will behell for the Russians, and notlike other areas,” the com-mander, Jaber Ali Bashar, said.

Tuesday’s strikes—about 30targeting an area 25 mileswest of Idlib city—were thefirst large-scale raids in threeweeks, according to the WhiteHelmets civil-defense group.

The Russian Ministry of De-fense wasn’t available for com-ment. On Tuesday, Kremlinspokesman Dmitry Peskovwarned that Syrian armedforces were readying to act inIdlib, where he said militantshad congregated. The Syriangovernment didn’t respond to arequest for comment.

WORLD NEWS

Russian warplanes struckrebels in Syria’s last major op-position stronghold on Tuesday,forcing the Trump administra-tion to confront a looming re-gime offensive that is expected

to deliver a fatal blow in theseven-year conflict and handMoscow a diplomatic victory.

The Trump administrationissued a coordinated call forRussia, Iran and Syria to avoida military assault on Idlib. Pres-ident Trump, Secretary of StateMike Pompeo, United NationsAmbassador Nikki Haley, andGen. Joseph Dunford, chairmanof the Joint Chiefs of Staff, allwarned of a potential catastro-phe if the battle goes forward.

Moscow has dismissed U.S.concerns that Syria again willuse chemical weapons duringthe offensive, a move that hastwice led Mr. Trump to orderlimited airstrikes targeting theSyrian regime. The Kremlin’sresponse has fueled wide-spread skepticism in Washing-ton about Moscow’s intentions,and raised fears that Russiawill give Syria a free hand touse chemical weapons on civil-ians as Syrian forces preparefor a battle that could delivera crippling blow to rebels whohave been fighting the regime.

“We will find out and learnthe extent to which the U.S.has power short of deployingmilitary force,” said NicholasHeras, a Syria expert at theCenter for a New American Se-curity. “The Trump adminis-tration has one more chanceto carve a line in the sand.”

U.S. officials have outlinedno plans to intervene militar-ily in an assault, but theTrump administration haswarned that it could again hitthe Syrian regime if it uses

By Sune EngelRasmussen in Beirutand Dion Nissenbaum

in Washington

Russian Airstrikes Hit Syria Rebel HavenTrump administrationwarns of consequencesof looming regimeeffort to retake Idlib

Smoke rose from buildings hit by Russian airstrikes, above, in rebel-held Muhambal, southwest of Idlib, on Tuesday, while firefighters battled blazes in nearby Jadraya.

OMARHAJKADOUR/AGENCE

FRANCE-PRESSE/GETTYIMAGES

UNITED NATIONS—Presi-dent Trump will chair a UnitedNations Security Council de-bate about Iran during theworld body’s annual gatheringof international leaders thismonth, U.S. Ambassador NikkiHaley said.

Mr. Trump’s Security Coun-cil appearance is scheduled forSept. 26 when he will be inNew York attending the U.N.General Assembly and meetingwith world leaders.

Mr. Trump isn’t seeking aCouncil resolution or state-ment, but rather an opportu-nity to openly discuss whatthe U.S. calls Iran’s “violationsof international law” and itsregional policies, from Leba-non to Syria and Yemen, Ms.Haley said.

By choosing Iran as hismarquee topic at the GeneralAssembly over other interna-tional issues, Mr. Trump isseeking to focus attention onand gain support for one of hiskey foreign policies: pressur-ing and isolating Iran econom-ically and politically.

The U.S. has tried repeat-edly—and failed—to bring Iranto the center of the SecurityCouncil’s monthly debatesabout the Middle East, asother Council members, in-cluding European allies, havegiven priority to other con-flicts and to the Israeli-Pales-tinian peace process.

By hosting a debate on Iran,Mr. Trump will elevate a side-lined Council issue to a majorevent.

Council members have linedup against Mr. Trump’s deci-sion earlier this year to exitfrom the Iran nuclear deal, butmost countries agree with theU.S. position that Iran is a de-stabilizing force in the region.They also share U.S. concernsabout Iran’s ballistic-missileprogram.

BY FARNAZ FASSIHI

PresidentTo HostU.N. TalksOn Iran

lanyi. He was charged withtreason for allegedly encour-aging supporters to stone themotorcade of Mr. Museveni,who has ruled the East Africannation since 1986.

In a Facebook post on Mon-day, the singer, who denies thecharges and is now in the U.S.for medical treatment after be-ing released on bail, gave de-tails of torture he said he wassubjected to by soldiers duringhis arrest, including beatingswith a metal rod. A govern-

ment spokesman said tortureclaims are being investigated.

The standoff between thepop star and the president isthe latest episode in a genera-tional battle playing out in sev-eral African nations. Theworld’s youngest continent,whose citizens have a medianage of 19½ years, has theworld’s oldest leaders, accord-ing to the United Nation’s de-velopment agency. Lacking jobsand opportunities, many youngpeople are feeling little alle-giance to governments led byformer liberation movements.

“Assertive and rebelliousyouths have put Museveni andhis club of the region’s otherold presidents on notice,” saidNicholas Ssengoba, a Kampala-based independent analyst.“It’s a shock challenge, whichold leaders have to contendwith in the foreseeable future.”

With a median age of 16years, Uganda has Africa’s sec-ond-youngest population afterNiger, but it is ruled by one ofthe continent’s oldest and lon-gest-serving presidents. Mr.Museveni has maintained abigger public profile than someof his fellow longtime rulers.

Last year, Mr. Museveni re-moved term limits from theconstitution and in July im-posed a tax on social-mediause, which he blames forspreading “fake news.” He hasclosed critical media and pro-democracy groups and arresteddozens of journalists.

Government data, mean-while, show that 3.4 millionUgandans slipped into povertyduring the past five years,youth unemployment standsabove 60%, and public hospitalsroutinely lack basic medicine.

In this context, Mr. Wine’smusic, which he calls “edutain-ment,” resonates. “We knowyou fought a bush war,” hesings about Mr. Museveni inhis 2017 single “Freedom.”“But imagine a child whowasn’t born when you came[into power] has now becomea parent.”

Critics point to Mr. Wine’slack of experience—he waselected as an independentmember of Parliament only lastyear—as an impediment in a

KAMPALA, Uganda—In hissongs, Bobi Wine, a Ugandanpop star turned parliamentar-ian, frequently taunts longtimePresident Yoweri Museveni,calling the 73-year-old an ag-ing despot who has forgottenhis country’s youth.

Now, Mr. Museveni is slap-ping back. In August, Ugandansecurity forces arrested the36-year-old, whose legal nameis Robert Ssentamu Kyagu-

BY NICHOLAS BARIYO

Uganda Generation Gap Echoes Across Africa

Bobi Wine was released on bail in Gulu, Uganda, on Aug. 27.

AGENCE

FRANCE-PRESSE/GETTYIMAGES

country whose politics havebeen dominated by formerguerrilla fighters. The coun-try’s opposition is fractured.

“Bobi Wine has not beentested as a leader. He does noteven have a political party,”said David Karungi, an aca-demic at Uganda’s KyambogoUniversity, who supports Mr.Museveni’s National Resis-tance Movement.

The president has called Mr.Wine and other critical law-makers “unprincipled politi-cians who mislead our youthinto rioting,” and intensified acrackdown on the singer andhis supporters. In December,Mr. Wine was one of severallawmakers beaten by soldierson the floor of Parliamentwhen they tried to filibuster a

bill to extend Mr. Museveni’srule. Days later, a grenade washurled at his home.

But Mr. Wine’s fans haven’tbeen deterred. In the wake ofhis arrest, Mr. Wine’s recordingstudio in the slum of Kam-wokya, outside the capitalKampala, has become a meet-ing point for jobless youngmen. Police have repeatedlyfired tear gas to disperse them,but many keep returning.

“Bobi Wine understandsour problems better than any-one else,” said Daniela Lufafa,a 29-year-old unemployedbutcher, who was outside thestudio Thursday evening.“Those in power are scared ofhim because he speaks for theordinary people like us. Welove him.”

Cameroon

Uganda

Zimbabwe

Republic of Congo

Equatorial Guinea

Rwanda

U.S.DemocraticRepublic of Congo

0 20 40 60 80

Population’s median age, 2015 Leader’s age

Age gap

Deep DivideA number of Africa’s longtime rulers lead countries where themedian age is a quarter of their own.

Sources: U.N. Department of Economic and Social Affairs (median ages); U.N. reports,government statistics, Encyclopedia Britannica (leader ages)

THEWALL STREET JOURNAL.

OMARHAJKADOUR/AGENCE

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THEWALL STREET JOURNAL. * * * * Wednesday, September 5, 2018 | A7

Chinese Family Aids Kim DynastyFrom a 1930s wartime partnership, Kim dynasty’s tie to the Zhous of China stretches ‘like the Yalu River’

DANDONG, China—Eightdecades ago, a Chinese com-mander named Zhou Bao-zhong fought Japanese forcesalongside the future founderof the North Korean dictator-ship, Kim Il Sung.

The battlefield alliance be-came a relationship that haslasted three generations, afamily story rich in propa-ganda value for the neighbor-ing communist countries.

It was also the foundationfor commerce, part of a Chi-nese trade and investmentlifeline that long nourishedNorth Korea and could do soagain if international sanc-tions are eased.

Businesses connected tothe Zhou family helped en-rich North Korea as Pyong-yang plowed much of its na-tional income into weaponsdevelopment, according to aninvestigation by The WallStreet Journal. Business re-cords, official media reportsand interviews connect theChinese commander’s familywith North Korean industriesincluding mining, trade andconsumer goods.

Sanctions have curtailedChinese trade with North Ko-rea in the past year, and amember of the family toldthe Journal that the Zhousdon’t do business in NorthKorea.

But the relationship be-tween the two families en-dures. In the past two years,family representatives haveendorsed the military pur-suits of North Korean leader

BY JAMES T. AREDDY

WORLD NEWS

WASHINGTON—PresidentTrump and South Korean Presi-dent Moon Jae-in agreed tomeet this month in New Yorkduring the United Nations Gen-eral Assembly as they seek tobreak an impasse over theirshared goal of denuclearizingNorth Korea.

The two leaders spoke byphone about negotiations withPyongyang and agreed to con-tinue the conversation duringU.N. meetings, the White Housesaid on Tuesday.

Mr. Moon also briefed Mr.Trump on meetings scheduledfor Wednesday between a teamfrom South Korea and KimJong Un, the North Koreanleader, in Pyongyang. Mr.Moon is scheduled to meetwith Mr. Kim this month inNorth Korea.

Mr. Trump expressed frus-tration with the deadlockedpeace process in a series ofTwitter posts last week inwhich he lashed out at Chinaand raised the prospect of re-suming joint U.S. military exer-cises with South Korea andJapan that would be “far biggerthan ever before.”

Pyongyang has said the U.S.needs to reciprocate North Ko-rea’s gestures—among them,the dismantling of its under-ground nuclear test site andthe return of U.S. war re-mains—with a statement de-claring an official end to theKorean War.

Meanwhile, Chinese Presi-dent Xi Jinping is sending alieutenant to North Korea’s70th anniversary celebrations,instead of going himself, a deci-sion some experts said reflectsChina’s balancing act betweenPyongyang and Washington.

Li Zhanshu, a member ofChina’s seven-person Commu-nist Party leadership, willtravel to Pyongyang as Mr. Xi’senvoy at weekend events com-memorating North Korea’sfounding, the Chinese andNorth Korean official news ser-vices reported Tuesday.

The announcement quashesspeculation that Mr. Xi woulduse the occasion to visit Pyong-yang, after Mr. Kim’s threetrips to China this year.

—Chun Han Wongcontributed to this article.

BY MICHAEL C. BENDER

Trump,Moon toMeet inNew York

TOKYO—One of Japan’s larg-est airports, Kansai Interna-tional, was closed indefinitely bydamage from the nation’s mostpowerful typhoon in 25 years.

The bridge that links the is-land airport with the mainlandwas hit by a storm-driventanker ship Tuesday, shearingoff one chunk and dislodging asection of roadway from therest of the bridge. At the air-port itself, one runway wasunder water and one termi-

nal’s basement was flooded,an airport spokesman said.

The airport, near Osaka,serves as one of the nation’smain gateways for Asian tour-ists. Japan Airlines said 150passengers and 600 staff werestill at the airport as of Tues-day night. All Nippon Airwayssaid 65 customers and 290employees were at the airport.An airport spokeswoman saida total of 3,000 customers andairport staff were strandedthere Tuesday.

On Wednesday morning, the

airport started evacuatingpassengers by ship to a port atKobe Airport, which is about1.5 hours away from Kansai In-ternational, the spokeswomansaid. So far, three ships haveevacuated about 300 peopleand ships will pick up custom-ers every 15 minutes, she said.

A terminal for low-cost car-riers escaped major damage,but its runway was closed. Thespokeswoman said it was stilltoo soon to say when the air-port might reopen.

Japan had been preparing

for days for Typhoon Jebi,which carried peak winds ofaround 130 miles an hour andbrought heavy rains to muchof central Japan.

No trains or cars were onthe bridge when it was struck,and NHK said all 11 crew mem-bers aboard the ship wereevacuated without injury. Na-tionwide, NHK said, at leastseven people were killed andmore than 300 injured.

Japan Airlines and All Nip-pon Airways both canceledhundreds of flights.

BY MEGUMI FUJIKAWA

StormDamage Cuts Off Major Japan Airport

Kim Jong Un, attended aPyongyang reception he ar-ranged, prospected for goldin North Korea and, in April,paid a weeklong visit, ac-cording to people familiarwith the matter and officialreports.

All three North Korean dic-tators have welcomed visitsby the Chinese commander’snow 76-year-old daughter,Zhou Wei, celebrating her asa lasting reminder of the na-tions’ shared “anti-Japaneserevolutionary struggle.”

North Korean media docu-ment Ms. Zhou’s visits toPyongyang, where she hasset a wreath inscribed with“Zhou Wei Family Tribute,Everlasting Glory” at theKim Il Sung Mausoleum andconfirmed the citizenry had“rallied close around Mar-shal Kim Jong Un.”

With family friendship hascome commercial access. TheJournal found official regis-tration documents for threecompanies in China, includ-ing Ms. Zhou’s flagship Dan-dong Weimin InternationalTrade Co., that name Ms.Zhou, her husband and twodaughters as shareholders ordirectors. North Korean andChinese official media namethose businesses and affili-ates in reports about mining,trading and other commercein North Korea.

In China, a Weimin busi-ness a few years ago adver-tised advisory services byboasting that with 20 yearsof experience it “can helpsolve any problem thatarises when investing in

ventures, including a Weiminmine, formed during a burstof deal making in North Ko-rea earlier this century; theventures drew at least $2.32billion in investment and Chi-nese enterprises were part-ners in 75% of them.

The North Korean econ-omy, hobbled by sanctions,shrank by 3.5% last year, itsworst downturn since 1997,according to South Korea’scentral bank.

If the U.N. relaxes NorthKorea sanctions, Chinese en-trepreneurs would pounce.“It’s like they could turn aswitch overnight,” said Nich-olas Eberstadt of the Ameri-can Enterprise Institute inWashington.

When Mr. Kim visited Bei-jing in March, Chinese Presi-dent Xi Jinping recalled howtheir forefathers shaped a“deep revolutionary friend-ship.” None connects the re-gimes more than the Chinesecommander’s legendary ca-maraderie with Mr. Kim’sgrandfather.

Last summer, Zhou Wei’sphoto came in handy for Chi-nese mining engineer FanZhongli. Mr. Fan said Weiminsent him to North Korea toevaluate two gold deposits.Gasoline was almost impossi-ble to find, he told the Jour-nal, but his handlers secureda tankful at a military depotby explaining “the chair ofour company has a reallygood relationship with yourgreat leaders.”—Chunying Zhang in Shanghaiand Yun-hwan Chae in Seoul

contributed to this article.

North Korea!”Few specifics about the

North Korea operations andfinancial performance of thecompanies could be learned.People answering Weimin’sphones wouldn’t answerquestions from the Journal;its registered address inDandong, near China’s bridgeacross the Yalu River toNorth Korea, is a single-cargarage.

Ms. Zhou is a retired Peo-ple’s Liberation Army doctorand lives in a Beijing com-pound for cadres near Ti-ananmen Square, accordingto records at the militaryhospital where she served.When a Journal reporterknocked on her green door inMarch, it was opened by Mao

Weiran, Ms. Zhou’s husband.“We do not do business,”

Mr. Mao said when askedabout North Korea, referringquestions to China’s PLA be-cause both are retired offi-cers. The military didn’t re-spond. The family didn’trespond to written questions.

Before China joined theU.S. and other United Na-tions members last year inbanning most trade and in-vestment with North Koreato protest its nuclear pur-suits, Chinese companies hadspent over a decade modern-izing the mines and factoriesthat made its weapons pro-gram possible.

A declassified U.S. CentralIntelligence Agency compen-dium lists 351 foreign joint

Source: Harvard University's Center forInternational Development THEWALL STREET JOURNAL.

LifelineExports to China, particularly coal, were an important revenue sourcefor North Korea before sanctions got in the way in 2017.

Annual value of North Korean exports

$3billion

0

1

2

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

Coal to China Other goods to ChinaExports to rest of world

The bridge to Kansai International Airport was damaged by a tanker in the typhoon. At least seven people were killed in the storm.

KENTA

ROIKUSH

IMA/M

AINICHIN

EWSPAPER/ASSOCIAT

EDPR

ESS

WORLDWATCH

CHINA

Xi, African LeadersAffirm Project Goals

Chinese President Xi Jinpingand African leaders reaffirmedjoint development goals at theconclusion of a Beijing summitshadowed by a debt crisis amongsome African nations and ques-tions about China’s role in it.

Following two days of meet-ings with top officials from morethan 50 African nations, Mr. Xisaid their interests align onstrengthening developing nationsand that Beijing is a defender ofthe continent’s success.

Mr. Xi’s drive to put a stampon globalization has met with in-creasing challenge from foreign-aid experts, who say China’s proj-ects can leave nations drowningin debt, and from the Trump ad-ministration, which says Chineseexport strategies eliminate jobsin its trade partners’ economies.

—James T. Areddy

SOUTH AFRICA

Economy SlipsInto Recession Mode

The South African economyfell into a recession in the secondquarter, the statistics office said,dealing a blow to President CyrilRamaphosa less than a year be-fore national elections.

The gross domestic product ofAfrica’s most developed economyshrank by an annualized 0.7% be-tween April and June—following a2.6% contraction in the first quar-ter—on the back of bad perfor-mances in agriculture, transportand trade, among other sectors.

After the GDP data were re-leased, the rand weakened 2.5%to 15.25 to the dollar, deepeninga monthslong selloff and pilingpressure on Mr. Ramaphosa andhis African National Congressparty ahead of elections due byAugust 2019.

—Thandi Ntobela

PHILIPPINES

Duterte OrdersArrest of a Rival

Philippine President RodrigoDuterte ordered the arrest ofhis most vocal and prominentcritic on Tuesday, revoking anamnesty granted to a senatorby his predecessor as he inten-sifies a crackdown on his politi-cal opponents.

The move against Sen. Anto-nio Trillanes IV is the secondtime a serving senator andpresidential critic has been tar-geted by law enforcement underMr. Duterte, who also supportedthe ouster of a Supreme Courtchief justice this year.

A presidential proclamationsaid Mr. Trillanes failed to com-ply with requirements for anamnesty, granted eight yearsago, to cover his role as aleader of a failed military coupin 2003.

—Jake Maxwell Watts

GERMANY

Leftists Unveil NewPolitical Movement

German leftists launched across-party political movementaimed at wooing back voterslost to right-wing populists, put-ting the political landscape underthreat of further fragmentation.

The group—called Aufstehen,or Stand Up—is backed by prom-inent members of the SocialDemocrats, now a junior partnerin the government, as well asthe opposition Greens and theradical Left Party.

It has said it aims to targetvoters on the right with a mix-ture of socialist prescriptionsand cautious criticism of immi-gration.

The movement is attemptingto address a yearslong weaken-ing among left-leaning parties, atrend seen across Europe.

—Bojan Pancevski

A museum for China’s Zhou Baozhong in Yunnan, left; Zhou and Kim Il Sung, right, in 1948 with their wives and children—Zhou Wei and future dictator Kim Jong Il.

CHINAMINZU

DAILY

YANGZH

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A8 | Wednesday, September 5, 2018 THEWALL STREET JOURNAL.

WORLD NEWS

cance of Mr. Kaepernick’s in-volvement in its marketing, say-ing he is one of many athletesfeatured as part of the brand’s30th anniversary of the “JustDo It” campaign. A spokes-woman pointed to ads featuringtennis star Serena Williams andNFL player Shaquem Griffin,who became the first one-handed player to be drafted inthe Super Bowl era. “All ofthose athletes embody the ‘JustDo It’ spirit,” she said.

The company declined tocomment on whether it hadexpected any backlash fromfeaturing Mr. Kaepernick.

In a statement, NFL spokes-woman Jocelyn Moore said theleague embraces its responsi-bility to promote change. “Thesocial justice issues that Colinand other professional athleteshave raised deserve our atten-tion and action,” she said.

Mr. Kaepernick has beensigned with Nike since hisdays as an emerging star withthe 49ers. A person familiarwith the negotiations said a

new deal was struck that willpay him a “top of the line,”multiyear deal for footballplayers that will include ashoe and apparel line. Mr.Kaepernick hadn’t been fea-tured in Nike campaigns re-cently and has gone unsignedby teams since March 2017,leading to his collusion griev-ance against the league.

Mr. Kaepernick’s discussionson a new deal with Nike havetaken place since around thestart of this year, the personsaid, which was also in themonths before Nike and theNFL completed their new ap-parel deal. Around March, Mr.Kaepernick also received inter-est from other apparel compa-nies including Puma SE andAdidas AG. The person said Mr.Kaepernick’s previous deal withNike went through mid-2019,all leading to the new pact.

Representatives of Adidasand Puma didn’t respond torequests to comment.

During a question-and-an-swer session at a sports-indus-try conference in April, Adidasexecutive Mark King said thecompany would “definitelywant to sign” Mr. Kaepernickif he signed with a team.

Recent data from a WallStreet Journal/NBC News shedlight on the divisiveness of theplayer protests during the na-tional anthem. In total, 54% ofrespondents said they found

the protests to be not appro-priate, versus 43% who did.

But those numbers sharplydiverge by demographic. Peo-ple between ages 18 and 34, akey target audience for anyapparel brand, view the dem-onstrations more favor-ably—56% said they found theprotests appropriate. Olderfans overwhelmingly deemedthem to be not appropriate, asdid Republicans—only 10%said they were appropriate.

Some on social media, in-cluding prominent athletes andother celebrities, have praisedMr. Kaepernick, saying he hasdrawn attention to issues suchas police brutality and criminal-justice reform. Basketball starLeBron James, who is spon-sored by Nike, shared the im-age of the new ad campaign onhis Instagram page. Actress Ja-mie Lee Curtis tweeted: “Theswish got it right!”

Sentiment expressed aboutNike on social media, blogsand other websites turnednegative after news of Mr.

Kaepernick’s involvement inthe campaign was released,according to data from Brand-watch, a social-media monitor-ing company. Not includingneutral references, more than90% of Nike-related mentionswere positive in the days lead-ing up to the news, the datashow. Positive sentimentdropped to about 50% onMonday and 40% on Tuesday.

Doug Hamburger, 62, wholives in Knoxville, Tenn., saidhe and his wife are Gold Starparents and take issue withNike describing Mr. Kaeper-nick’s actions as “sacrificingeverything.” “We said forgetit, we can walk away fromNike,” the retired district man-ager said.

Miranda Lang, 23, who livesin Washington and works at anonprofit, said she intends tobuy more Nike products as aresult of the campaign. “In thelast year or so, I have made aconscious effort to spend onbrands that support the thingsI support,” she said.

Former San Francisco 49ersplayer Colin Kaepernick

TEDS.WARREN/ASSOCIATEDPRESS

competitive sports market.Mr. Kaepernick revealed his

role in the campaign with aMonday tweet that said: “Be-lieve in something, even if itmeans sacrificing everything.#JustDoIt.” The tweet, whichwas shared by Nike on its offi-cial account, included a black-and-white picture of Mr. Kaep-ernick’s face.

An NFL executive said theleague had received a “modestheads-up” that Mr. Kaepernickwas going to be used again byNike, but the exact messagingattached to him and the extentof the revitalized commercialrelationship with the playerwasn’t made clear.

Nike played down the signifi-

ContinuedfromPageOne

amid patchy progress in talksbetween London and Brusselsand infighting in Parliament.

“I am willing to do what-ever else I can in order topromote both a smooth Brexitand an effective transition atthe Bank of England,” Mr.Carney said in testimony toParliament’s Treasury Com-mittee.

Mr. Carney’s term hadbeen due to end in June 2019,six years after he took up thepost. He initially planned toserve only five years butagreed in late 2016 to stay onan extra 12 months to steerthe economy past its ex-pected March 2019 exit fromthe EU.

Since then, uncertaintyabout what will happen inMarch has intensified. Expec-tations for a smooth and or-

derly British exit from the EUhave taken a hit as negotia-tions have dragged on with-out agreement. Prime Minis-ter Theresa May’s efforts tounite her ruling ConservativeParty and lawmakers morebroadly behind her Brexit vi-sion are unraveling.

London and Brussels havestepped up preparations forthe possibility of talks endingin March without an agree-ment on terms of Britain’swithdrawal—an outcome thatpolicy makers, executives andeconomists warn would causewidespread disruption totwo-way trade.

Mr. Carney’s willingness tostay on provides a measure ofreassurance, said David Owen,chief European economist atJefferies in London. “The per-ception of international in-

LONDON—Bank of EnglandGov. Mark Carney signaledthat he is willing to stay onas head of the U.K. centralbank beyond his planned de-parture date next year, offer-ing a measure of stability inBritish policy making as thecountry prepares to leave theEuropean Union.

In testimony to lawmakersTuesday, Mr. Carney said hehad discussed the possibilityof extending his tenure withTreasury chief Philip Ham-mond and a decision on hisfuture should be made publicsoon.

The central-bank chief said“a measure of continuity”might help the Brexit process,which is mired in uncertainty

BY JASON DOUGLASAND PAUL HANNON

BOE Chief Willing to StayLonger for Brexit Stability

vestors and investors here inthe U.K. is that we have gotcontinuity. In the event of nodeal, there will be a grown-upcontrolling monetary policy,”he said.

Mr. Carney didn’t say howlong he might stay on. Con-

servative lawmaker NickyMorgan, head of the TreasuryCommittee, said the govern-ment needs to provide fur-ther clarity swiftly. “Stabilityis vital during this importantperiod,” she said.

A spokeswoman for the

Treasury, which handles theappointment of BOE officials,said it would make an an-nouncement “in due course.”

Agreeing to an extensionto Mr. Carney’s term wouldalso give the Treasury extratime to find a successor.

Unemployment in the U.K. hasalmost halved...

Unemployment rate*...and the economy has grown...

GDP†

...but inflation has been volatile.

Consumer-price inflation†

Report CardA look at Mark Carney’s tenure at the Bank of England

Sources: U.K. Office for National Statistics (Unemployment, CPI); Eurostat (GDP) THEWALL STREET JOURNAL.*Quarterly data; †Annualized quarterly change

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AfterBrexit vote

FROM PAGE ONE

Nike FacesKaepernickBacklash

THEWALL STREET JOURNAL. * * * * Wednesday, September 5, 2018 | A9

WORLD NEWS

troversy and his response.“With persons lacking goodwill, with persons who seekonly scandal, who seek onlydivision,” the proper responseis “silence and prayer,” hesaid.

According to ArchbishopViganò, Pope Benedict or-dered the American cardinalto move out of the seminarywhere he had been living andbanned him from publicly cel-ebrating Mass, among otherrestrictions.

Pope Francis learned aboutthe cardinal’s behavior andhis punishment from Arch-bishop Viganò, but didn’t en-force the sanctions and in-stead made Cardinal

McCarrick a powerful adviseron Vatican foreign pol-icy and the appointment ofU.S. bishops, the archbishopsays. He has called for thepope to resign.

Now-Archbishop McCarrickbecame the first man to resignas a cardinal in nearly a cen-tury, after a church investiga-tion found credible a chargethat he had sexually abused ateenager in the early 1970s. Hehas said he can’t recall the in-cident with the teenager. Hislawyer has said he deservesdue process with regard toArchbishop Viganò’s allega-tions.

In the absence of any re-sponse by the Vatican, ques-

tions remain open about theextent of sanctions imposedon then-Cardinal McCarrick.Witnesses confirm he movedout of his apartment at aWashington seminary in early2009.

But the cardinal continuedto celebrate Mass in public,even at the Vatican, and ap-peared at events with PopeBenedict—suggesting that, ifthe former pope had restrictedhim to a life of private “prayerand penance,” it wasn’t en-forced. Retired Pope Benedicthasn’t commented on the af-fair.

Some observers have ques-tioned why Pope Benedictwould have kept sanctions on

Cardinal McCarrick secret.But doing so is common prac-tice in the case of bishops,present and past Vatican offi-cials say.

Others have questionedwhy Archbishop Viganòwarmly praised Cardinal Mc-Carrick as an ambassador“very much loved from us all”at a gala dinner in 2012 if heviewed the cardinal as a pa-riah. The archbishop has sug-gested he was just being dip-lomatic.

Several U.S. bishops havereleased statements praisingArchbishop Viganò as a man ofhonesty, while others have ac-cused him of ill will towardthe pope.

ROME—The Vatican hasn’tissued a response more than aweek after a former Vaticandiplomat accused Pope Francisof covering up sexual miscon-duct, but former officials aredisputing some his claims—while other churchmen havevouched for his integrity.

On Sunday, two former pa-pal spokesmen challenged theaccount of Archbishop CarloMaria Viganò, former Vaticanambassador to the U.S., abouta 2015 meeting he had withPope Francis.

Archbishop Viganò’s claimthat the pope rehabilitated afavorite U.S. cardinal who thearchbishop said had been pun-ished for sexual activity withseminarians has shocked theCatholic Church, deepening di-visions between the pope’sprogressive supporters andconservative critics such asthe archbishop.

The archbishop’s indict-ment, published Aug. 25,landed amid an escalating cri-sis over the church’s handlingof sexual abuse of minors bypriests in the U.S., Australiaand Latin America.

The accusations threatento damage Pope Francis’smoral authority, and under-mine his agenda of increasingthe church’s focus on social-justice issues such as immi-gration, poverty and the envi-ronment.

The pope has stayed silenton the archbishop’s main accu-sation against him: that hedisregarded sanctions that hispredecessor, Pope BenedictXVI, had placed on then-Cardi-nal Theodore McCarrick, a for-mer archbishop of Washing-ton.

“The truth is meek, thetruth is silent,” Pope Francissaid in a homily on Monday, ina possible allusion to the con-

BY FRANCIS X. ROCCA

Pope’s Accuser Sparks Church DivisionsDoubts, support followVatican ex-diplomat’sclaim that Franciscovered up sex abuse

Pope Francis celebrating Mass on Tuesday at Santa Marta, the boarding house where he resides at the Vatican.

VATICA

NMEDIA/AGENCEFRANCE-PRESSE/GETTYIMAGES

Cardinal ConsultsPriests on Next Step

Cardinal Donald Wuerl,the beleaguered archbishopof Washington, D.C., faced amixture of calls to resign andto stay in his post frompriests in his diocese at ameeting Monday, according topeople who were present.

At an annual Labor Daygathering, Cardinal Wuerl toldmore than 100 clergy that hehad met in Rome the previ-ous week with Pope Francis,who instructed him to conferwith his priests over whatstep to take next. The cardi-nal has faced growing pres-sure to resign in recentweeks, following criticismthat he mishandled allega-tions of sexual abuse.

Following an openingprayer and brief remarks byCardinal Wuerl, more than adozen priests spoke for morethan an hour in total, thepeople present said. Thoughthe tone was cordial, somesuggested that it might betime for the cardinal to stepaside; others encouraged himto stay and be part of thechurch’s healing process.

The cardinal said little inresponse to the comments. Hereceived two standing ova-tions during the event at aMaryland church and grew vis-ibly emotional at the end, thepeople who were present said.

Ed McFadden, a spokesmanfor the Archdiocese of Wash-ington, said the reception frompriests was mostly positive.

A report released lastmonth by the attorney gen-eral of Pennsylvania detaileddecades of sexual abuse bymore than 300 priests in thestate. Cardinal Wuerl, whoserved as the archbishop ofPittsburgh from 1988 to2006, has been criticized fornot doing enough to keeppriests accused of abusefrom returning to ministry.

—Ian Lovett

This is Not HowYou Make a Decision

Make a smart decision with TheWall Street Journal’s college

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compare schools, investigate the factors that matter most to you,

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A10 | Wednesday, September 5, 2018 * * * * * THEWALL STREET JOURNAL.

executives say that as Face-book’s reach and influence ex-panded, her deliberate man-agement style made it difficultto resolve issues and bringthem to a close and at timesobscured the big picture.

“Bad actors, pornography,racist content, sexist contentand concerns about new adproducts and privacy. None ofthis stuff is new,” recalls oneformer employee who was inthe meetings.

Some current and formeremployees have asked whetherMs. Sandberg’s outside activi-ties proved a distraction whenFacebook’s challenges hit. Herfirst best-seller “Lean In,”which in 2013 Oprah Winfreycalled “a manifesto for womenin the workplace,” spawned afoundation and a thrivingspeaking career.

After the sudden death of herhusband in 2015, SurveyMonkeyCEO Dave Goldberg, she turnedher journals about the deathinto “Option B,” which was pub-lished in April 2017.

The book got a big publicitypush through much of 2017,adding trips to places likeHouston, Cleveland, and Dur-ham, N.C. She recorded inter-views with Oprah, Stephen Col-bert and Ellen DeGeneres. Mr.Zuckerberg was away a lot toothat year, fulfilling the personalgoal he’d set to visit 30 U.S.states he’d never seen before.

This was a time when Face-book’s problems were intensi-fying. Among other things,Facebook’s security team wasuncovering more evidence ofadditional Russian interferenceon the platform; legislatorswere increasingly frustratedwith the social media giantand hate speech was fuelingmore violence overseas.

People close to Ms. Sand-berg strongly dispute the sug-gestion that she was distractedand say she scheduled herbook tour around her work ob-ligations. “A lot of CEOs play

FROM PAGE ONE

Ms. Sandberg started atFacebook when Mr. Zuckerbergwas 23 years old and famouslygreen as a corporate executive.A former Google executive, shebecame the company’s busi-ness strategist and residentgrown-up, with direct respon-sibility for advertising sales,legal and policy issues. This al-lowed Mr. Zuckerberg to focuson engineering challenges.

The business grew up thatway—in two parallel parts.While senior leaders workedcollaboratively, Mr. Zuckerbergand Ms. Sandberg effectivelyran two separate businessesthat share the same campus,according to a number of cur-rent and former employees.“The Sheryl world and Mark’sworld of all the technical stuffare operated very differentlyand at very different paces,”says one person who hasworked closely with them.

Engineering buddiesMr. Zuckerberg’s organiza-

tion is the technology engineof the company, filled with en-gineering buddies who havehis ear and, for better orworse, are empowered tomove quickly and messily. Ms.Sandberg is by nature moremethodical and cautious, host-ing numerous meetings as herteam calibrates the impact ofpotential policy changes andbusiness decisions.

The company as a whole, in-cluding Mr. Zuckerberg’s team,was for years focused primar-ily on growth and developingnew products, rather thansafety and security. Last year,Mr. Zuckerberg said that washis responsibility and that heis moving to fix the imbalance.

Sue Desmond-Hellmann, aFacebook board member andCEO of the Bill & MelindaGates Foundation, says Ms.Sandberg is an “exceptionalbusiness executive.” Yet shewouldn’t have had all of the

Q1 and Q2Annual revenue

Book of BusinessFacebook's platform hasremained popular withadvertisers, despite recentcontroversies.

THEWALL STREET JOURNAL.Source: FactSet

$40 billion

0

10

20

30

2012 ’14 ’16 ’18

power to solve the problemsthat were surfacing at thecompany, she adds.

“Even though it is a greatpartnership, I will say there’s amaterial difference betweenbeing CEO and being COO,”says Dr. Desmond-Hellmann,former president of the bio-tech firm Genentech Inc.“While they both discuss pri-orities, ultimately Mark makesthe calls on personnel alloca-tion—not just how much tospend but what percent of theengineering staff works onthings as well.”

Ms. Sandberg became afeminist icon by encouragingwomen to “lean in” and notshy away from daunting work-place challenges. As shesteered Facebook’s torridgrowth—its 2017 net incomewas more than $15 billion—sheraised two children, wrote twobest-selling books, gave com-mencement speeches and TEDTalks, and was a regular at Da-vos and Allen & Co.’s Sun Val-ley Conference.

A compulsive organizer, Ms.Sandberg manages her packedschedule of Facebook, familyand book-writing in part bymaking “to-do-lists of to-do-lists of to-do-lists,” says psy-chologist Adam Grant, who co-wrote a book, called “OptionB,” with her.

Over 20 years of workingtogether, “she has gonethrough I don’t know howmany thousands of these littlenotebooks that fit nicely in thepalm of your hand,” says DavidFischer, Facebook’s vice presi-dent for business and market-ing partnerships. “She has listsfor each person as well as her-

self so when I go in and havemy one-on-one with her latertoday, she will flip to my nameand there will be a set of is-sues. It’s effective.”

During the Cambridge Ana-lytica crisis, Ms. Sandbergworked through the weekendsand school functions. Duringthe depths of the crisis, herdaughter starred in a schoolmusical, according to peoplefamiliar with her schedule. Ms.Sandberg was seen pacing thecourtyard during intermissionon conference calls as thecompany struggled to containthe growing controversy.

Some current and former

One critic called thefirm’s P.R. efforts ‘arolling multiyeardisaster.’

Friend ZoneFacebook's user growth slowed in the second quarter,after years of steady gains.

THEWALL STREET JOURNAL.Source: FactSet*Q2 2018

2.5 billion

0

0.5

1.0

1.5

2.0

2013 ’14 ’15 ’16 ’17 ’18*

Monthly active users Daily active users

to be complex, expensive andthankless, people close to thecompany say, with any failuresvery public.

Ms. Sandberg will face herfirst extended questioningabout many of the issues sur-rounding Facebook onWednesday, when she is sched-uled to testify on Capitol Hillabout matters regarding for-eign interference.

Many former and currentexecutives believe Ms. Sand-berg’s internal standing washurt by the company’s lack ofpreparedness for its cascadingcrises over the past two years,including the proliferation ofmisinformation and hatespeech on the platform and anumber of flubs around dataprivacy. So does David Kirk-patrick, founder of New York-based Techonomy Media andauthor of a 2010 book, “TheFacebook Effect,” who saysthat by all appearances Ms.Sandberg’s role has weakenedin the past several years.

A new No. 2?“Mark has found himself

forced to step up to deal withthings he wouldn’t otherwisewant to pay attention to,” Mr.Kirkpatrick said. He called thefirm’s public-relations efforts“a rolling multiyear disaster.”

When Ms. Sandberg wentunmentioned in a major re-shuffling of Mr. Zuckerberg’stop product executives in May,the moves caused former em-ployees and executives tospeculate that she had beendisplaced as the second-most-powerful figure by Chris Cox, aclose friend of Mr. Zuckerberg,who had been elevated to anew role in charge of all thecompany’s apps, includingFacebook, WhatsApp and In-stagram.

A spokesperson for Face-book said Mr. Cox strongly dis-agrees with this perceptionand noted the two have workedclosely together for years.

Meanwhile, at a companywhere departures are uncom-mon, five senior executives onMs. Sandberg’s leadershipteam have said in recentmonths they are leaving.Those include general counselColin Stretch, policy chief El-liot Schrage and security headAlex Stamos.

People close to Facebook saythe perception that her influ-ence has lessened isn’t true.“Sheryl is key to building Face-book,” Mr. Zuckerberg said in astatement. “We’re makingsteady progress preventingabuse on our platform, includ-ing during elections—but we al-ways have more work to do.This is a priority for both of us.”

Ms. Sandberg’s new role,which she takes on in additionto her other duties, makes herof critical importance to Mr.Zuckerberg, these people say.Few others at Facebook arepositioned to figure out how toget on top of its problems, letalone pre-empt them.

When asked about her plansat Facebook, Ms. Sandbergsaid in a statement she is com-mitted to the company. “Tenyears ago I joined Facebookbecause I believed in Mark’svision for the good that cancome from connecting people,and I still feel that way,” shesaid. “Yes, we face real chal-lenges and we have a lot ofwork to do to address them.But I can’t imagine doing any-thing else.”

ContinuedfromPageOne

ing experience. At the SugarClub, executive chef Josh Bar-low says the rock plating offersguests a surprise and gets themexcited. “The first thing youhave to do is tell them not toeat the rocks,” says Mr. Bar-low. He also serves deep-friedpig head on tree bark.

El Ideas, a Michelin-star-rated Chicago restaurant,serves a coconut-and-lime pow-der on a mirror with razor-blades for a 1980s “Miami Vice”feel. Diners suck up the powderwith straws. “It makes people

ContinuedfromPageOne

laugh and gets people on theedge of their seats,” says ownerPhillip Foss. “I’ll take the lumpsfrom all the naysayers.”

Naysayers of odd plating in-clude Ross McGinnes, a digital-content consultant living inHebden Bridge, England, whostarted wewantplates.com, asite curating user-submittedphotos of plate substitutesthey’ve found at restaurants:axes, clipboards, tennis rackets,hubcaps, flower pots.

Among detractors in the cu-linary world are Jacques Pepin,a dean at the International Cu-linary Center in New York Cityand former chef to Frenchheads of state, who calls thetrend “ridiculous,” saying “ithides the lack of technique.”

Joseph Fattorini, a Londonwine merchant, says “the smartdining world in London sees itas gimmicky.” On a ski trip inSwitzerland several years ago,

he says, he was “utterly flab-bergasted” when soup arrivedin a glass nestled in a stiletto.

Food in footwear featured ininternational diplomacy whenIsraeli Prime Minister BenjaminNetanyahu had Japanese PrimeMinister Shinzo Abe over fordinner in May. The chef servedchocolate pralines in mockmetal shoes, posting an Insta-gram photo that sparked onlinecriticism calling the shoe-ta-bling “tone deaf.”

The Israeli Ministry of For-eign Affairs confirmed the din-ner but didn’t comment on theshoes. The Japanese Embassyin Israel says then-AmbassadorKoji Tomita visited the chef’srestaurant several weeks laterand ordered the same dessertin a shoe.

The chef, Moshe Segev, sayshe also serves sweet-creammushroom linguine on a woodstump, cheesecakes on a

painter’s palette and a potato-and-goat-cheese gnocchi on topof a tea pot. “This is not onlyfood, this is art,” he says. “Realart is never 100% for everyone.”

Some unconventional platingmay stem from the tradition ofchefs gathering outside work toexperiment, says Russell Jack-son, a veteran New York Citychef and once a contestant onthe “Iron Chef America” show.He says he first got wind ofsuch experimentation around2010. Others date it earlier: Mr.McGinnes, who runs the odd-plating website, says he wasserved cake on a ping-pongpaddle around 2008 in Barce-lona, and “it still gives mesleepless nights.”

In the trend’s early days, Mr.Jackson says, chefs put carefulthought into “syncing the cre-ative arc,” between food andwhat it was on. Plating mate-rial, construction and color

were considered important ele-ments. “There’s a fine line,” hesays. “I can’t imagine walkingup to a table with a shovel.”

An ashtray didn’t cross theline for diner Mimi Dendias.One appeared under her des-sert featuring chocolate and ba-con flakes during a dinner-and-performance show in May atthe Vaults, a London venue. “Ithink it’s really interesting anddifferent,” says Ms. Dendias, aphotographer in the city. “Gen-erally, definitely in favor.”

Not too successful were thebaby bottles filled with foiegras steeped truffle milk thatMr. Foss, the Chicago chef, onceserved. He took them off themenu because “it was creepy,”he says. “Grown men andwomen were sucking on babybottles together.”

James Dragan, who managesLos Angeles County food in-spectors, says he hasn’t seen

any plating violations issued.California code states whateverrestaurants use as plates musthave “a smooth, easily clean-able surface” that doesn’t allowthe “migration of deleterioussubstances or impart colors,odors, or tastes to food.”

“A shoe wouldn’t fit that,”Mr. Dragan says.

The Birmingham Magis-trates’ Court in England fined asteakhouse this year for a plat-ing-related offense, says a Bir-mingham city-council mediamanager. It had served on woodboards with cracks, after inspec-tors had warned that the boardscouldn’t be properly cleaned.

Mr. Jackson, the New Yorkchef, thinks the next experi-mentation will forgo plating al-together, with food consumeddirectly off the table.

“At that point, we havenothing better to say, cre-atively.”

golf,” says Mr. Grant. “Herwork is Facebook. Her bookwas squeezed in as a hobby.”

By then, an important issuehad bubbled up in a businessunder Ms. Sandberg thatwasn’t initially elevated to Mr.Zuckerberg’s attention.

Mr. Stamos, the securitychief, began raising alarms inthe summer of 2016 aboutRussian interference, accord-ing to a person familiar withthe situation.

His team had identifiedRussian state-sponsored activ-ity on Facebook’s platform, al-though it had yet to link it tofake-news accounts that werealready active on Facebook.

Internally, however, Face-book staffers were aware offake news operations run outof Macedonia looking to makemoney from advertising. Butthe issue got bogged down be-tween the policy team, whichhad no rules for fighting anddisabling fake news accounts,and Facebook lawyers whowere reluctant to do anythingthat smacked of trying to in-fluence the election, the per-son said.

After the 2016 election,when Mr. Zuckerberg re-marked that it was “prettycrazy” to think that the out-come might have been influ-enced by fake news, the secu-rity team realized its warningshadn’t gotten to the engineer-ing side of the company andthat the CEO hadn’t beenbriefed. It couldn’t be learnedif Ms. Sandberg herself hadbeen notified of the concerns.

In December 2016, Mr. Sta-mos circumvented the bureau-cracy by sending a report to awider group of Facebook execu-tives, including Mr. Zuckerberg.

The team began getting theresources it needed to solvethe problem, the person famil-iar with the situation said, andMr. Zuckerberg later said heregretted his initial remarksabout fake news.

Security teamIn early 2018, almost all of

the 127-member security teamwere shifted over to Mr. Zuck-erberg’s side of the house, amove that reflected Facebook’smaturing approach to security,Mr. Stamos said. “The productorganization is taking respon-sibility for the negative conse-quences of the product deci-sions they make,” he said.

The Russia findings sparkedcongressional hearings anduser backlash—and forcedFacebook to start investingmore heavily in securing itsplatform. The uproar overCambridge Analytica in Marchkicked that process into highgear, according to people closeto the company.

Now, Ms. Sandberg’s man-date is to spend a majority ofher time on safety and securityvulnerabilities. She formed aSWAT team to do what sheand other Facebookers hadstruggled with when facedwith a crisis: bridge the gapbetween the technical andbusiness sides of the companyto act decisively. The shift“from reactive to proactive de-tection is a big change,” Mr.Zuckerberg said in August.

Many of the changes thatare being put in place to cleanup the Facebook platform willbe expensive and could havean impact on growth, putting abrake on the ad-revenue ma-chine that Ms. Sandberg built.

In July, when Facebook re-ported that a surprise slow-down in revenue growth forthe second quarter was likelyto continue along with an un-expected increase in costs forsecurity and privacy, investorsshaved almost $120 billion invalue from the company’s valu-ation—the biggest one-day lossever for a U.S.-listed company.

SandbergMonitorsRisk Issues

Chefs ServeOn Rocks,In Stilettos

‘Yes, we face realchallenges and we havea lot of work to do toaddress them. But Ican’t imagine doing

anything else.’

In a statement, Sheryl Sandbergsaid she is committed to Facebook

Facebook Chief Executive Mark Zuckerberg has drawn protests over privacy and data protection.

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THEWALL STREET JOURNAL. * * * * Wednesday, September 5, 2018 | A10A

ocrat, who accused Mr. Trumpof holding up Gateway becauseof a “political vendetta.”

Sen. Chuck Schumer of NewYork, the Senate’s Democraticleader and a frequent critic ofthe president’s, is one of Gate-

way’s most prominent boosters.The Trump administration

has rejected claims by NewYork and New Jersey officialsthat it must honor an Obamaadministration pledge to pay forhalf of Gateway’s costs. Trans-

portation Secretary Elaine Chaotold a House committee earlierthis year that the states wouldneed to put more “skin in thegame” to pay for the program.

Gateway is a series ofmassiveinfrastructure projects expected

passed legislation this year al-lowing taxpayers to make pay-ments to charitable organiza-tions controlled by localgovernments in exchange forcredits against their state orlocal taxes. The workaroundaimed to allow taxpayers todeduct these payments ascharitable contributions forfederal income-tax purposes,while using the same paymentsto satisfy local tax liabilities.

The $10,000 annual cap onstate and local tax deductionshas big implications for thetri-state region. In New Jerseyand Connecticut, four out of10 tax filers claimed morethan $10,000 in state and localtax deductions in 2015, accord-ing to the Moody’s report. InNew York, it was more thanone-third of tax filers.

Most tri-state residents,however, will pay less in taxesoverall this year, according tothe Tax Policy Center, a re-search group run by a formerObama administration official.About 8.3% of New Yorkhouseholds will pay more in2018 than they would have un-der the old law, comparedwith 6.3% nationally. In NewJersey it is 10.2%, and in Con-necticut, 8.4%.

here to federal requirementsfor NYCHA. The Friday courtfiling said NYCHA officials ad-mitted in correspondenceswith prosecutors on Aug. 3that they weren’t in compli-ance—and wouldn’t be untilearly 2019.

On Tuesday, Mr. de Blasio, aDemocrat, said NYCHA—thelargest public housing author-ity in the country with 176,000apartments across New YorkCity—is continuing to repairand renovate its buildings.

“The issues raised by the

GREATER NEWYORK

Southern District…these areall things that are works inprogress,” the mayor said atan unrelated news conference.“Everything’s moving, we’retaking it all very seriously.”

New York City agreed to theconsent decree after federalprosecutors found health andsafety hazards at NYCHA de-velopments following a two-year investigation into the au-thority. Under the decree, thecity will spend $1 billion dur-ing the first four years of thefederal monitoring, and then$200 million each year duringthe next decade to make re-pairs. The rehabilitation costshave continued to rise, and theauthority acknowledged inJuly that it would need $31.8billion to make necessary re-pairs, which was an increaseof nearly $7 billion from previ-ous estimates.

In the Friday filing, prose-cutors said the violationsshowed the need for an inde-

pendent monitor to improveNYCHA. A judge would have toapprove such a move.

“Absent oversight from amonitor charged with policingNYCHA and directing it toachieve compliance, NYCHAwill continue to violate the lawand put residents at risk,”prosecutors wrote in the courtdocument.

NYCHA had a “dysfunc-tional approach” to serioushealth issues and didn’t moveto address the hazards untilfederal prosecutors pressuredthe authority, according to thefiling.

The court document alsosaid that NYCHA officials ig-nored requests by federalprosecutors to meet and dis-cuss immediate compliance,and waited more than threeweeks before saying theyfound a way to become com-pliant sooner.

Mr. de Blasio said on Tues-day that there may have been

some “crossed wires” in com-munications between the cityand the federal government butthat conversations about thesettlement were productive.

“I would say during discus-sions around the settlement,which were very, very exten-sive, everyone ultimately gotto a cooperative place and aproductive place,” he said.“Where this is leading issomething more formal, whichis when there’s a monitor inplace.”

A spokeswoman for NYCHA,Jasmine Blake, said the au-thority has new managementthat is changing its cultureand training more than 1,400staffers to make repairs.

“Large-scale transformationwill not happen overnight—and the consent decree re-flects that,” she said in astatement. “We’re taking ag-gressive steps to implementreforms and are making steadyprogress for our residents.”

Mayor Bill de Blasio de-fended the New York CityHousing Authority on Tuesdayafter Manhattan federal prose-cutors accused the city of fail-ing to comply with orders tofix the agency’s deterioratingpublic-housing developments.

Prosecutors in the U.S. At-torney’s Office for the South-ern District of New York saidin a court filing on Friday thatNYCHA has been violating fed-eral safety protocol by con-tinuing to expose its residentsto toxic lead dust duringbuilding renovations.

Under a consent decreereached with prosecutors inJune, the city agreed to ad-

BY KATIE HONAN

CityMaking Progress on Housing RepairsMayor de Blasio saysthere were some‘crossed wires,’ butrehab is moving along

NYCHA has been working to fix dilapidated apartments.

JAMESKEIVOM/PRESSPOOL

Soaking Up aWin at the U.S. Open

SWEET SUCCESS: Anastasija Sevastova of Latvia reveled in her win Tuesday after defeating defending U.S. Open tennis championSloane Stephens of the U.S. 6-2, 6-3 in the quarterfinals at the USTA Billie Jean King National Tennis Center in Queens.

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The Treasury Department’srecent proposal barring NewYork, New Jersey and Connecti-cut from letting taxpayers avoida new cap on state and local taxdeductions is a “credit nega-tive” for the states, accordingto Moody’s Investors Service.

Blocking workarounds to thenew $10,000 cap on state andlocal tax deductions would in-crease the burden on people inhigh-tax jurisdictions, thecredit-ratings firm said in a re-port released Tuesday. The capis part of President Trump’s newtax law enacted in late 2017.

A “credit negative” meansMoody’s believes the Treasuryproposal, if finalized, wouldhurt the credit of the threestates. But that is only one ofmany credit factors the firmtakes into consideration, andit doesn’t mean Moody’s isweighing a rating or outlookchange for any of the states.

“Voters in some municipali-ties will be more likely to re-ject tax increases because theywill not be partially offset by afederal tax benefit,” the reportsaid.

New York, New Jersey, Con-necticut and California all

BY JOSEPH DE AVILA

Moody’s: Tax CapHurts Tri-State

times a year, causing delays toripple along the busiest passen-ger rail line in the country.

Last October, Mr. Murphy’sRepublican predecessor, Gov.Chris Christie, stood on thesame spot with the bridge inthe background to celebratethe start of $20 million worthof early construction work, in-cluding relocating utilities andbuilding a new pier to supportwork on the replacementbridge, which will rise morethan 50 feet over the river andwon’t need to open.

But the real work can onlybegin once the federal share offunding for the roughly $1.7billion bridge is in place. “Thisought to be a no-brainer forhim,” Mr. Murphy said of Re-publican President Trump.

A spokeswoman for the U.S.Transportation Departmentsaid the bridge project re-mains under review, pendingfurther information regardingits financing. The departmentdidn’t respond to statementsmade Tuesday by U.S. Sen. BobMenendez, a New Jersey Dem-

to be built during the next twodecades between Newark andNewYork City. They include newrail bridges, new tracks and atunnel under the Hudson River.

The program would vastlyimprove rail service along Am-trak’s Northeast Corridor line.It also would improve servicefor about 100,000 daily com-muters who travel betweenNew Jersey and New York. Itstotal cost is estimated atabout $30 billion.

The Trump administrationhas held up the bridge project,citing technical reasons in-cluding the fact that New Yorkand New Jersey intended tofund part of their share ofconstruction costs using a fed-eral loan, which the govern-ment said counted as federal,not local, funding.

In June, Mr. Murphy replacedthat loan as he announced $600million of funds from New Jer-sey. Gateway’s leaders, made upof a coalition of state officials aswell as representatives fromAmtrak, are still awaiting a re-sponse from the administration.

New Jersey Gov. Phil Mur-phy rallied with federal electedofficials Tuesday to highlight astalled effort to modernize anddouble rail links between NewJersey and New York.

Standing on the shore of theHackensack River near New-ark, Mr. Murphy, a Democrat,said he had heeded the Trumpadministration’s demand thatNew Jersey and New York findalternative sources of fundingto qualify for federal supportfor the sprawling programknown as Gateway.

He called on the adminis-tration to start moving on theproject. That would require re-leasing about $800 million infederal grant funding to allowconstruction of the first partof Gateway, a new rail bridgeover the river.

The current century-old span,known as the Portal Bridge,stands less than 25 feet abovethe water and must swing opento accommodate boats. It fails toclose properly at least several

BY PAUL BERGER

New Jersey Governor Calls on Trump to Fund Key Rail Link

Standing by the Hackensack River, Gov. Phil Murphy highlighted the need to replace the Portal Bridge.

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A10B | Wednesday, September 5, 2018 * * THEWALL STREET JOURNAL.

Dai says. Employees andcontractors can choose theirown schedules, and mostwork between five and 30hours a week. Daivergent of-fers no benefits but plans todo so in the future.

For Mr. Dai, who is 28 andgrew up in New York City be-fore studying data science andepidemiology at Harvard Uni-versity and Johns HopkinsBloomberg School of PublicHealth, the motivation to startDaivergent was personal. His19-year-old brother, Brandon,is on the autism spectrum.Four years ago, before theirmother died of cancer-relatedcomplications, she asked Mr.Dai to look after him.

People on the spectrum of-ten struggle with job inter-views and navigating the so-

cial aspects of work. Anestimated 50% to 75% of peo-ple on the autism spectrumexperience long-term periodsof unemployment. “I want himto have a meaningful life,” Mr.Dai says of his brother.

Autistic workers can faceother challenges in the work-force once employed. Manypeople with autism thinkvery literally and may strug-gle with ambiguity. So Mr.Dai developed his own digi-tal work platform to accom-modate Daivergent’s work-ers. It breaks projects intosmall chunks so workers caneasily track their own prog-ress, and the system reliesheavily on video instruction.

Employees such as LeonCampbell, a Bronx 23-year-old who recently graduated

from Hunter College, saythey appreciate this struc-ture. “I was afraid my firstjob would be overwhelmingand give me more stressthan even school did,” hesays. “But this is simpler.”

Mr. Dai consulted withemployment-services expertsat the Arc New York, an ad-vocacy group, while develop-ing the work platform. To re-fine it further, Daivergent isalso consulting with a li-censed clinical social workerspecializing in young adultson the autism spectrum.

Because the spectrum in-cludes such a range of condi-tions, Mr. Dai says he doesn’trequire any specific diagno-sis to hire. He typically re-cruits from organizationsthat provide support services

to people on the spectrum.Some small outfits already

employ workers on the spec-trum for remote work, saysDave Kearon, director ofadult services for advocacyorganization Autism Speaks,but Daivergent stands out forthe training it provides. “He’soffering not just technicalskills but social and commu-nication skills-training.”

The Points Guy, a websitefor consumers aiming tomaximize their travel re-wards, retained Daivergent tohelp build the database be-hind its new app. “It’s supercomplicated, and it’s tediouswork,” says director of productmanagement Alon Hartuv.“But they provided the goods.”

AnneKadet@wsj.com

GREATERNEWYORKWATCH

MILITARY

Korean War Soldier’sRemains Identified

The remains of a missingNew York soldier who died dur-ing the Korean War more than60 years ago have been identi-fied, U.S. military officials say.

The Pentagon’s DefensePOW/MIA Accounting Agencyannounced Tuesday that First Lt.Herman L. Falk’s remains wereidentified last month using DNAanalysis, dental records and ma-terial evidence.

The 22-year-old from Man-hattan was serving in theArmy’s Second Infantry Divisionwhen he and other members ofhis platoon were reported miss-ing during fighting in South Ko-rea in February 1951, DPAA says.

After the war returningAmerican POWs reported Lt.Falk had died that spring at aPOW camp in North Korea, offi-cials say.

Lt. Falk’s remains wereamong those of at least 400U.S. servicemen handed over bythe North Koreans from1990-94.

—Associated Press

NEW JERSEY

Man Hit and KilledBy Commuter Train

A man was struck and killedby a train in northern New Jer-sey on Tuesday, NJ Transit said.

A Main Line train hit the manat about 12:30 p.m. just west ofthe train station in Ramsey, theagency said. His name hasn’tbeen released, and it wasn’t im-mediately clear why he was onthe tracks.

It didn’t appear that any ofthe 10 passengers aboard thetrain were injured.

The train had departed fromHoboken earlier Tuesday and wasbound for Suffern, N.Y. The acci-dent caused rail service betweenSuffern and Waldwick, N.J., to besuspended for about 90 minutes,and residual delays were re-ported after the service resumed.

—Associated Press

METRO MONEY | By Anne Kadet

Wanted: Workers With AutismAlexis Pren-

dergast, a 25-year-oldBrooklynwoman whohas autismspectrum dis-

order, is the first to admitthere are skills she hasn’tmastered. “Mostly it’s socialstuff. I miss some cues,” shesays. Her wiring also lends un-usual strengths, like an abilityto focus for long stretches ontasks requiring great attentionto detail. Happily, she foundan employer looking for some-one just like her.

Daivergent, a Manhattantech startup, provides autis-tic contractors to clientsseeking high accuracy andspeed on tasks including dataentry and online research.Most people find these jobstedious and tiring; they getsloppy after an hour, says co-founder and chief executiveofficer Byran Dai. But Daiver-gent’s autistic workers “cando it for the day, can do itfor the week, can do itmonth after month,” he says.

Mr. Dai, who launched hiscompany in February with$50,000 in savings and$100,000 in funding from theEntrepreneurs RoundtableAccelerator, manages a teamof four autistic employees athis headquarters and a poolof some 200 contractorsaround the country whowork from home.

In a project Mr. Dai de-scribes as typical, workersdigitally labeled items such asdoors and windows in blue-prints for a company makingconstruction cost-estimatesoftware. The tagged imagesare used to train an artificial-intelligence system to recog-nize such objects on its own.

Daivergent’s remote work-ers are paid by the project.They might earn a setamount for tagging a certainnumber of images, for exam-ple. Pay typically works outto $12 to $20 an hour, Mr.

Worker Leon Campbell, left, with Daivergent CEO Byran Dai, says he appreciates the structure that the company provides.

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THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | A11

LIFE&ARTS

and a whistle. Parents want theirkids to have a great experiencethat’s also developmental.”

Nearly all the private swimschools promise a maximum classsize of four children per instructorand pools heated to 88 or 90 de-grees. (Lap pools typically rangefrom 78 to 82 degrees.)

Because swimming is their onlyfocus, they tend to offer moreclasses at more times and more lo-cations. They may require instruc-tors to have anywhere from 40 to50 hours of training in theirschool’s proprietary swim-teachingtechniques in addition to a life-guard certification. All charge apremium over their local YMCA.And if the chains’ expansion is any

indication, it’s a premium thatplenty of parents are willing to pay.

Traditionally the YMCA was thefirst place parents turned whenlooking for swim lessons. Withabout 2,000 pools offering aquaticsprograms for 1.3 million children, itremains the country’s largest net-work of swim instruction.

The YMCA’s goal is to teach asmany children as it can to swim, re-gardless of background, says Lind-say Mondick, senior manager ofaquatics for YMCA-USA. “Our mis-sion is to support communities.”

The organization revamped itsswimming curriculum in 2016 witha primary focus on water safety.Drowning is the leading cause ofdeath among healthy children un-

tions in New York City. Its co-founders swam for the nationalteams of their home countries, Ger-many and Canada. They draw theirstaff from the ranks of internation-ally competitive swimmers.

“When you have a competitiveswimmer who loves the sport andhas dedicated so much of their lifeto swimming, it shows up in thequality of their teaching and les-sons,” says Imagine COO KatePelatti, a former collegiate swimmer.

Four years ago, when NewYorker Lauren Higgins startedlooking for swim lessons for herthen-6-month-old daughter Lucy,she was primarily concerned withwater safety. Her in-laws had abackyard pool.

She first checked her neighbor-hood YMCA in Long Island City,but found baby swim classes to beoversubscribed.

That drove her to Imagine Swim-ming. Every Saturday morning forthe past four years, the family hasbeen getting up at 7 a.m. to drive toManhattan for swim class for Lucy,now 5, and Claire, 2. “If we take afew weeks off, they start askingwhen can they go back,” Ms. Higginssays.

Imagine’s rate of $47 a class is atthe high end. (It and some otherschools offer scholarships for low-income children.) But both girlscould swim unassisted before age 3.

“When we go on vacation, peo-ple see a kid in swim-diapers div-ing for rings in the pool, and totalstrangers will approach us and say,‘Holy mackerel, how can your kidsswim like that?’” Ms. Higgins says.

der 5, and the sec-ond-leading cause ofdeath for those un-der 15, according tothe Centers for Dis-ease Control andPrevention.

The YMCA isn’tcompeting with pri-vate swim schoolsfor students, Ms.Mondick says—they’re competingfor instructors: “Ourbiggest challenge isrecruiting and re-taining talentedstaff.”

One competitor isGoldfish SwimSchool, which origi-nated in Michigan. Ithas over 70 franchiselocations, with an ad-

ditional 25 scheduled to open in thenext year.

Founders Chris and Jenny McCui-ston created a curriculum based onthe idea of guided play, like gamesthat teach safety skills, that all fran-chisees must follow.

Pricing varies by location, rang-ing from about $85 a month forweekly lessons in parts of the Mid-west to $120 a month in the North-east. Mr. McCuiston encourages hisowners to charge slightly above thelocal market rate—even by just afew dollars.

“We want to be the premiumlearn-to-swim product out there,and we’ll charge a bit of a premiumfor that,” he says.

Imagine Swimming has 14 loca-

AQUA-TOTS

SWIM

SCH

OOLS

A class for children 3 and up at an Aqua-Tots Swim School in Ahwatukee, Ariz.

resembling the Strokes (early2000s), they’re now grabbing rap-pers with social-media fame and alo-fi, melodic sound associatedwith the streaming service Sound-Cloud. If you’re in a music videowith a famously morose rapper, itcould land you a deal.

Acts like rap collective Brock-hampton and the recently mur-dered Florida rapper XXXTenta-cion command huge moneybecause they’re seen as safe bets.

But there’s “a lot of froth,” saysPeter Edge, chief executive of RCARecords, which signed Brockhamp-ton and Childish Gambino. “Themusic business has always beenknown to get a little overexcited.”

The swiftness of star-making inthe social-media age and wide-spread reliance among labels ondata from YouTube, SoundCloudand Spotify mean executivesquickly swarm over the same actsand overpay to win bidding wars,insiders say.

In March, Young Nudy, a cousinof Atlanta rap star 21 Savage,signed with labels RCA Recordsand SamePlate for a four-album,multimillion-dollar deal, according

to his manager, Trevor Patterson.The same month, in one of the

industry’s most touted deals, 19-year-old Chicago rapper JuiceWRLD signed a multimillion-dollarpartnership with labels InterscopeRecords and Grade A Productions,according to a person familiarwith the situation. “Lucid Dreams,”

Juice WRLD’s biggest single, hasbeen a smash hit, reaching No. 3on the Billboard singles chart.

Other rappers that have fueledbidding wars include California’sYung Pinch and Florida’s DominicFike, music-industry executives say.

One of the most aggressive la-bels to sign new acts has been At-lantic Records, part of Warner Mu-sic Group, the record industry’sthird-biggest company. Atlantic

has signed hitmakers Cardi B andLil Uzi Vert and emerging acts LilSkies, Shoreline Mafia and RicoNasty, according to people familiarwith the matter. Independent dis-tributor and label Empire hasmade waves by offering acts art-ist-friendly deals.

Some labels are proceeding cau-tiously. Executives at Mass AppealRecords, co-founded by veteranrapper Nas, are launching a newimprint, Street Dreams, in partner-ship with Nas’s younger brother,Jabari “Jungle” Jones, to sign abroader array of acts. “We’re notgoing to put out a bunch of guysthat look the same,” Jungle says.

It’s still tough to get a recorddeal. And some artists, like 21 Sav-age, who has a joint venture withEpic Records, have rejected offersin favor of partnerships, says hismanager, Kei Henderson.

Industry executives are alreadyspeculating about how long thebidding frenzy can last. “At somepoint, is this a bubble?” says JohnIngram, a music-industry lawyer.“And if so, when will it burst?”

The industry has changed consid-erably over the past decade and la-

bels may be justified in ramping uptheir investments, some executivessay. Global distribution of music to-day is cheap compared with thedays of physical CDs and records,making profit margins better. Rapdoesn’t require large studio bud-gets, and radio promotion—a signif-icant label expense—is no longeressential. In some cases, deals canpay off quickly.

With the record industry’s re-bound driven almost entirely bythe rise of streaming services, la-bels need to invest in the rela-tively new music popular on Spo-tify and other platforms, someexecutives say. Hip-hop represents38% of U.S. on-demand audiostreams, Nielsen Music says, morethan rock (20%) or pop (16%).

But critics have begun complain-ing that the rap frenzy is creating aglut of gimmicky, relatively inter-changeable artists. “A lot of itsounds the same,” says Empire A&Rexecutive Tina Davis.

Labels “sign five of the samething, to see which of them willwork,” she says. “They’re grabbingthem and throwing them at the walllike spaghetti.”

MUSIC

BehindHip-Hop’s BiddingWarsPLASTERED WITH FACE andneck tattoos, 21-year-old Lil Xanhas been in the music businessonly a year—but he’s already abreakout star.

The Redlands, Calif., rapper,whose real name is Diego Leanos,sparked a bidding war last fall af-ter his anti-Xanax song “Betrayed”went viral. He signed with Colum-bia Records in November for athree-album deal worth north of$1 million, according to a personfamiliar with the matter. In April,his debut album hit the Top Tenon the Billboard charts and lastmonth he walked the red carpet atthe MTV Video Music Awards. “It’sf—ing phenomenal,” says Lil Xan’sbooking agent, Joshua Ritten-house. “He’s still in his infantstages of even rapping.”

It’s the era of the million-dollarhip-hop deal.

Over the past 12 to 18 months,competitive pressure has pushedthe cost of signing a new rapper upthreefold, music-industry insiderssay. The biggest contracts for debutartists, once capped at $1 million,can hit the double-digit millions.

“In 2017, some of the first guysgetting signed were [receiving]less than a $200,000 advance” fortheir first album, says TariqCherif, co-founder of Rolling Loud,one of hip-hop’s biggest festivals.“Now you’ve got guys that no-body’s ever heard of—they’ve gotone music video that goes viral—and they’re getting deals for multi-ple millions of dollars.”

Hip-hop dethroned rock asAmerica’s most popular genre lastyear, putting pressure on labels toexpand their rap rosters to buildmarket share. Feeling flush froman industry rebound fueled by mu-sic-streaming, executives arescrambling to sign buzzy rappersbefore competitors do.

Artists increasingly have lever-age in negotiations, music-industryinsiders say, thanks to streamingsuccesses and powerful attorneysand managers. They’re demandingheftier advances, shorter contractsand lucrative profit splits. Often,they’re rejecting traditional dealswhere labels own the recordingsand receive the lion’s share of roy-alties and instead seeking tempo-rary licensing agreements wherethey retain ownership.

The hip-hop bidding wars are anew chapter in the until-recentlymoribund U.S. record industry,even if overall revenues remain40% lower than their 1999 peak.

Just as music executives oncechased “hair-metal” bands (’80s),grunge groups (’90s) and anything

BY NEIL SHAH

PHOTO

ILLUSTR

ATIONBYIANKELTIE;GETTYIMAGES(7);ABC

PARENTING

THE NEWWAVE OF SUPERCHARGED SWIM CLASSES

SUMMER MAY BE ENDING, butAnastasia Smirnova will still beswimming every week with her 6-month-old daughter, Maya. Thepair started taking baby swim les-sons at the British Swim School inSecaucus, N.J., about two monthsago and Maya can now float on herback independently—without thehelp of a flotation device.

“I wanted my baby to learn tolove the water and not be scared ofit,” says the 26-year-old Ms.Smirnova, an avid swimmer. “She’sa water baby now. When she’s cry-ing, if you put her in the water, shestops.”

The Florida-based British SwimSchool, with 200 franchise loca-tions, is part of a wave of privateswim school chains across thecountry aiming to transform howchildren learn to swim.

Demand for dedicated children’sswim schools offering parents amore personalized experience thanwhat’s on offer at the YMCA hascreated a marked shift over thepast decade. Schools with a justhandful of locations years ago arenow expanding rapidly.

“Parents are a lot more activewith their kids now. When I learnedhow to swim, my father justchucked me in a lake,” says PaulPreston, co-founder of Arizona-based Aqua-Tots Swim School,which has more than 90 franchiselocations and favors instructors withbackgrounds in childhood education.“This is not a coach with a clipboard

BY HILARY POTKEWITZ

Music executives arescrambling to sign new,buzzy rappers beforetheir competitors do.

A12 | Wednesday, September 5, 2018 THEWALL STREET JOURNAL.

Stanley Morrical, 58, an em-ployee-benefits broker in San Fran-cisco, on his 1967 Chevrolet Ca-maro, as told to A.J. Baime.

My dad bought the Camaro yousee here in 1977. I had just gottenmy driver’s license, and I wouldstand in our garage in Fort Wayne,Ind., drooling. This was a dream

car for a long-haired kid in the late’70s, but my father was not enthu-siastic about me driving it. Hethought I would get in trouble. Hewas probably right. I went off tocollege and, in 1982, my father diedof a heart attack. He was only 45.

For 13 years, the Camaro sat inmy mother’s garage, but I never

we replaced it with a new 350 thatputs out more horsepower [385],plus disc brakes to handle that ex-tra power.

My father probably spent lessthan $1,000 on this car. I spentmore than that on one wheel. If heknew how much I spent on it, hewould die of a heart attack a sec-ond time. But for me, this Camarois more than a vehicle; it’s mydream car and a tribute to mymemory of him.

—Contact A.J. Baime atFacebook.com/ajbaime.

LIFE & ARTS

ANGELA

DECENZOFO

RTH

EWALL

STR

EETJOURNAL

Stanley Morrical’s1967 Chevrolet

Camaro, in front ofSan Francisco’s

Golden Gate Bridge.

forgot about it. The model year1967 was the very first year of theCamaro, which Chevrolet launchedto battle Ford’s Mustang. Thisspecific Camaro came withthe Super Sport pack-age—high performance.

In the mid-1990s,my business in SanFrancisco was doingwell, and I finally hadsome money. Throughmy work I met a guynamed Jack Nilson[who has since died]. Hewas a drag racer and heowned a garage near the SearsPoint racetrack in Sonoma [nowknown as Sonoma Raceway].

He convinced me to take mydad’s old Camaro to his shop. Over10 years, together, we built out theCamaro as I would have done if Ihad had money back when I was ateenager.

The process was like redoing anold house. You do one thing and

then realize thatthere are all these

other things youhave to do. For exam-

ple, when we reuphol-stered the back seats, we realizedwe needed new carpeting and anew headliner [the fabric on theunderside of the roof].

Purists will roll their eyes atsome of the stuff we did, but Iwanted to build the car I wanted.We put in more comfortable frontseats and air-conditioning. Theoriginal engine was a 350 V-8, and

Mr. Morrical believes his father spent less than $1,000 on thecar in 1977. ‘I spent more than that on one wheel,’ he says.

WORK & FAMILY MAILBOX | By Sue Shellenbarger

MY RIDE | A.J. Baime

Living the High-SchoolDreamWith a ’67 Camaro

Q Regarding your Aug.22 story on more em-ployers handing outpromotions without a

pay raise, what impact doesthat have on the likelihoodthat employees will quit totake another job?—S.W.

A: It depends onwhether the employee inter-prets the offer as an appre-ciative gesture by a respect-ful boss whose hands aretied on compensation, or asa disrespectful ploy by amanipulative boss trying toget more work done fornothing.

A boss whose motivesare suspect is likely to hittwo hot buttons that driveemployees to quit—dissatis-faction with one’s boss, anda lack of pay raises, accord-ing to a 2012 study of 560employees by Deloitte. Thisis especially true of employ-ees who have been with thecompany for only one tothree years, a stage whenworkers are most liable tojump ship. In general, em-ployees are far more likelyto bail if they see their em-ployer’s pay practices as po-litical or arbitrary, accord-ing to another Deloittesurvey from 2018.

If the employee sees theoffer as recognition of hardwork and an opportunity togrow, it’s likely to have theopposite effect. Promotionsare among the top five rea-sons employees stay withtheir current employers, the2012 Deloitte study says.And employers who deliber-ately create growth opportu-nities and stretch assign-ments for employees havefar better retention ratesthan those who don’t.

A FINE LINE ONPROMOTIONS

ROBWILSON

Q Regarding your Aug.14 column on long-distance marriages,most of the couples

you mentioned have grown-up children, or no childrenat home. What happenswhen little children are in-volved?—N.K.

A: There’s little researchon the impact of commutermarriages on children, butthe challenges can be com-plicated. The spouse livingfull-time with the childrenoften feels like a single par-ent, and may have to cutback his or her own time atwork to meet increased fam-ily-care demands. Childrenmay feel shortchanged, too.Such risks make corporatehuman-resource managersreluctant to pressure em-ployees into transfers thatsplit their families.

However, commuter set-ups can be better for chil-dren than relocating thewhole family, which forceschildren to change schools

and makenew friends.Teens whohave had tomove oftenwith theirfamiliestend to havemore behav-ioral andemotionalproblems.

Com-muter par-ents withchildren of-ten adapttheir rou-tines tosupportthem, trav-eling home

more often than others.Many FaceTime with tod-dlers and use cellphonesand texting to stay in touchwith teenagers. Also, digi-tal tools enable parents tomonitor their children’sgrades, coordinate sched-ules and pay for extracur-ricular activities from afar.Some commuter wives saydelegating responsibility toteenage children helps themlearn new skills, accordingto a 2007 study led byKarla Mason Bergen, an as-sociate professor of commu-nication at the College ofSaint Mary in Omaha, Neb.

Parents’ attitudes canshape children’s response.Children whose parentscommunicate well withthem and embrace com-muter setups as a route to abetter, more prosperous lifefor the family tend to getbetter grades and havefewer behavior problems inschool, according to a 2015study of 217 commuter fami-lies with teenagers.

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THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | A13

LIFE & ARTS

pared with the forlornness of thesun-blasted terrain.

On the opposite extreme arethe action-packed scenes of policeraids in high-crime districtsaround Rochester and East Roch-ester, N.Y., and Miami by the Ital-

ian photojournalist Paolo Pel-legrin. Taken during 2012-14,mainly at night, the images aresuffused with the dreamlike vio-lence of film noir, mitigated byMr. Pellegrin’s obvious sympa-thies for the bystanders, who

watch as friends and family mem-bers are handcuffed and pinned tothe ground.

Less lurid, and perhaps morerepresentative of daily life in manycities, are Dawoud Bey’s affection-ate studies of streets and people in

Harlem (2015-16), and Ms. Vermeu-len’s in Detroit (2007-17), whereshe lives. Both places sufferedsteep economic declines overmany decades and are now on anupswing, realities that each pho-tographer has documented withneighborly care.

“This Land” allows artists topresent unique aspects of America.Ms. Sanguinetti set herself up asthe town photographer in BlackRiver Falls, Wis., center of the Na-tive American Ho-Chunk Nation;Ms. Lê takes us to parishes in NewOrleans that tourists don’t fre-quent; Mr. Wylie explores the ar-chitecture of the interstate high-way system in New Haven, Conn.,and how lives are shaped by it.

While the social tensions in thecountry can’t be ignored in theserooms, the photographers aren’t il-lustrating headlines. Independentof the news cycle, the show reas-sures us that certain landscapesand rituals will endure, no matterwho’s in office.

This LandPier 24 Photography, through March31, 2019

Mr. Woodward is an arts critic inNew York.

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Alec Soth’s ‘The Key Hotel.Kissimmee, Florida’ (2012), left; JimGoldberg’s ‘Meghan’ (2015), above;Guillermo Galindo’s ‘Zapatello’ (2014),above left; Bryan Schutmaat’s‘Abandoned Homestead’ (2011), top

ART REVIEW

‘This Land’: Picturing AmericaAn exhibition with over 400 photographs tries to take stock of the mood in the U.S. over the past decade

San FranciscoSINCE OPENING in 2010 on theSan Francisco waterfront, Pier 24Photography has provided whatmay be the most agreeable condi-tions in the world for looking atphotographs.

The cavernous former ware-house is divided into both soaringand intimate spaces. Admission isfree but by appointment only (viaphone or email) so overcrowdingis never a problem. Exhibitions areinstalled for six months or longer,usually without wall labels: An il-lustrated catalog serves as a por-table guide for names, dates, titles,and as a paper record.

“This Land” is its latest the-matic show, a valiant attempt togauge the mood of the U.S. overthe past decade. Within the 18 gal-leries are two sculptures, a video,a small installation, and morethan 400 photographs by 18 art-ists, both well-established (AlecSoth, Alessandra Sanguinetti, An-My Lê, Katy Grannan) and lesser-known (Bryan Schutmaat, CorineVermeulen, Donovan Wylie, DanielPostaer).

National art surveys are risky,and maybe foolhardy. If curatorstry to represent every constitu-ency, the exhibition may lack astrong point of view. Conversely,favoring one style or group canunfairly exclude nonconformistsfrom the historical picture.

“This Land” only partially suc-ceeds at resolving this dilemma,especially in a place as big and di-verse—ethnically, romantically, ec-onomically, regionally—as contem-porary America. (For those whomeasure art shows by numbers:Fewer than one-third of the artistsare women; only one is African-American; another is Hispanic.)

Nonetheless, if you can acceptits stylistic prejudice for thesharp-focused, documentary-stylestill image, “This Land” offers no-table rewards. These are highlypersonal reports from around thecountry by photographers youwon’t see together elsewhere.

Jim Goldberg often encourageshis subjects to write on his por-traits of them, a technique that in-troduces unpredictable feedbackinto what is typically a rigid one-way process. The words on “Fifty-Six Polaroids” (2011-16), hangingnear the entrance, range from theprosaic (“My dream is to retire”)to the confessional (“I like to wearwomen’s underwear”) to the guile-lessly boastful (“I am Jack and Ican spell the word ninja”)—hand-drawn messages as distinctive asvoices on a video.

Mr. Schutmaat’s series (2010-12)on mountain mining communitiesin the West is another of theshow’s highlights. He wants itknown that the business of rippingmetals out of the ground leavesharrowing scars on people and theland. At the same time, as hewrites in the catalog, “every struc-ture built and later abandoned is arelic of hope,” even a makeshiftcemetery.

Work about the U.S.-Mexicoborder by Guillermo Galindo andRichard Misrach fills one of thelargest rooms. Standing in themiddle of the floor are two of Mr.Galindo’s improvised sculptures/musical instruments. Fashioned in2014-15 from artifacts picked upin the desert (a shoe, chair seat,bicycle wheel, juice can), they’retributes to those who havepassed briefly across these deso-late lands.

Mr. Misrach has photographedin the deserts of the AmericanWest since the 1970s. The exam-ples here are from visits (2013-15)to Southern California, Arizonaand Texas, where the border fencehas taken various forms: toweringsteel pilings driven into the sandon a beach in San Diego; a vehiclebarrier of x-shaped bars in Oco-tillo, Calif.

One wall of prints shows dis-carded bottles and pieces of cloth-ing on the barren ground. Like Mr.Galindo’s objects, they’re a memo-rial to the area’s transients. But inwhat may be the most militarizedlandscape in the country, Mr. Mis-rach views the continuing contestbetween immigrants and law en-forcement as a draw. Both are mi-nuscule in his photographs com-

BY RICHARD B. WOODWARD

Highly personal reportsfrom around the countryby artists you won’t seetogether elsewhere

A14 | Wednesday, September 5, 2018 THEWALL STREET JOURNAL.

SPORTS

WeatherShown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.

City Hi Lo W Hi Lo W City Hi Lo W Hi Lo WToday Tomorrow Today Tomorrow

City Hi Lo W Hi Lo W

Anchorage 64 50 pc 62 50 sAtlanta 89 74 pc 89 72 pcAustin 92 73 t 91 72 tBaltimore 92 74 s 94 73 sBoise 95 64 s 94 63 sBoston 86 72 pc 92 65 tBurlington 90 72 pc 78 56 pcCharlotte 90 69 t 92 72 sChicago 86 63 t 71 62 cCleveland 92 73 t 79 68 tDallas 90 74 t 92 72 pcDenver 73 55 pc 77 56 tDetroit 92 69 s 77 62 cHonolulu 88 75 pc 88 77 pcHouston 90 75 t 89 75 tIndianapolis 91 72 s 85 67 tKansas City 77 68 t 75 64 tLas Vegas 98 79 s 100 79 sLittle Rock 87 72 t 80 71 rLos Angeles 81 68 pc 82 68 pcMiami 88 76 pc 87 73 tMilwaukee 80 60 t 69 59 pcMinneapolis 73 54 pc 73 56 sNashville 89 73 pc 89 72 tNew Orleans 86 78 r 86 78 tNew York City 87 76 s 92 71 tOklahoma City 81 69 t 79 67 t

Omaha 73 62 r 74 60 shOrlando 89 75 pc 87 75 tPhiladelphia 92 76 s 94 74 sPhoenix 102 80 s 105 82 sPittsburgh 90 71 s 84 68 tPortland, Maine 81 68 pc 86 55 tPortland, Ore. 89 59 s 85 57 pcSacramento 88 56 s 90 58 sSt. Louis 92 72 t 86 71 tSalt Lake City 87 61 pc 87 63 pcSan Francisco 70 56 pc 70 55 pcSanta Fe 77 52 t 74 50 tSeattle 81 56 s 81 56 pcSioux Falls 71 50 pc 73 54 pcWash., D.C. 92 77 s 94 76 s

Amsterdam 73 59 sh 66 52 shAthens 92 73 s 88 72 sBaghdad 109 76 s 110 77 sBangkok 89 77 t 91 77 pcBeijing 91 66 s 86 63 sBerlin 75 57 pc 77 60 pcBrussels 73 60 sh 65 51 cBuenos Aires 72 53 c 75 50 sDubai 107 89 s 105 92 sDublin 64 51 c 59 44 shEdinburgh 64 43 c 57 45 sh

Frankfurt 81 59 t 76 57 tGeneva 80 57 s 77 57 tHavana 88 74 pc 87 71 tHong Kong 91 81 pc 88 78 tIstanbul 86 71 s 80 71 tJakarta 92 75 pc 91 76 pcJerusalem 87 67 s 83 65 sJohannesburg 81 55 s 82 51 pcLondon 70 49 c 68 46 pcMadrid 85 60 s 84 61 sManila 87 76 t 88 79 tMelbourne 66 54 pc 64 43 tMexico City 73 57 t 71 56 pcMilan 84 62 s 84 65 tMoscow 77 56 pc 77 54 sMumbai 86 79 sh 86 77 shParis 76 60 c 71 51 rRio de Janeiro 72 66 sh 73 64 pcRiyadh 111 81 s 110 80 sRome 81 63 s 81 65 sSan Juan 89 78 s 88 77 pcSeoul 82 66 s 83 70 pcShanghai 91 76 pc 90 75 pcSingapore 85 75 pc 85 77 tSydney 66 51 pc 68 56 pcTaipei City 94 79 t 93 78 tTokyo 87 75 r 87 78 pcToronto 87 67 s 75 56 pcVancouver 72 53 pc 72 56 sWarsaw 74 56 t 74 55 pcZurich 77 54 t 76 56 t

Today Tomorrow

U.S. Forecasts

International

City Hi Lo W Hi Lo W

s...sunny; pc... partly cloudy; c...cloudy; sh...showers;t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice

Today Tomorrow

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Rain

T-storms

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Flurries

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TheWSJ Daily Crossword | Edited by Mike Shenk

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Across1 Do some seriousdamage to

5 Prelude to riots,perhaps

11 Consist of

14 Eliciting an“eww!”

15 Act like a startledsteed

16 Put an end to

17 Buck’s comedyroutine?

19 “Eww, stop!”

20 Old Testamentprophet

21 PTA meetingplace

22 Organizationalaid

23 “Pagliacci” piece

Previous Puzzle’s Solution

25 Low digits?

27 Sucker whoappreciates goodbooks?

33 Just betweenus?

34 Pastel color

35 Semi front

37 Story told overmultiple episodes

38 Issue forth

40 Choler

41 Utteranceaccompanying ahead slap

42 Preseason airing

43 “Elf” co-star

44 Mushiness overnot beingmarried?

48 Irrelevant

49 Their boughsmake bows

50 Agitated state

52 Egg: Prefix

55 Touched gently

59 High roller’s roll

60 Junk incrosswords?

62 Phoenix bodyspray brand

63 2009 HilarySwank biopic

64 James Bondattended it

65 “___ Autumn”(1941 jazzstandard)

66 Go overboard,perhaps

67 Jumbotroninventor

Down1 Knee-concealingskirt

2 Gets a perfectscore on

3 Seller of manyDIY kits

4 Oodles andoodles

5 Mischievousimp

6 Book beforeEsth.

7 “Aw, darn!”

8 Holder of anObama cabinetposition

9 So

10 Pennsylvania’s is360 mi. long

11 Not a companyman?

12 Fancy featuresof a tricked-outride

13 Take one’s leave

18 Dress for aBengali bride

22 Fifth of twelvesigns

24 Harshly bright

26 Back in the day

27 Spot for somesalesmen

28 Monaco money

29 Man witha screwyinvention

30 Nasal cavityneighbor

31 Creator of JackRyan

32 Measure ofpurity

36 Auto pioneerKarl

38 Thus

39 Croonernicknamed“The Velvet Fog”

43 Makes a two-man move

45 “Pronto!”

46 Jazz fan

47 Sound of an airkiss

50 2017 TV reboot

51 Uber alternative

53 Is a contender

54 Not busy

56 Emerald Cityvisitor

57 Micro or macroclass

58 YSL competitor

60 Wander(about)

61 Hitchcock title

s

Solve this puzzle online and discuss it atWSJ.com/Puzzles.

S H I L L I V A N D R A TA U D I O L I S A R I T AF R E E W E I G H T E P P SE T A C R A G K A R A T

R A N D O M M E M O R YM O R A L E Y E N T AO P E N R A T T Y R A EJ U D I C I A L H E A R I N GO S S O M I T S I N T O

N O V A S I N A G E SS T A T E C A P I T A LH O P O N A D A M E N DE X P O L O S S L E A D E RB I E L P I T A I X N A YA C R E S L A Y T E A R S

PUZZLE, SCHMUZZLE! | By Jeff Chen

COLLEGE ATHLETES mountedtheir latest and strongest chargeagainst the idea that they are ama-teurs as they began a court chal-lenge on Tuesday of the NCAA’spower to limit their compensationin a multibillion-dollar industry.

Former athletes in Division Imen’s and women’s basketball andtop-division football are seeking toend the NCAA’s cap on what theymay receive for participating incollege sports: gener-ally, little more than tu-ition, room and board.

The plaintiffs in “InRe: National CollegiateAthletic AssociationAthletic Grant-in-AidCap Antitrust Litiga-tion” say the NCAA’srules violate U.S. anti-trust laws by artifi-cially depressing ath-letes’ compensation.Previous litigation byathletes sought to stopthe NCAA from profit-ing from their name,image or likeness without sharingthe proceeds, but in this casethey’re seeking to change the basicrelationship between collegesports leaders and participants.

The NCAA says compensationlimits are necessary to maintainthe distinction between collegeand professional sports, and thatletting schools pay athletes unlim-ited sums would erode collegesports’ appeal to the public. NCAAofficials say athletic scholarshipsand the chance to earn a college

BY RACHEL BACHMAN

degree—in many cases worth afew hundred thousand dollars—areample compensation for what theysay is an amateur pursuit.

“What sets college sports apartis that the competitors are stu-dents and not paid professionals,”NCAA lawyers wrote in their pre-pared opening remarks, releasedahead of Tuesday’s trial start.They warn that a “competition be-tween athletes recruited and paidbased on the value of their perfor-mance, on one hand, and athletes

who compete just as part of theirstudent experience and a way tomaintain it, would readily degener-ate into an uninteresting and po-tentially dangerous mismatch.”

The class-action case will be de-cided in a bench trial in U.S. Dis-trict Court for the Northern Dis-trict of California in Oakland, andis expected to last several weeks.A ruling is expected weeks ormonths later.

College sports’ annual revenueshave skyrocketed in recent de-cades, boosted by escalating feespaid by TV networks to broadcastgames. The NCAA earned morethan $1 billion in revenue last year,

mostly from the men’s basketballtournament. Its associated athleticconferences together earned bil-lions more, largely through broad-cast-rights fees for football games.

In their prepared opening re-marks, plaintiffs’ lawyers wrotethat “the schools compete againstone another without limitation toattract top coaches and trainersand administrators, to constructthe largest stadia and the most lav-ish suites, and to secure the mostlucrative broadcast and sponsor-ship and licensing agreements. Inthe multibillion-dollar business ofD-I basketball and FBS football,competition is stifled only—and en-

NCAA

Athletes Challenge Limits on CompensationThe plaintiffs say rulesviolate U.S. antitrustlaws by artificiallydepressing pay

tirely—when it comes to compen-sating athletes for their services.”

The current case will be decidedby Judge Claudia Wilken, who fouryears ago ruled for NCAA athletesin a similar but more limited anti-trust case. That case, headlined byformer UCLA basketball star EdO’Bannon, was sparked by anNCAA-licensed videogame that fea-tured animated likenesses thatmimicked actual college athleteswithout compensating the players.

Wilken’s ruling in O’Bannon re-sulted in schools being allowed toaward the full cost of college at-tendance to athletes. Some schoolsbegan giving athletes stipends topay expenses that scholarshipsdidn’t cover, such as laundry ortransportation.

The O’Bannon case set a prece-dent favorable to future plaintiffs inthat it ruled that the NCAA violatedantitrust laws. Yet the decision alsolargely preserved the current col-lege-sports model so the NCAA alsoclaims it as a kind of victory.

“As was demonstrated in theO’Bannon case, the NCAA willshow that our rules are essentialto providing educational opportu-nities to hundreds of thousands ofstudent-athletes across the coun-try,” Donald Remy, chief legal offi-cer of the NCAA, said in a state-ment last week. “Allowing paidprofessionals to replace student-athletes on college campuseswould change the face of collegesports as we know it.”

Skeptics—or realists—point outthat a shadow market already ex-ists for college athletes’ services. Acriminal case working its waythrough U.S. federal court allegesthat shoe-company representativesand others connected to collegesports arranged kickbacks andbribes to induce high school re-cruits to sign with certain schools.

A win by the plaintiffs in thiscase could bring bidding for play-ers into the light.

Above, Shawne Alston, who played at West Virginia, is one of the plaintiffs ina lawsuit challenging the NCAA. Left, former UCLA star Ed O’Bannon.

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THE SAINTS AREFANTASY FAVORITE

With the NFL season set tokick off, the New England Patriotsand Philadelphia Eagles are theearly favorites to make it back tothe Super Bowl.

But fantasy football players ap-pear to favor another team: the NewOrleans Saints.

With an average total of nineplayers drafted by owners in high-stakes leagues, the Saints are theteam with the most players repre-sented in drafts conducted in thepast few weeks for the National Fan-

tasy Football Championship.With fantasy football placing an em-

phasis on skill-position players on of-fense, New Orleans is the go-to-teamthis season, with a roster that includesrunning back Alvin Kamara, who has anaverage draft position, or ADP, of No. 5overall, pictured with quarterback DrewBrees (85), receiver Michael Thomas(16), running back Mark Ingram (52) andreceiver Cameron Meredith (134).

In addition, their defense/specialteams is taken on average 185th.

The Saints are also one of the favor-

ites in real-life football, after they wereseconds away from advancing to theNFC Championship game last season,before then-Vikings quarterback CaseKeenum connected with Stefon Diggs onthe “Minneapolis Miracle” to send NewOrleans home.

Applying the same standard last yearwould have highlighted the Patriots, with

a league-high 11 players. Tom Bradyand company ended up winning 13regular-season games en route to theAFC title. But critics who say thatfantasy football isn’t an accurate rep-resentation of real football, can pointto last season’s Super Bowl champi-ons. The Eagles were one of the leastpopular teams in fantasy, with onlythree players selected, and went onto hoist the Lombardi Trophy.

They can also look at the TampaBay Buccaneers, tied with the Patri-ots and Green Bay Packers for thesecond-highest total this year witheight players each. The Buccaneers,with quarterback Jameis Winstonsuspended for the first three gamesof the season, are projected to be oneof the league’s worst teams.

Coincidentally, Tampa Bay visitsNew Orleans on Sunday. Oddsmak-ers have made the Saints a 9.5-point favorite. —Michael Salfino

WhoDat?Playersdrafted inNational FantasyFootball Championship leagues. (Top192,tiesbrokenbyavg. draft position.)

TEAM(PLAYERS) TEAM(PLAYERS)1.Saints (9)* 17.49ers (6)2.Patriots (8) 18.Broncos (6)*3.Packers (8) 19.Raiders (6)4.Buccaneers (8) 20.Redskins (6)5.Vikings (7)* 21. Jaguars (6)*6.Rams(7)* 22.Bears (5)7.Eagles (7)* 23.Giants (5)8.Lions (7) 24.Seahawks (5)9.Chargers (7)* 25. Bengals (5)10.Falcons (7) 26.Titans (5)11.Colts (7) 27.Ravens (5)*12. Chiefs (6) 28.Dolphins (4)13. Browns (6) 29.Cowboys (4)14.Panthers (6) 30.Cardinals (3)15. Steelers (6) 31. Jets (3)16. Texans (6)* 32.Bills (3)Source:NFFC *Defense/special teamsdrafted

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THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | A15

JudgingThe JudgesThe Most Dangerous BranchBy David A. Kaplan(Crown, 446 pages, $30)

BOOKSHELF | By Adam J. White

OPINION

W hen a Supreme Court justice’s retirement turnsAmerican politics on its ear—as Anthony Kennedy’sretirement did this summer—we ought to consider

whether the federal judiciary plays too large a role in ourpolitical life. Then again, Americans have been debating theSupreme Court’s power from the start.

In 1788, a critic of the proposed Constitution, writing as“Brutus,” warned that the court would dominate Congressand the States by imposing the justices’ own “sense” of theConstitution. “There is no power above them, to controulany of their decisions,” Brutus wrote. Judges would be“independent of the people, of the legislature, and of everypower under heaven.” Men who are placed in this situation,he added, “will generally soon feel themselves independent

of heaven itself.”Brutus’s argument

inspired a response:Federalist 78, the seminaldefense of judicial powercomposed by AlexanderHamilton under the name“Publius.” The judiciary,Hamilton assured, “may trulybe said to have neither forcenor will, but merely judgment.”The court will always be, hestated, “the least dangerous tothe political rights of theConstitution.”

Have two centuries provedHamilton wrong? Brutus’s warnings of a

powerful and unchecked Supreme Court mayseem apt today, as critics make similar charges in similarterms. They include David A. Kaplan, whose book bears atitle directed squarely at Hamilton’s assurances.

In “The Most Dangerous Branch,” Mr. Kaplan has two aims:to break news with original reporting on the Supreme Court’sinternal politics and to make an argument about its excessivepower. “Today,” he writes, “liberals and conservatives alikeblithely rely on the Court’s members to settle society’stoughest issues—at the expense of the two branches ofgovernment that are designed to be democratic.” The result,he says, is “an arrogant Court and an enfeebled Congress.”

Mr. Kaplan, a former Newsweek legal-affairs editor,attacks recent conservative courtroom victories—e.g.,protecting gun rights and limiting the Justice Depart-ment’s power over redistricting—as well as Roe v. Wade,the court’s 1972 decision creating a broad right toabortion. Liberal court watchers, in response to thenomination of Brett Kavanaugh to replace Justice Kennedy,argue that Roe is a super-precedent that must bepreserved at all cost. Mr. Kaplan, by contrast, sees Roe asan “inflection point,” when justices “needlessly placedthemselves in the middle of a matter best left to thedemocratically accountable branches.” This decision, hesays, inaugurated “the modern triumphalism of theCourt—making it the most dangerous branch and, in sodoing, undermining its legitimacy.” Mr. Kaplan’s analysiscalls to mind that of John Hart Ely, the liberal legalscholar who noted in 1973 that Roe “is not constitutionallaw and gives almost no sense of an obligation to try tobe.” Mr. Kaplan’s critique of judicial power will resonatewith the court’s critics on both right and left, though theywill disagree about which precedents should be abandoned.

As a work of journalism, “The Most Dangerous Branch”relies on an astonishing number of sources—beginning withthe Supreme Court justices themselves. Mr. Kaplan saysthat he conducted “interviews with a majority of thecurrent justices; past justices; 65 law clerks who worked atthe Supreme Court” and myriad others. Unfortunately, henotes, “virtually all” of his interviews were given “onbackground,” meaning that he can give no specific evidencefor a host of eyebrow-raising allegations, including hisclaim that Chief Justice John Roberts directed his clerks todraft two different opinions in the 2012 constitutionalchallenge to ObamaCare before choosing, eventually, toaffirm the statute’s “individual mandate” as a tax. He alsoreports (without sourcing) that Justice Ruth BaderGinsburg, whose election-year denunciations of candidateDonald Trump drew criticism even from her supporters,consoled her clerks after the election by assuring them that“we’ll try again in four years.”

But here Mr. Kaplan’s bipartisan approach ends abruptly.He is routinely negative about the court’s conservatives—especially Neil Gorsuch, who replaced Antonin Scalia in2017. The author paints him as so “insufferable” during oralargument that the other justices, except Clarence Thomas,“couldn’t stand him most of the time.” Meanwhile, JusticesAlito and Thomas “seethed to their law clerks” aboutJustice Roberts’s shift in his approach to ObamaCare.

By contrast, the liberal justices generally shine in Mr.Kaplan’s account. His clear favorite is Stephen Breyer,whose “earnest pragmatism” predisposes him “to seekconsensus.” Similarly, Democratic presidents, in Mr.Kaplan’s reckoning, see the act of choosing a court nomineeas a “nuanced” responsibility not dominated by politics—supposedly unlike their Republican counterparts. And, Mr.Kaplan adds, Senate Democrats, unlike Republicans, have no“stomach for [nomination] death matches.”

The political lens through which Mr. Kaplan surveys thescene not only undermines his account of the court; itundermines his treatment of court opinions, too. CriticizingShelby County v. Holder, for example—in which the courtdeclared unconstitutional Congress’s latest iteration of theVoting Rights Act—he complains that the opinion lacked “aconstitutional anchor. It certainly wasn’t in the FifteenthAmendment.” But the 15th Amendment, which empowersCongress to protect the right to vote through “appropriatelegislation,” was precisely what the court’s opinion restedon. Such tendentiousness is unfortunate, since it mayweaken the force of Mr. Kaplan’s critique of judicialsupremacy, much needed in an era when judges’ role in ourpolitics and culture is so heavily felt. Like today’s SupremeCourt, “The Most Dangerous Branch” too often shows a lackof self-restraint that undermines its credibility.

Mr. White is a research fellow at the Hoover Institution andan assistant professor of law at George Mason University.

Has the Supreme Court become too powerful,usurping the role of the government’sdemocratically accountable branches?

A Better Way to Prepare for War in Korea

D efense Secretary JimMattis has suggestedthat the major annual

U.S.-South Korea military exer-cises—suspended this year tofacilitate negotiations withNorth Korea—may resume.The biggest are “Foal Eagle,” aspringtime exercise with morethan 10,000 U.S. troops plusover 300,000 South Koreans,and “Ulchi Freedom Guardian,”which typically includes some20,000 Americans and 50,000South Koreans.

The Pentagon and PresidentTrump have both subsequentlyplayed down the idea of re-suming exercises. But Mr. Mat-tis’s concerns are valid. Alliesneed to practice together to beready for war and thereby en-sure deterrence.

On the other hand, Mr.Trump has called the large ex-ercises “provocative,” echoingPyongyang’s rhetoric. A re-sumption could heighten ten-sions on the peninsula.

There is an alternative.Through the U.S.-South KoreanCombined Forces Command,headed by Gen. Vincent Brooksin Seoul, the allies could de-velop a new plan for smallerbut more numerous exercises,unrelated to the nuclear nego-tiations. They should be de-signed to practice the samecombat capabilities as the ear-lier large exercises.

A series of smaller but morefrequent exercises could actu-ally be better for combat pre-paredness. Consider how U.S.forces train at home. They beginsmall and work up to exercisesinvolving hundreds or thou-sands of troops—but almostnever tens of thousands.

Army forces culminate theirtraining cycles in brigade-level

exercises at the Joint Readi-ness Training Center in Louisi-ana or the National TrainingCenter in California. Navy bat-tle groups typically exercisewith several surface ships orsubmarines, each with crew of100 to 300, plus shore-basedpersonnel— still no more thanthousands, even if an aircraftcarrier and air wing are in-volved. Marines often train,and deploy, as Marine Expedi-tionary Units with some 2,000uniformed personnel in all.The Air Force (and air units ofother services) typically willconduct big exercises at thesquadron or wing level, withup to a few dozen aircraft—meaning dozens or hundredsof people in the air and hun-dreds or thousands in supporton the ground.

Why then the big exercisesin Korea? One reason is sym-bolic—to demonstrate the alli-ance’s solidarity and capability.Another is to simulate the largepersonnel movements of a mas-sive reinforcement operation,

and to help commanders grap-ple with the sheer scale of anactual war.

But big exercises have to bechoreographed carefully to keepto schedule. Because so manypeople are involved, major dis-ruptions to plans cannot be al-lowed. That means huge exer-cises cannot really be used totest commanders’ capacity forhandling big surprises. Smallerexercises, by contrast, can allowenough leeway to require realproblem solving.

Smaller exercises alreadyoccur today. We don’t talkabout them much, so NorthKorea is unperturbed. By ex-panding small exercises ratherthan resuming big ones, theU.S. and South Korea can dobetter at simulating the fog ofwar while also staying underthe metaphorical radar whendoing so. For military as wellas diplomatic reasons, that isprobably the way to go.

Mr. O’Hanlon is a senior fel-low at the Brookings Institution.

By Michael O’Hanlon

Scrap the big annualexercises and conductfrequent smaller ones.

“Cars are thebig one,”P r e s i d e n tTrump toldFox News inJuly, explain-ing his evolv-ing theory ofeasy-to-wintrade wars.

Whetherhe meant

cars are his leverage point toremake the world trade systemaccording to some coherent vi-sion, or simply the means tocreate a big show, with lots offake drama and suspense, is anopen question.

But perhaps not that open:If one thing became clearthrough 14 campaign debatesand two years of the Trumppresidency, Mr. Trump doesnot do policy details. It’s alljust symbolism to him.

A victory will be declared atthe end of the day, of that youcan be sure.

His underlings, however, areobliged to give text to his im-pulses, and onlookers areobliged to try to make sense ofthe result. Let’s start with theMexico deal. It requires that40% to 45% of a vehicle eligiblefor no-tariff treatment underthe North American Free TradeAgreement be produced byworkers making $16 or morean hour. It also requires that75% (up from 62.5%) of a car’scontent be produced within theU.S. or Mexico.

The first rule would shiftproduction of Nafta-eligiblecars from Mexico to the U.S.The second would shift pro-duction from third countries

Detroit vs. Protectionism?(say South Korea, Germany orChina) to the U.S. and Mexico.Yet the effect would be small.Only 27% of cars currentlymade in Mexico would be af-fected, and auto makers say ad-justing won’t be hard. Whetherthis means more U.S. jobs isuncertain. Car makers mightprefer just to swallow the exist-ing 2.5% tariff that applies tonon-Nafta imports.

This is where those inclinedto see method in Mr. Trump’strade madness point to a pend-ing Section 232 study by theCommerce Department, meantludicrously to find that U.S.national security is threatenedby auto-related imports,thereby allowing Mr. Trump toimpose 25% duties on carsfrom Europe and Asia and pos-sibly even Canada.

Doing so would thoroughlydisrupt global auto markets,driving up prices for U.S. con-sumers, and only eventuallyperhaps bring more auto in-vestment to the U.S. A Mer-cedes or BMW from Germanymight jump $10,000 in price; aChevy Equinox, Dodge Caravanor Toyota RAV4 from Canadamight jump $5,000.

Right now, such an outcomeis unthinkable. Congress wouldhear from dealers and car buy-ers and throw itself athwart Mr.Trump’s plan. Even the unionsare ambivalent. In their publicutterances, the Big Three—Ford, GM and Chrysler—arealso opposed and presumablymean it, presumably.

Widely quoted was GM chiefMary Barra’s apparently blan-ket statement on a conferencecall that “we are free traders.”

Unfortunately her claim waspreamble to a typically vague,noncommittal GM answer to anadmirably precise question.

The question, by J.P. Mor-gan analyst Ryan Brinkman, isworth repeating: “Has therebeen any scenario planningwithin GM that suggests thatpotential other changes totrade could actually shake outpositively for you? I know GM

management stands for freetrade, but it seems to us thatcertain scenarios, such asNafta remaining but Section232 tariffs applying to im-ported vehicles from outsidethe Nafta bloc, that could actu-ally end up being quite posi-tive for you from a pricing orshare perspective?”

Exactly. Protectionism canbe quite profitable for compa-nies that benefit from it, atleast until they become fat andlazy and fall behind their over-seas competitors in qualityand technology.

Mr. Trump, in Trumpianfashion, has lots of balls in theair, and is proceeding chaoti-cally as he did at times in hisbusiness. He may yet decide togo for broke. And Detroit, de-spite its investment in risingmarkets like China and its at-tachment to its global supplychains, could be the weak link

in any resistance to a Trumpimpulse to turn the global carmarket upside-down.

Certainly you wouldn’t taketo the bank anything that no-toriously obfuscatory Detroitauto executives say about thematter right now.

Among the blunt truthsthey are trained not to men-tion is that they embracedNafta in the first place to useMexico to level the playingfield with foreign transplantsthat built their factories in thesouth to avoid the United Au-tomobile Workers. Home-grown U.S. auto makers re-main bound to the UAW whileforeign-born ones in the U.S.enjoy a free labor market. Thisis a bigger trade distortionthan any Mr. Trump is offer-ing. It’s also the cause of manyother distortions.

For instance, the Big Three’salso-ran status in sedans is alegacy of John Dingell’s “anti-backsliding rule” that for de-cades required them to buildmoney-losing small cars inhigh-cost UAW factories. TheBig Three’s continuing depen-dence on excess pickup profitsis a legacy of the 25% tariff onimported pickups that hasevolved since the 1960s intoWashington’s main gift to propup Detroit despite the many po-litical burdens it must bear.

So keep this history inmind. I wouldn’t be 100% con-fident of Detroit turning up itsnose at a big offer of Trumpprotectionism to solve all theheadaches that continue toarise from Washington’s 80-plus years of meddling in thecar business.

Don’t rule out U.S.auto makers goingsquishy for DonaldTrump’s tariffs.

BUSINESSWORLDBy Holman W.Jenkins, Jr.

When it comesto trade, it isnot America’sallegedly clue-less elites whoare out oftouch with theAmerican peo-ple—it’s Presi-dent Trump.

The evi-dence is clear.

According to a Chicago Councilon Global Affairs survey re-leased last week, 82% of Amer-icans believe trade is good forthe economy, 85% think it’sgood for consumers, and 67%think it’s good for creating jobsin the U.S.

Mr. Trump has presidedover, and may inadvertentlyhave sparked, the most signifi-cant shift toward pro-tradesentiment in modern Americanhistory. As recently as 2016,the Chicago Council finds, only59% of Americans thoughttrade was good for the econ-omy. In two years this figurehas risen by 23 points. Percep-tions about the effect of tradeon employment have changedeven more dramatically. Twoyears ago, 40% of Americansthought trade was good for jobcreation. Today, this figure isan astounding 27 pointshigher.

The president and his ad-visers might be interested tolearn that this shift of opinionhas been broad-based. Whilepositive sentiment about theeffects of trade on the econ-omy rose 16 points amongDemocrats, it increased 25points among independents

Trump Swims Against the Tide on Tradeand 31 points for Republicans.Not surprisingly, 61% of Amer-icans now believe that the U.S.should join the successor tothe Trans-Pacific Partnership,the free-trade agreement fromwhich Mr. Trump withdrewearly in his administration.

Public opinion on the NorthAmerican Free Trade Agree-ment, the current focus of dis-putes between the U.S. and itstrading partners, is more com-plex. During the past decadeoverall support for Nafta hassoared from 42% to 63%. Thesurge has been especiallystrong among Democrats,whose support increased from41% to 79%, while supportamong independents rose from40% to 62%. For Republicans,however, the story has beendifferent: 43% in 2008, 43% to-day. As the rest of the countryhas abandoned its reservationsabout open trade with Mexicoand Canada, Republicans haveretained theirs.

Here too, the most recenttrends are unmistakable—andstartling. In just the pastyear, as Mr. Trump hasramped up his attack, overallpublic support for Nafta hasrisen by a broadly based 10points—8 points among Dem-ocrats, 9 for Republicans, 11for independents.

Mr. Trump should thinkagain, moreover, about focus-ing his ire on Canada. Accord-ing to the Pew Research Cen-ter, 67% of Americans harborwarm feelings toward Canada,including 59% of his ownparty. After he spent morethan three years whipping up

antipathy to Mexico, his sup-porters may be experiencingwhiplash when they are toldthat the real bad actor isAmerica’s neighbor to thenorth.

Actually, China is the prob-lem. But as the Trump admin-istration prepares to expandtariffs on Chinese imports, it isin danger again of outrunningits political supply lines. Sev-enty-one percent of Ameri-cans, including 56% of Republi-cans, are concerned that a

trade war with China will hurttheir local economy. Thoughthe public cares far moreabout job creation than morechoices and lower costs, 80%of Americans believe expand-ing exports is best for jobs,compared with only 17% whothink that restricting importsis the way to go.

Republicans are split ontrade. Although Mr. Trump’sworking-class base supportshis tough approach, the rest ofthe party doesn’t. After theNovember election, Republicanofficeholders will face a deci-sion: Stand up to Mr. Trump orconcede and allow themselvesto be branded the antitradeparty. Pro-trade Republicansshould join forces with Demo-crats, who have come to doubt

the wisdom of conceding somuch discretion on trade to apresident of either party.

The president will face in-tensifying pressure to showthat his threat-based negotiat-ing style can produce morethan an escalation of protec-tionism on all sides. Climbingdown from his ill-advised deci-sion to abandon the TPP wouldrelieve some of this pressure,and he could argue that join-ing forces with 11 countries onboth sides of the Pacific wouldstrengthen his hand in dealingwith China.

Democrats now represent astrongly pro-trade coalition.Their challenge is to nominatea presidential candidate whocan speak for the national ma-jority on this issue while offer-ing bold new policies to helptrade’s losers. Public policymust help the victims of off-shored jobs and depressedwages rebuild their workinglives and enjoy a dignified re-tirement. While Mr. Trumpspeaks for the past, Democratsshould focus on the future.

This orientation doesn’tpreclude—indeed, it must in-clude—firm opposition toChina’s policies on forced tech-nology transfer. Democratsshould emphasize the incom-patibility between state-subsi-dized Chinese enterprises andthe assumptions built into theWorld Trade Organization, andthey should form the widestpossible coalition with U.S. al-lies in Europe, Asia and theAmericas to challenge China’sabuses. Going it alone on tradewon’t work.

More Americans thanever say free exchangeboosts the economyand job creation.

POLITICS& IDEASBy WilliamA. Galston

A16 | Wednesday, September 5, 2018 THEWALL STREET JOURNAL.

Light and Darkness and Young Adult BooksRegarding Steve Salerno’s “The Un-

bearable Darkness of Young Adult Lit-erature” (op-ed, Aug. 29): As a mid-dle-school librarian, I don’t under-stand Mr. Salerno’s criticism of thedarker offerings in recent young adult(YA) literature. A certain subset ofyoung adults has always been at-tracted to books about social diffi-culty, just as adults enjoy readingabout characters struggling throughtrauma and adversity.

Certainly these books aren’t toblame for the uptick in depressed andsuicidal teens. Rather it is our alienat-ing society, the increased sense of iso-lation and cyberbullying due to smart-phones and social media, and ourculture’s ever-widening income dis-parity that place more children at risk.

As a school librarian, I offer stu-dents the books they want to read,and as long as certain students are in-terested in these books and find themcathartic, our school library will con-tinue to offer them along with the“Harry Potter,” “Twilight” and “TheHunger Games” series, and any othertrend. Our vocation is to develop life-long readers. Adults who identify asreaders vote at higher rates and aremore involved in their communities.

SARA STEVENSONAustin, Texas

Having been a crisis counselor tohundreds of teens, I can assure Mr. Sa-lerno that no one calls in with a con-cern over what book they just read.The darkness and depravity he findsquestionable in the novels presentedat June’s YA lit summit are betterviewed as educational escapes, ratherthan instruction manuals. The act ofreading increases the muscle of empa-thy—the real tool young adults needto navigate the world. That thesebooks are socially relevant makes it

only better. Children won’t be toldwhat not to read; ask my generationwho passed around stolen copies oftheir parents’ “The Shining.”

CHRISTIAN DURSOLos Angeles

YA literature doesn’t showcase allthings dark and dreadful. While thesebooks take on tough topics like mentalillness, racial bias and police brutality,cultural expectations and burgeoningsexuality, they show teens that beingwho they are means being part of aculture that is highly politicized,highly divided, and charged with find-ing commonalities, connections andplaces to come together and makechange.

These books don’t showcase“anomalies and unorthodoxies.” Theyshowcase the world as it is. Teacherswho are brave enough to teach thesebooks are doing today’s students theutmost in service.

Teens know the world they live in.They also know how it could be iftheir differences and wide, rich rangeof experiences were acknowledgedand celebrated. They want to escapeinto books that allow them to be thepeople who spark change. Thesebooks offer them hope and power bysimply telling them their aches, painsand injustices are real, but that theycan stand up and make things better.YA literature isn’t the darkness. It’sthe light.

KELLY JENSENWoodstock, Ill.

Political correctness claims penulti-mate authority as the champion ofvictims of injustice. Isn’t it ironic thatit makes victims of those who areshaped by its precepts?

SHANNON VOWELLFrisco, Texas

LETTERS TO THE EDITOR

Letters intended for publication shouldbe addressed to: The Editor, 1211 Avenueof the Americas, New York, NY 10036,or emailed to wsj.ltrs@wsj.com. Pleaseinclude your city and state. All lettersare subject to editing, and unpublishedletters can be neither acknowledged norreturned.

“Sure, we could just print outthe specials, but the chef doesn’twant to leave a paper trail.”

THEWALL STREET JOURNAL

Lack of an Opposition Helped Sink VenezuelaRegarding Daniel Pipes’s “Venezu-

ela’s Tyranny of Bad Ideas” (op-ed,Aug. 27): The problem with Venezuelahasn’t been the left-wing views heldby the government per se, but stemsfrom a lack of accountability that hasallowed the government to pursuepolicies that have led to economic di-saster. The 1998 presidential electionwas won by Hugo Chávez in a fair anddemocratic way. However, the mainpolitical problem with the chavistaadministration is that it has neverfaced a strong political oppositionthat countered its left-wing rhetoricwith sensible free-market economicpolicies and beneficial to all the popu-lation of the country.

The traditional parties that hadgoverned the country since the fall ofthe military dictator Gen. MarcosPérez Jiménez in 1958 were a bustedflush at the time of the 1998 election.It took some considerable time for arainbow coalition to emerge that in-

cluded left-wing parties such as theCommunist Party of Venezuela andextreme right-wing parties like theCruzada Cívica Nacionalista, for thepurpose of getting rid of PresidentChávez. The Mesa de la UnidadDemocrática (MUD) didn’t offer aclear, acceptable alternative to thechavista electorate, which is made upmainly by the poor and dispossessedof the country, who depend criticallyon government handouts such as freefood baskets and a free health service.Without a clear, attractive alternativethe chavistas were unwilling to cutthe hand that fed them.

The Venezuelan case illustratesperfectly that the democratic processsuffers without the proper checks andbalances of a strong opposition, tothe detriment of the well-being of acountry.

BRIAN MCBETH, D.PHIL.Oxford University

Oxford, U.K.

This Millennial Scapegoat Still Has HopeRegarding Nicole Ault’s “Don’t

Trust Anyone Over 21” (op-ed, Aug.23): As a millennial I feel compelledto defend my generation. Despitethe fact that millennials acquiredthe nasty reputation of being “self-ish sloths,” it should be known thatwe are a product of our environ-ment and didn’t come out of thewomb the way we are now.

We lived through the Great Reces-sion while we were in school (withall due respect, Generation Z has thefortune of graduating during theTrump economy), and when we cameout, there were no jobs to be found

and we had to struggle through apainstakingly slow recovery. We arein debt because it was pounded intous to go to college and get a degree(any degree) and to not be failures.Heaven forbid we go to trade school.

It’s true a lot of us stayed homewith parents longer than might beexpected, but thanks to the presenteconomy we are getting better jobs,managing our debt and getting ontrack with our careers. There is stilltime to regroup and make a differ-ence. The oldest of us is only 37.

NICHOLAS MATARANGASPhiladelphia

In Praise of the FormerlyPopular Larger Family

Congratulations on Mark Oppen-heimer’s wonderful “Yes, We ReallyDo Want to Have a Fifth Child” (Re-view, Aug. 25). Have as many as youcan care for and love.

With so much propaganda in thepast 40 years against having children(such as they befoul the environment,interfere with our self-pleasure andare a blight on the planet), it is re-freshing to read of a father whowants a large family, for all the rightreasons he cites.

If those who are capable of caringfor children and are married in stablefamilies don’t replace themselves, ourcountry will be the weaker. And ku-dos to Mr. Oppenheimer for wishingto help replace his fellow Jews, mil-lions of whom were destroyed duringhis parents’ lifetime.

It was a welcome relief to read anessay by a person whose values areintact and whose family is growing.

EILEEN POLLOCKBaltimore

Pepper ...And Salt

Richard Trumka Now HasJobs Challenge in Missouri

Regarding Richard Trumka’s“Unions Triumph at the Ballot Box”(op-ed, Aug. 9) and the letters of Aug.22 in reply: Now that union powerhas defeated the right-to-work law inMissouri, how many jobs will Mr.Trumka bring there?

JOHN WITMERPurcellville, Va.

The Kavanaugh Histrionics

E xpectations were low for Brett Ka-vanaugh’s confirmation hearing, andSenateDemocrats onTuesdaywastedno

time meeting them. We can’ttell if they’re going throughthe histrionic motions or ifthey might actually try toblock a confirmation vote.

Judiciary Chairman ChuckGrassley couldn’t finish hisfirst sentence before California Democrat Ka-malaHarris interrupted todemandahearingde-lay. Democrats continued to speak over theChairman even after they were ruled out of or-der to the jeers of protestors who had to be re-moved from the hearing room.Democrats inter-rupted 44 times in the first hour, part of whatNBC reported as a “plotted, coordinated strat-egy” organized by Minority Leader ChuckSchumer over the weekend.

Themain charge is thatMr. Grassley is “deny-ing” crucial documents to “hide” Judge Ka-vanaugh’s record. The Senators are ignoring the307 opinions he has written, and the 17,000pages ofmaterial he provided in response to thecommittee’s questionnaire—themost extensiveever demandedof a nominee. The Senators havealready receivedmore than half amillion pagesabout his time as a lawyer and judge—moredoc-uments thanwere provided for the past five Su-preme Court nominees combined.

Democrats haven’t found a killer issue in allof this, so they are demanding documents fromJudge Kavanaugh’s time as a staff secretary intheBushWhiteHouse. Thedocumentswould re-veal little about Judge Kavanaugh’s legal think-ing, since as staff secretary his jobwas to vet andmonitor what President Bush saw each day.

Most of these documents are privileged, andfor good reason. They represent high-level delib-erations that require honest advice.WhenDem-ocrat Pat Leahy ran the Judiciary Committee, hedidn’t even ask the ObamaWhite House to pro-videdocuments fromElenaKagan’s tenure at theSolicitor General’s office, though they surely

were relevant to her legal views.Jeff Sessions, a GOP Senator at the time,

askedMs. Kagan during her 2010 hearing aboutthe need for such privilege.She agreed that such docu-ments “ought not to be pro-duced” since it would under-mine the “confidentiality”necessary for “effective deci-sion-making.”

Once they got past this procedural tantrum,Democrats used their opening statements totake shots at Judge Kavanaugh’s integrity. Ms.Harris (#KamalaIn2020) derided himas a parti-sanwhowould not be loyal “to the people of theUnited States.” Is he a traitor? Several SenatorsclaimedDonald Trump chose JudgeKavanaughto protect the President from indictment or im-peachment or something.Nevermind that JudgeKavanaughhaswritten opinions that are skepti-cal of unchecked presidential power.

Democrats portray Mr. Kavanaugh as someTrumpian legal gargoyle, but he’s the epitomeof amainstream legal conservative that anyGOPPresidentwould have hadonhis short list. Some97% of the opinions and orders that Judge Ka-vanaugh tookpart in over 12 years on the federalbenchwere unanimous. Hewas in themajority98% of the time.

Of his 62 dissents, the SupremeCourt has ad-opted his legal reasoning in at least nine cases—an extraordinary number for an appellate judge.He’s a center-right version of his colleague onthe federal bench,MerrickGarland,whomDem-ocrats continue to laud as an ideal Justice.

Thepolitical question iswhether this is all forshow, or are Democrats willful enough to useSenate rules to block the nomination frompro-ceeding to a vote? They could do so for a whileif they stage a walkout, and Tuesday’s melo-drama suggests theymight be up for such a self-defeating gesture. About half of the Democratson Judiciary are running for President, but havethey consulted their Senate colleagues runningfor re-election this year?

Senate Democrats turnthe hearing into a

presidential campaign.

Trump’s Syria Moment

W hat happens in Syria rarely staysthere, as Barack Obama learned thehard way and Donald Trump is now

discovering. Bashar Assad’sforces and his Iranian andRussian allies are preparingan assault on Idlib province,the last major opposition re-doubt, and the attack is put-ting Mr. Trump’s lack of aSyria strategy in sharp relief.

The White House issued a statement Tues-day warning against “a reckless escalation ofan already tragic conflict.” The press secretaryalso warned against another use of chemicalweapons, while the Chairman of the JointChiefs, Marine Gen. Joseph Dunford, worriedabout a “humanitarian catastrophe” in Idlib.“We don’t see any way that significant militaryoperations are going to be beneficial to the peo-ple of Syria,” Gen. Dunford said.

This is all well meaning, but it’s the kind ofdiplomatic pleading that John Kerry and Mr.Obama were famous for in Syria, and we knowhow that worked. Amid these U.S. entreaties,Russia began air strikes around Idlib on Tues-day and a Kremlin spokesman promised to fin-ish the job “unconditionally.”

Mr. Trump has dined out politically on histwo air strikes responding to Mr. Assad’s useof chemical weapons, but those pinprick attacksdidn’t change the underlying reality in the con-flict: Mr. Assad, Russia and Iran are on theirway to controlling Syria in the post-civil war,post-Islamic State era. This axis of opportunismallowed the U.S. and Kurds to roll up ISIS inSyria’s northeast while the axis focused onwip-ing out opposition strongholds.

Mr. Trump’s impulse has been to withdrawU.S. troops from Syria once its stronghold inRaqqa was liberated, but he is slowly figuringout that this has damaging strategic conse-quences for U.S. interests.

One problem is that it lets Iran turn Syriainto another forward operating base on Israel’sborder. National Security Adviser John Bolton

has been demanding that Iranleave Syria, and seeking Rus-sia’s help in the effort. ButIran and Russia respond topower, not pleading, andthey’ve heard Mr. Trump an-nounce many times that he

wants out of Syria.Meanwhile, Turkey, Russia and Iran are

meeting later this week in Tehran to decideon their next steps in Syria. The Turks wanta buffer zone in the north from refugees, aswell as some assurance that Kurdish separat-ists won’t be allowed to operate from Syria.Russia wants to be seen as having assured thevictory of its client, Mr. Assad, while retainingair and naval bases. Iran wants to be Mr.Assad’s puppet-master.

Mr. Obama left Mr. Trump with a mess inSyria, but in 20months the President has donelittle to alter the balance of forces. Mr. Trumpseems content to issue tweets about Idlib, butMr. Assad and his allies won’t stop there. Theirnext target will be the Kurds and Syrian Demo-cratic Forces (SDF), America’s main groundpartners, who are working with U.S. specialforces in Syria east of the Euphrates River.

The danger is that the Kurds and SDFwill be-gin to negotiate a cease-fire to save themselvesfrom becoming the next Idlib. Then U.S. forceswould be isolated in Syria and a withdrawalwould be inevitable. Iran will own the place, de-spiteMr. Trump’s speeches about containing itsregional aggression.

The U.S. needs to reassure the Kurds and SDFthat it will protect them if they’re attackedwhile working out a longer-term strategy thatraises the price for Iranian intervention. AnObama-style retreat from Syria will not endwell for U.S. interests.

The looming massacrein Idlib shows the

lack of U.S. leverage.

Burma’s Ethnic Cleansers

A Burmese court on Monday sentencedReuters reportersWaLone andKyawSoeOo to seven years in prison. The twowere

victims last December of a far-cical set-up by the police, whohanded them supposedly se-cret documents and arrestedthem. Police Captain Moe YanNaing admitted during the trialthat his superior ordered himto entrap the journalists; he was sentenced to ayear in prison for breaking police discipline.

Burma’smilitary-dominated government rail-roaded the Reuters journalists because they ex-posed the army’s persecution of ethnic RohingyaMuslims. They tracked down amass grave withthe bodies of 10 civilians in the village of Inn Din,and Reuters published photos of the victims inarmy custodywith their hands bound shortly be-fore theywere killed. The authorities grudginglyacknowledged the killing and sentenced sevensoldiers to prisonwith hard labor, but they insistthe victims were terrorists.

Burma’s government clearly wants to deterother journalists from similar reporting. Satel-lite photos show themilitary burned hundredsof Rohingya villages. According to a report lastweek by a United Nations fact-findingmission,troops and local authorities killed about 10,000Rohingya and drove more than 700,000 into

neighboring Bangladesh. The U.N. investigatorsaccused themilitary’s top generals of directingthe ethnic cleansing, including the use of mass

rape. They recommendedcharging six officers withgenocide at the InternationalCriminal Court or a specialtribunal.

China has signaled that itwill shield Burma’s generals

from prosecution. “Unilateral accusation orpressure will not help to solve the problem,”Chinese Foreign Ministry spokeswoman HuaChunying said last week.

But the international nature of Burma’s per-secution of the Rohingya demands an interna-tional response. The generals refuse to allowthe Rohingya to return home and guaranteetheir safety, so they continue to suffer appallingconditions in camps in Bangladesh. Aung SanSuu Kyi, the pro-democracy icon whose partywon 86% of the seats in parliament in the 2015election, has defended the military and deniedaccess to international investigators and pro-viders of humanitarian aid.

The U.S., the U.N. and other governments arecalling for the release ofWa Lone and Kyaw SoeOo. Burma’s use of a transparently unjust trialshows that the generals fear themedia’s powerto expose their ethnic-cleansing campaign.

Two brave reporters goto prison for exposingmurder and rape.

REVIEW & OUTLOOK

OPINION

THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | A17

OPINION

E very time President Trumpwrites off the mainstreammedia as “fake news,”members of the press arebefuddled by how many

Americans seem to agree. Yet we atthe Center for the National Interesthave been unable to ignore the me-dia’s widespread bias since April2016, when our magazine, the Na-tional Interest, hosted Mr. Trump’sfirst foreign-policy speech. Sincethen we have faced relentless biasedattacks from supposedly objectivemedia outlets.

Mr. Trump is wrong to call themainstream media “the enemy of thepeople.” Yet it’s true that many inthe media have cavalierly abandonedtraditional journalistic standardswhen covering him and anything re-lated to him. For example, Bloombergreporters implied that the center’sinvitation of Russian diplomat SergeyKislyak to attend the Trumpspeech—among two dozen other for-eign ambassadors—was unusual orinappropriate. Other journalists haveattacked the center over reports thata former Reagan-administration offi-cial on the center’s board contributedto Mr. Trump’s speech—another rou-tine function for Washington thinktanks. Whether this bias results fromcarelessness or hostility, the conse-quences are the same: The trend is athreat to America’s democracy andnational security.

The Center for the National Interest

Media Guilt by Russian Associationis an odd candidate for media on-slaught: We’re a nonpartisan foreign-policy research institute with a bipar-tisan board of directors, includingformer national-security officials fromboth parties and retired senior mili-tary officers. No member of the cen-ter’s board or management endorsedMr. Trump’s candidacy, and somepublicly opposed it, contributing mil-lions to anti-Trump political-actioncommittees. The month after Mr.Trump’s speech we presented anaward to Sen. Tim Kaine, who laterbecame Hillary Clinton’s runningmate. A broad range of officials havepraised our work publicly, includingDefense Secretary Jim Mattis andPresident Obama’s national securityadviser Susan Rice. The center hostedMr. Trump’s speech as a public ser-vice, not a political statement.

Unlike some other think tanks, thecenter doesn’t employ Russian citi-zens, take money from Russia, ormaintain an office there. Nor do weissue joint statements with Russianinstitutions or experts. Rather, wework to advance the commitment ofour founder, Richard Nixon, to dia-logue among major powers—includ-ing with U.S. adversaries like Russia.We do this not because we believeRussia is likely to become America’sfriend, but because, like Nixon andRonald Reagan—in whose adminis-tration many on our board and staffheld senior positions—we believe di-plomacy is an essential complementto strength in achieving U.S. foreign-policy objectives.

In the center’s case, this dialogueincludes meeting with Russian offi-cials, opposition figures and experts,as well as appearing in Western andRussian media outlets to discuss pol-icy issues. When we meet Russian of-ficials, or anyone else in Russia, weexplain the facts as we see them. Inconversations in Moscow last fall, wetold senior officials including ForeignMinister Sergei Lavrov that relations

with the U.S. would suffer if Moscowdidn’t address its election interfer-ence. Confident that these meetingsare justified and highly important,we refuse to change course.

Media outlets like Bloomberg, theDaily Beast and Newsweek continueto portray the center’s dialogue withRussia as strange and even sinister.Notwithstanding the small scope ofour interaction with the Trump cam-paign, the Trump-Russia nexusseems irresistible to reporters andtempts them to imagine conspiracies.Thus journalists have smeared ourboard members whose companies in-vest in Russia—something that isneither rare nor inappropriate—andinsinuated that our honorary chair-man, Henry Kissinger, is a “confi-dant” of Vladimir Putin simply be-cause the two men have met anumber times across the decades Mr.Putin has been in power.

The Carnegie Endowment for In-ternational Peace and the WoodrowWilson International Center for Schol-ars and its respected Kennan Institute

have been targets of similarly base-less attacks on their Russia-relatedprogramming, as have some promi-nent philanthropic foundations thatsupport such work. But becausenone of these institutions have alsohosted Mr. Trump, and some are ledby Democrats or perceived as lib-eral-leaning, they receive much lessattention.

The McCarthyism of today’s politi-cal climate is further evidenced bythe way Republican senators whovisited Moscow in July were deridedby a Democratic candidate for officeas having traveled “to meet withtheir most important constituents.”Foreign-policy experts have been ac-cused of repeating Kremlin propa-ganda merely for suggesting that theU.S. should consider Russia’s nucleararsenal in formulating policy towardMoscow.

Suspicion toward people of Russianorigin is also widespread. Former Di-rector of National Intelligence JamesClapper, one of Mr. Trump’s principalcritics, stated on national TV that

Russians are “typically, almost geneti-cally driven to co-opt, penetrate, gainfavor.” This newspaper’s KimberleyStrassel has reported an attempt by aDemocratic Senate staffer to questiona witness about contacts with anypeople the witness had “reason to be-lieve are of Russian nationality or de-scent”—making Russian ancestry abasis for investigation.

Similarly, journalists have re-peatedly characterized one of us,Dimitri Simes, as “Russian-born,”even though he came to the U.S. 45years ago as a political refugee andhas been an American citizen fornearly four decades. It is an act ofstunning hypocrisy that some jour-nalists denounce Mr. Trump’s anti-immigrant rhetoric but displaytheir own offensive bias towardmillions of Americans of Russianorigin, including Jewish refugeesfrom communism.

In their coverage of Mr. Trumpand Russia, far too many in the me-dia have developed a sense of mis-sion that goes well beyond pursuit ofthe facts, lacking any sense of re-sponsibility for the wider conse-quences of their zealous search forcollusion. This approach to journal-ism diminishes the American valuesof tolerance and the presumption ofinnocence.

Such journalists likewise ignorethe danger of stoking hatred forAmerica’s adversaries. George Wash-ington warned against this propheti-cally when he wrote that “the nation,prompted by ill-will and resentment,sometimes impels to war the govern-ment, contrary to the best calcula-tions of policy.” It’s something wecan’t afford to forget in dealing withAmerica’s greatest nuclear rival.

Mr. Boyd is a retired U.S. AirForce general and chairman of theboard of the Center for the NationalInterest. Mr. Simes is the center’spresident and CEO.

By Charles G. BoydAnd Dimitri K. Simes

©ALDRAGO/CONGRESSIONALQUARTERLY/NEWSCO

MVIA

ZUMAPRESS

On the hunt for ‘collusion,’journalists attack ourthink tank and othersfor engaging in dialogue.

Candidate Donald Trump at the Center for the National Interest, April 27, 2016.

Rubio’s Family-Leave Benefit Will Go the Way of All Entitlements

S en. Marco Rubio has introducedlegislation to establish a mod-est federally funded family-

leave program. Mr. Rubio proposes tofinance the benefit by requiring re-cipients to forgo their first three tosix months’ Social Security checks.Mr. Rubio’s well-intentioned plan be-gins by promising a small, carefullytargeted benefit and assuring us thatit won’t add to the long-run publicdebt. But history demonstrates thatis how costly entitlement programsbegin.

The pattern of expansion is re-markably common. New programsinitially target benefits to a group ofindividuals deemed particularly wor-thy at the time. Eventually the ex-cluded come forth to assert thatthey are no less worthy of aid andpressure lawmakers to relax eligibil-ity rules.

This ever-present pressure hasbeen magnified during periods of bud-get surpluses, during periods of eco-nomic distress since the Depression,and by the imperative of lawmakersand presidents to be elected and re-elected. Eventually, the government

acquiesces and additional “worthy”claimants are allowed to join the ben-efit rolls.

The broadening of eligibility rulesbrings yet another group of claim-ants closer to the boundaries of eli-gibility, and the pressure to relaxqualifying rules begins all overagain. The process of liberalizationrepeats itself until the entitlementprogram reaches a point where itsoriginal noble goals are no longerrecognizable.

The two major 19th-century enti-tlement programs—RevolutionaryWar and Civil War disability pen-sions—followed this pattern. Eligibil-ity in both programs was initiallylimited to soldiers and sailors whowere injured during wartime service.Both programs eventually grew intouniversal service entitlements thatprovided benefits to virtually all vet-erans of those wars at extraordinarycost to the nation.

In modern times, the Medicaidand food-stamp programs followed asimilar path. These programs wereoriginally limited to providing healthand nutrition assistance, respec-tively, mainly to supplement welfarecash assistance. Both programs now

extend aid to large segments of thepopulation who are not on cash wel-fare and in some cases above thepoverty line. Medicaid assists 25% ofthe nonelderly population. Foodstamps pay a major part of the gro-cery bills for 14% of the nonelderlypopulation.

Even Social Security followed thisexpansionary path. The promise ofthe 1935 program was simply toprovide a measure of economic se-curity against poverty in old age. AsCongress increased monthly bene-fits over the years and added Medi-care, the two programs togethercame to provide middle-income re-tirees with a generous benefit. Thetypical married couple that retiresthis year will receive benefits thatannually cost taxpayers more than$50,000.

For more than 200 years, no enti-tlement program has been immunefrom the expansionary pressuresthat inexorably drive entitlement lib-eralizations, and there is no earthlyreason to think Mr. Rubio’s plan willprove the exception.

Once family leave benefits are en-acted into law, pressure will mounton Congress to increase the amountof assistance and add other equallyworthy activities—job search duringa spell of unemployment, caring for asick family member, helping one’schildren attend college, putting adown payment on a house. Pressurewill also mount to raise the $70,000annual family income eligibility limitin his current proposal. Advocates forexpansion will argue first that it’s un-fair to exclude families making$70,500—then $71,500 and $80,000and so on. Congress will acquiesce tothese pressures, and Mr. Rubio’s well-meaning proposal will become a largeand costly entitlement program. Asthese expansions occur and the costgrows, so will the national debt.

Stripped to its barest essentials,Mr. Rubio’s plan proposes to spendfederal funds now (on family leavebenefits) while promising to pay for

this expenditure later with reduc-tions in future federal spending (onSocial Security benefits). Throughthe years there have been countlessproposals promising future entitle-ment benefit reductions while failingto deliver them. “Spend now, paylater” is a well-traveled congressio-nal path that has brought the coun-try massive federal budget deficitsand a staggering national debt. Mr.Rubio’s plan will be no different.Congress will find some reason torestore benefits, as it has so often inthe past with entitlements.

Instead of creating a new entitle-ment program for a benefit the fed-eral government has no businessproviding, Congress should let fam-ily-leave benefits be the concern ofprivate employers, who are perfectlycapable of providing them. Mr. Ru-bio surely doesn’t intend it, but hisplan would move the federal govern-ment further down the path to na-tional insolvency.

Mr. Cogan is a fellow at StanfordUniversity’s Hoover Institution andauthor of “The High Cost of Good In-tentions: A History of Federal Enti-tlement Programs.”

From Civil War pensionsto Medicare and Medicaid,they always start modest,then bust the budget.

By John F. Cogan

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Guatemala’s President Defends Democracy Against the U.N.

G uatemalan President JimmyMorales announced Friday thatthe agreement his country has

with the United Nations CommissionAgainst Impunity in Guatemala won’tbe renewed. The commission—knownby its Spanish acronym, CICIG—hasone year to tie up its work and, bySept. 3, 2019, leave the country.

Mr. Morales sent a letter to theU.N. secretary-general advising himof the decision. In a press conferenceMr. Morales said that CICIG shouldimmediately begin transferring itsresponsibilities to “corresponding[Guatemalan] entities,” mainly theattorney general.

On Monday CICIG’s top prosecu-tor, Colombian Iván Velásquez, flewto Washington, though he didn’t re-veal why and has no public eventsscheduled. His spokesman said thetrip had been planned for a while.It wouldn’t be the first time theprosecutor went north on a secretmission.

The U.S. Congress pays a substan-tial part of CICIG’s budget, but Mr.Velásquez has refused to answerquestions at congressional hearingsor in any public forum. Instead hemeets behind closed doors on CapitolHill, where he can control the narra-tive in front of an audience—bothleft and right—that is unfamiliarwith or doesn’t care about CICIG’s

transgressions against innocent Gua-temalans. He also seems to haveState Department sympathizers.

Mr. Morales’s detractors chargethat he fired Mr. Velásquez to protecthimself. CICIG has been investigatingthe president and alleges that he wasthe beneficiary of illegal campaign fi-nancing. He denies wrongdoing andenjoys immunity as long as he holdsoffice. Mr. Velásquez has been work-ing to lift that immunity.

Mr. Velásquez might successfullydefend his commission if the stand-off with the president were the onlydisputed issue. But under his leader-ship there is strong evidence thatCICIG routinely flouts the rule of lawand tramples civil liberties in viola-tion of the Guatemalan constitution.His methods can’t be supported by arepublic that pledges allegiance totransparency and human rights.

CICIG was born in 2006 and beganits work in 2007. It was supposed toinvestigate criminal networks oper-ating inside state institutions undera temporary mandate. U.S. and Euro-pean Union support gave it enor-mous clout, and Guatemalans wel-comed the idea of outside help todefeat corruption.

But over the years CICIG expandedits authority to advance the politicsof the extreme left, which seeks toconsolidate power by gaining controlof institutions. It’s the same strategyemployed by the late Venezuelan dic-tator Hugo Chávez.

Mr. Velásquez isn’t an elected of-ficial. He’s more of a modern-dayviceroy, suppressing with force op-position in the “colony” from thosewho challenge his authority. Guate-malans have come to understand

that to complain about the illegalmethods of CICIG is to risk publiccondemnation as a friend of thecorrupt—or even investigation andpreventive detention. Shady busi-nessmen, politicians, notoriousthugs and especially judges seem tobe given a pass so long as they em-brace Mr. Velásquez’s agenda orstay out of his way. In other words,CICIG’s administration of justicehas been selective.

Guatemalans have been afraid tospeak out. But that changed whenWilliam Browder, a victim of Vladi-mir Putin’s global vengeance, de-fended the Bitkov family. The Bitkovshad fled Russia to escape Mr. Putin’sclutches but fell into the snare of hu-man traffickers in Guatemala. Putinhenchmen followed the family toCentral America and enlisted thehelp of CICIG to jail them.

In April congressional hearings,Americans learned for the first timeabout Mr. Velásquez’s extralegalprosecution of the Bitkovs. CICIGhad even thrown 3-year-old Vladi-mir Bitkov into a state orphanage,denying him his right to a legalguardian when his parents werecarted off to prison. CICIG declinedto send someone appear at the hear-ing and defend its actions. Perhapsnow Guatemala’s attorney general

can conduct a full investigation intowhat looks like collusion betweenRussia and CICIG.

Another egregious CICIG case isthe jailing of Max Quirin, a well-re-spected Guatemalan businessmanwho has been denied the presump-tion of innocence and has been incaptivity since May 2015. At his trial,CICIG was unable to present evi-dence of any crime yet Mr. Quirin hasrepeatedly has been denied bail oreven house arrest.

The international left has cheeredthe murky influence and capricious-ness of CICIG because it strong-armsand silences ideological opponents ofsocialism. In CICIG, socialists insideand outside the U.N. believed theyhad found a model they could plopdown all over the developing worldto weaken advocates of center-rightideas and empower collectivism, allunder the pretense of fighting cor-ruption. Rumors abound that theConstitutional Court, an ally of Mr.Velásquez, is getting ready to declarethe president’s decision illegal. Thatwould explain why, on Tuesday, Mr.Morales announced that Mr. Ve-lásquez will not be allowed back inthe country.

Mr. Morales’s decision to orderarmy jeeps to the street in front ofCICIG offices on Friday morning wasunnecessary and counterproductive.His critics immediately accused himof intimidation and of militarizing thegovernment. But the decision to expelthe commission is his right as theelected leader of a sovereign nation,and he has ample justification.

Ms. O’Grady is the Journal’sAmericas columnist.

By Mary Anastasia O’Grady

He booted the CommissionAgainst Impunity, whichhas jailed innocents whilepromoting socialism.

© 2018 Dow Jones & Company. All Rights Reserved. * * * * * * THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | B1

TECHNOLOGY: PHONE BATTLE HEATS UP IN INDIA, B4

BUSINESS&FINANCE

criminal trial.The dissolution process

was precipitated by the factthat Theranos breached acovenant governing a $65million loan it received fromFortress Investment Grouplast year, according to theemail. Under the loan terms,Fortress was entitled to fore-close upon the company’s as-sets if its cash fell beneath acertain threshold.

In the email sent Tuesday,Theranos General Counsel andChief Executive Officer DavidTaylor said the company istrying to negotiate a settle-ment with Fortress thatwould give the New York pri-vate-equity firm ownership ofthe company’s patents butleave its remaining cash—es-timated at about $5 million—for distribution to other unse-

PleaseturntopageB12

Theranos Inc., the blood-testing company accused ofperpetrating Silicon Valley’sbiggest fraud, will soon ceaseto exist.

In the wake of a high-profilescandal, the company will for-mally dissolve, according to anemail to shareholders. Thera-nos will seek to pay unsecuredcreditors its remaining cash incoming months, the email said.

The move comes after fed-eral prosecutors filed criminalcharges against Theranosfounder Elizabeth Holmes andthe blood-testing company’sformer No. 2 executive, alleg-ing that they defrauded inves-tors out of hundreds of mil-lions of dollars and defraudeddoctors and patients.

The executives have deniedthe charges and face a coming

BY JOHN CARREYROU

Embattled TheranosTo Shut Itself Down

Ad and SubtractWPP revenues less pass-throughcosts, second-quarter like-for-like change

THEWALL STREET JOURNAL.Source: the company

Western Europeexcluding U.K.

Other*

U.K.

Group†

North America

3.9%

2.9%

1.4%

0.7%

–3.3%

*Asia Pacific, Latin America, Africa, MiddleEast, Central and Eastern Europe†Entire company, including all regions

LEGO BUILDS ASLOW-GROWTH

STRATEGY

BUSINESS NEWS, B3

NORDICNATIONS BREAKICE ON ENERGY

PROPERTY REPORT, B6

Liu spent last week at a resi-dency for a Ph.D. program inbusiness administration of-fered by the University ofMinnesota’s Carlson School ofManagement, authorities con-tinued to investigate whatpeople familiar with the situa-tion said is a complaintagainst Mr. Liu by a femalestudent from China.

Earl Gray, an attorney forMr. Liu, on Tuesday said hedoesn’t expect Mr. Liu to facecharges. “There is no believ-able or credible evidence thathe has done anything wrongand he denies any wrongdo-ing,” Mr. Gray said.

A Minneapolis policePleaseturntopageB2

Chinese billionaire LiuQiangdong was arrested lastweek on suspicion of rape,Minneapolis police said onTuesday as they continue toinvestigate the entrepreneur’sactions during a residency atthe University of Minnesota.

Mr. Liu was released Satur-day and returned shortlythereafter to China. He ap-peared at an event in Beijingon Tuesday for the e-com-merce site he founded, JD.comInc., underscoring what busi-ness observers describe as hisextraordinary confidence

In Minneapolis, where Mr.

BY AUSTEN HUFFORDAND LIZA LIN

Chinese BillionaireIn U.S. Rape Probe

INSIDE

HEARD ON THE STREET | By StephenWilmot

Tough Job for WPP’s New CEOThe ad in-

dustry ischanging fast.WPP’s newchief execu-tive has the

unenviable task of convincinginvestors that the world’slargest agency group is stillattractive despite toughercompetition.

WPP on Monday formallyannounced Mark Read’s ap-pointment to the top job af-ter making him one of twoco-chief operating officers inApril. He had his first oppor-tunity to reset investors’ ex-pectations Tuesday, whenWPP unveiled second-quarterresults. He dropped hints ofhis approach but deferredthe moment of reckoning un-til a strategy update laterthis year.

WPP will likely end up asmaller, more tightly knitcompany under Mr. Read. Italready has sold some minor-ity stakes, raising £676 mil-lion ($868 million) of cash topay down debt, and is ex-pected to sell more. Mr. Readtold analysts Tuesday itdoesn’t matter whether thecompany owns data capabili-

ties, paving the way for asale of Kantar Group. Thedata provider has weighedon WPP’s results for years.

Mr. Read also is relocatingsome 30% of staff into groupoffices out of individualagency offices.

Crucially for investors, thecompany may end up lessprofitable. Brands’ trust inagencies has been strainedby years of problems with in-effective and fraudulent on-

line ads. They have turnedfor help to the more securead ecosystems of Google andFacebook on the one hand,and consultancies like Accen-ture and Deloitte on theother.

Faced with these chal-lenges, Mr. Read struck amore humble tone than hispredecessor, Martin Sorrell,who left the company undera cloud in April. But the newboss has kept a long-termgoal of expanding WPP’s op-erating margin. This couldprove unrealistic. In the firsthalf, the margin slipped halfa percentage point to 13.3%,and the company warnedthat the full-year marginwould also be lower than in2017. Reversing this trendwhile trying to mount a salesturnaround will be tough.

WPP ADRs fell Tuesday,bringing the decline sincethe start of 2017 to one-third. It looks cheap at 10times prospective earnings,but this multiple isn’t mean-ingful if margins fall. Inves-tors should hold fire.

� Weak North American saleshit WPP results........................ B3

S&P 2896.72 g 0.17% S&PFIN À 0.53% S&P IT g 0.30% DJTRANS À 0.14% WSJ$ IDX À 0.37% LIBOR3M 2.323 NIKKEI (Midday) 22631.17 g 0.29% Seemore atWSJMarkets.com

$300 billion 208135

$400 billion 267231

$500 billion 24202

$600 billion 119114

$700 billion 62216

$800 billion 56585

$900 billion 12836

$1 trillion 18328

Trading days to milestone

Market value

Sources: FactSet (value); Dow Jones Market Data (milestones)THEWALL STREET JOURNAL.

$1.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

trillion

’10 ’15 ’182008

Nov. 2010Amazon Studios launched

Nov. 2011Kindle Fire tabletbegins selling

July 2014Fire Phonereleased

Nov. 2014Echo introduced

June 2017Whole Foodsacquisitionannounced

June 2018PillPack acquisitionannounced

Feb. 2018

Quarterly profit tops$1 billion for first time

Apple Amazon

and treats its warehouse work-ers, something Amazon hassaid is an inaccurate portrayal.

Investors also worry aboutthe tech companies’ outsizeimpact on the stock market.Amazon, Apple and Microsofthave accounted for more than35% of the S&P 500’s total re-turn this year, according toS&P Dow Jones Indices datathrough Aug. 28.

One of the biggest benefi-ciaries of Amazon’s growth isits 54-year-old leader, Jeff Be-zos, who has surpassed BillGates to become the richestman in the world, according tomultiple indexes that track theworld’s wealthiest people. Mr.Bezos owned roughly 16% ofAmazon, as of an August regu-latory filing, and is worthabout $166 billion, accordingto the Bloomberg BillionairesIndex.

Amazon has expanded rap-idly since its humble founding

as an online bookstore in Mr.Bezos’s garage in 1994. The in-ternet then was just becominga viable platform, and the mostvaluable companies at the timeincluded industrial conglomer-ate General Electric Co., oil gi-ant Exxon Inc. and telecommu-nications power AT&T Inc.

Amazon.com Inc. becamethe second U.S. company toreach $1 trillion in marketvalue, reflecting the online re-tailer’s striking transformationfrom a profitless booksellerinto a disruptive force of com-merce.

Amazon shares climbed 1.9%in midday trading Tuesday,briefly topping the $2,050.27needed to push the company’svalue above $1 trillion. Thestock, which ended the day up1.3%, has surged nearly 75% in2018 and added roughly $430billion to the company’s mar-ket capitalization—about thesize of Walmart Inc., CostcoWholesale Corp. and TargetCorp. combined.

Investors have rewarded theSeattle-based company as itdemonstrated better financialdiscipline in recent quarters,reporting record profits be-cause of lucrative businessessuch as cloud computing de-spite aggressively spending onindustries from health care togrocery delivery.

“They’ve proven they canmake it work,” said MichaelLippert, who manages theBaron Capital OpportunityFund that counts Amazon asits largest holding. “They’respending a lot on all thesethings to build and enforcetheir competitive advantages.”

Amazon and Apple Inc.,which hit the trillion-dollarmilestone on Aug. 2, symbolizethe growing influence of techcompanies on markets and theeconomy. The industry isamassing wealth and power,creating a new order in busi-ness where the most valuableresource is no longer oil, butdata. Not far behind in marketvalue are Google owner Alpha-bet Inc. and Microsoft Corp.,both approaching $900 billion,while Facebook Inc.—whichcrossed $500 billion in July2017, a day after Amazon—hasstalled at those levels amid adata-privacy scandal andgrowth concerns.

The companies’ increasingclout have prompted lawmak-ers to scrutinize the tech sec-tor. Amazon, which capturesnearly half of all dollars spentonline, is simultaneously draw-ing the ire of President Trumpover its effect on traditionalretail and its use of the U.S.Postal Service. Sen. BernieSanders has also criticized thecompany for the way it pays

BY LAURA STEVENSAND AMRITH RAMKUMAR

Amazon Follows Apple,Hits $1 Trillion Mark

� Heard: Apple won’t bebiggest for long...................... B14

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B2 | Wednesday, September 5, 2018 * * * * * THEWALL STREET JOURNAL.

BUSINESS & FINANCEINDEX TO BUSINESSESThese indexes cite notable references to most parent companies and businesspeoplein today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A

Accenture....................B1Alibaba Group Holding.....................................B2Alphabet......................B1Amazon.com.B1,B13,B14Apple...............B1,B4,B14APS Management.......B2Arconic ......................B13Aspelin Ramm Eiendom.....................................B6Atlas Sand..................B5AT&T............................B1Avenue CapitalManagement.............B5

B

Baoshan Iron & Steel...................................B14Barings Real Estate ...B6Baron Capital Enterprise.....................................B1BlueMountain CapitalManagement.............B5

C

Calpers.........................B7CBS..............................B8Citigroup..............B5,B12Covia Holdings............B5

D

Danske Bank.............B12Deere.........................B13Didi Chuxing Technology.....................................B4Dongfeng Motor Group

.....................................B2

E

Elliott Associates.......B5Entra............................B6Exxon...........................B1

F

Fabege.........................B7Facebook .....................A1Ford Motor..................B2Freeport-McMoRan...B13

G

Geely AutomobileHoldings....................B2

General Electric ..........B1General Motors...........B2Great Wall Motors .....B2Green Street Advisors.....................................B7Guangzhou AutomobileGroup.........................B2

H

Huawei Technologies..B4

I

ING Groep..................B12

J

Jagged Peak Energy...B5JD.com.........................B1JPMorgan Chase.......B13

K

Klovern........................B6

L

Lego.............................B3Liberty Oilfield Services

.....................................B5Lidl...............................B6

M

Microsoft.....................B1

N

News Corp...................B8Nike......................A1,B13

O

Ocean Rig....................B5Oppo Technologies......B4

P

Pfizer.........................B13

S

Samsung Electronics..B4Skanska.......................B6Stockholm Exergi........B6Storebrand ..................B6

T

Theranos......................B1Tobin Properties .........B6Toyota Motor..............B2Transocean..................B521st Century Fox........B8

U

Unilever.....................B13

V

Vedanta Resources...B14Vivo Electronics..........B4

W

Walt Disney................B8WPP.......................B1,B3

X

Xiaomi.........................B4

INDEX TO PEOPLEA

Agarwal, Anil............B14Armitage, Eric...........B12

B

Bahrke, Witold..........B13Bezos, Jeff..................B1Blackwood, Amanda...B7Brigham, Ben..............B5

C

Chesbrough, Charlie....B2Christiansen, Niels B......................................B3Corbat, Michael.........B12

D

Deckard, Jenniffer D. .B5

F

Flynn, Phil.................B13

G

Gerspach, John.........B12Gusek, Ron..................B5

H

Hahn, Peter...............B12

Holmes, Elizabeth......B1

Hong, H.C....................B4

K

Kaepernick, Colin........A1

Kaminski, Kathryn....B12

Kirchner, Cristina......B14

Kok, Wong Hoi............B2

L

LaNeve, Mark..............B2

Larsson, Claes.............B6

Laszewski, Chuck........B1

Lindow, Rosen ............B6

Lippert, Michael..........B1

Liu, Qiangdong............B1

M

Malec, Jeff................B12

Malek, Christyan.......B13

Mason, Mark.............B12

N

Natkin, Mark...............B2

P

Pandit, Vikram..........B12

Pathak, Tarun..............B4

R

Read, Mark............B1,B3

S

Sandberg, Sheryl........A1

Sand, Peter.................B5

Saunders, Neil............A1

Sorrell, Martin............B1

Steinberg, Darrell .......B7

V

Varga, Tamas............B13

Y

Yang, Will....................B4

Z

Zhang, Zetian..............B2

tary receipts fell 6% to $29.43on Tuesday in New York.

Mr. Liu’s enrollment in theMinnesota program isn’t asurprise. Despite his wealth,he had long advocated self-im-provement and in 2013 stud-ied for one semester at Co-lumbia University in NewYork.

It was while at Columbiathat Mr. Liu began datingZhang Zetian, then a 19-year-old exchange student at Bar-nard College in New York. Ms.Zhang shot to fame in highschool after a photo of herholding a cup of milk tea wentviral on Chinese social media,earning her the sobriquet“Sister Milk Tea.” The couplemarried in 2015.

Mr. Liu’s wealth and famestands in contrast to his child-hood. His family was so poor,Mr. Liu has said, that theywere able to afford meat onlyonce or twice a year.

After graduation in 1998,Mr. Liu started his own com-pany selling computer acces-sories in Beijing’s technology-hub district.

Mr. Liu credits a seniormanager with giving him theidea to sell online following

the outbreak of severe acuterespiratory syndrome in 2002and 2003, which left manypeople fearful of going out inpublic.

Since JD’s listing in 2014,Mr. Liu has become one ofChina’s richest men, with anet worth of about $7.9 billion,according to Forbes. He alsobegan to make proclamationsabout the growth of his busi-ness, a move that led to criticssaying his confidence is morelike cockiness.

“He brags a lot, makes falserepresentations and makesempty promises,” said WongKok Hoi, founder and chief in-vestment officer of investmentfirm APS Management, whichhas taken a short position onJD’s Nasdaq-listed shares.

Among other things, Mr.Wong said, Mr. Liu had prom-ised investors in recent yearsthat JD would be larger thanAlibaba in the next few years.That promise isn’t credible, hesaid, given that Alibaba’sprofit last year was $10 bil-lion, while JD has posted 14straight years of losses.—Chunying Zhang, Xiao Xiao

and Shan Licontributed to this article.

JD.com Chief Executive Liu Qiangdong was taken into custody on Friday at the University of Minnesota.

spokesman said the investiga-tion is continuing. Mr. Liuhasn’t been charged with anycrimes. Minneapolis policesaid the alleged rape occurredFriday at 1 a.m. Mr. Liu wasapprehended Friday evening.

Chuck Laszewski, a spokes-man for the Hennepin CountyAttorney’s Office, said prose-cutors were still waiting forthe case file from police inves-tigators before they would beable to make a determinationabout any potential charges.

The 45-year-old tycoon wasborn in a farming village ineastern China’s Jiangsu prov-ince, where his parents ran asmall business ferrying goodsand people along canals.

His ambition earned him aberth at Beijing’s prestigiousRenmin University, where hestarted his first business in histhird year, and propelled himto found JD.com, which be-came an e-commerce giantwith 362.3 billion yuan ($53billion) in annual sales.

With JD.com, Mr. Liu—whoalso uses the name RichardLiu—took on more establishedplayers such as Alibaba GroupHolding Ltd. and focused hiscompany on selling qualitymerchandise when online re-tailing was dominated by thesale of cheap and often coun-terfeit goods.

“Richard bucked that trend,bucked that idea. He under-stood early on that there wasa sufficient core of users whodid care about quality andwere willing to pay more forit,” said Mark Natkin, manag-ing director of research firmMarbridge Consulting. “I thinkit speaks to his confidence inhis own vision and his faith inChina to develop” in that di-rection.

There are asterisks to therags-to-riches story. JD.comhas reported only one profit-able quarter since going publicin May 2014, and it most re-cently reported a quarterlyloss of $334 million. Its shareprice has fallen 25% this year.

JD.com’s American deposi-

Continuedfromthepriorpage

BillionaireArrested inRape Probe

August, the highest-ever levelfor the month, said J.D. Power.Consumers were expected tospend $41.1 billion on new ve-hicles in August, $1.5 billionmore than last year’s level, thecompany said.

“There are lots of reasonsto be optimistic,” Mark La-Neve, Ford Motor Co.’s U.S.sales chief, told reporters on aconference call. “The underly-ing factors that we want to be

positive are positive,” includ-ing a low unemployment rateand a strong stock market.

Ford, Honda Motor Co. andNissan Motor Co. reported per-centage sales increases in thesingle digits, gains driven bytheir SUV lineups. Fiat ChryslerAutomobiles NV said sales in-creased 10% in August, propelledby its Jeep and Ram pickupbrand. Sales of the Jeep Chero-kee rose 85%, and sales of the

Jeep Compass increased 76%.GM sales declined 13% for the

month, according to a person fa-miliar with the matter, missinganalysts’ expectations of aboutan 8% drop. GM officially reportssales quarterly.

Toyota Motor Corp. reporteda slight decrease, with sales ofthe auto maker’s flagship Camrysedan dropping 19%.

—Mike Coliascontributed to this article.

Debt Curbs CrimpChina Purchases

Chinese auto makers aregrappling with falling sales as abroad clampdown on debt lim-its credit to prospective vehiclebuyers.

A plan by Great Wall Mo-tor Co. to offer discounts of be-tween 11% and 27% on its carshas helped trigger stock sellingthis week, according to analystsat Deutsche Bank.

Dongfeng Motor Group Co.,Geely Automobile HoldingsLtd. and Guangzhou Automo-bile Group Co.—among thelargest Chinese auto makerslisted in Hong Kong—have seen

shares drop between 4% and7% in the past two days oftrading.

Combined, the three havelost nearly 194 billion HongKong dollars (US$24.8 billion)in market capitalization thisyear, Datastream shows, whilea Thomson Reuters index ofHong Kong-listed auto andtruck manufacturers is down39%.

Vehicle purchases are de-clining. In July, new-car saleswere 5.5% lower than in thesame month last year. Sales ofinsurance policies are also fall-ing. Peer-to-peer lending for carpurchases had become increas-ingly popular, but after a seriesof lending scandals the govern-ment has cracked down.

There is one consolation:Unlike U.S. and European peers,Chinese car makers aren’t beingbattered by fears of heightenedrestrictions on global trade.Many produce cars designed byforeign companies for domesticdrivers—Brilliance China Auto-motive Holdings Ltd., for exam-ple, makes BMWs—insulatingthe companies from trade-re-lated volatility.

An official at the NationalDevelopment and Reform Com-mission, China’s top economic-planning agency, said the gov-ernment plans to restrainoverinvestment and strengthenregulation, in comments re-ported by Reuters over theweekend.

—Mike Bird

Most major auto makers re-ported increases in U.S. salesin August, though analysts ex-pect vehicle demand to coolfor the remainder of 2018amid higher interest rates andrising vehicle prices.

Overall U.S. auto sales wereexpected to rise slightly in Au-gust, but General Motors Co.’sworse-than-expected monthdragged down the industry’stally, resulting in flat sales.Customers took advantage ofLabor Day discounts against abackdrop of a healthy U.S.economy, analysts said. Con-sumers continued to flock tosport-utility vehicles andpickup trucks, helping pushthe average selling price to$31,836 in August, market re-search firm J.D. Power said.

The year-over-year compar-ison benefited from weak salesin August 2017, when Hurri-cane Harvey forced the closureof hundreds of dealerships insoutheast Texas, denting thenational total.

Sales are expected to cool incoming months because of ris-ing interest rates, higher vehi-cle prices and the threat oftariffs on imports promptingcustomers to consider buyinga used car or delaying a vehi-cle purchase altogether.

“All the positive economicnews can’t overtake the wors-ening buying conditions forconsumers,” Charlie Ches-brough, senior economist forCox Automotive, said. He saidhe believes the U.S. auto mar-ket, which peaked in 2016 witha record 17.6 million vehiclessold, is tracking about twoyears ahead of the broadereconomy.

Still, the car business re-mains historically strong, onpace to reach U.S. sales ofabout 17 million vehicles thisyear.

The shift toward higher-price SUVs and pickup truckscontinues, which should helpbolster auto makers’ bottomlines.

SUVs, pickup trucks andvans accounted for about 68%of new-vehicle retail sales in

BY ADRIENNE ROBERTS

Slowdown in Car Demand Expected

Fiat Chrysler Automobiles said August sales were propelled by its Jeep and Ram pickup brand.

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THEWALL STREET JOURNAL. Wednesday, September 5, 2018 | B3

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up decision making as part ofa broad overhaul, and saidthat it would shed 8% of itsglobal workforce.

Lego said Tuesday itdoesn’t expect to return to thedouble-digit growth it enjoyedfor years in developed marketssuch as the U.S. and WesternEurope. Like Mattel Inc. andHasbro Inc., which it has over-taken as the world’s biggesttoy maker by sales, Legois increasingly competing withvideogames, YouTube andother digital distractions.

This year “is about stabiliz-ing the business and buildinga platform for longer-termsustainable growth,” saidChief Executive Niels B. Chris-tiansen, who took the reins inOctober. “There will be nomagic bullet or very quickpath back to growth.”

Lego said sales werebuoyed by new launches, in-cluding a line of roller-coastersets, “Jurassic World”-themed

sets and a high-price Bugattiset. Lego said existing bricksets including “Ninjago,” LegoCity and “Star Wars” per-formed well, according to thecompany.

Facing headwinds in theU.S. and Europe, Lego is ex-panding in the Middle East,Africa and China, where it willopen two new flagship storesin the next year. It recentlystruck a partnership with Chi-nese tech and videogame giantTencent Holdings Ltd. to makeLego-branded games.

Lego isn’t publicly listed, soit doesn’t disclose full finan-cial results. It said Tuesdaythat stripping out currencymoves, revenue in China roseby a double-digit percentagein the first half. Revenue inWestern Europe increased bylow single digits, it said, whilein North America it declinedslightly. The company didn’tprovide further details.

Mr. Christiansen said Lego

has no plans to cut prices orshift its product mix towardmore-affordable toys.

“We believe that overall theprice level we have actuallyreflects very well the value ofLego brands,” he said.

Lego, like Mattel and Has-bro, has tried to adapt to thecollapse of retailer Toys “R”Us Inc. in markets such as theU.S., the U.K. and Australia.The company has increased itsonline offerings and said it isworking to make sure its fullproduct range is available atother retailers across the U.S.,Mr. Christiansen said.

Toy makers are also grap-pling with how to incorporatenew technology into theirproducts. Among other moves,Lego has created Lego Boost, arobot-building kit. “The brickis at the heart of what we dobut we are, to an increasingamount, using digital to en-hance it,” said Mr. Chris-tiansen.

Lego AS reported weakersales and sharply lower profitfor the first half, but the Dan-ish toy-brick maker said it wasmaking progress in a yearlongturnaround that includes a re-structuring.

Net profit fell 10% to threebillion Danish kroner ($468million), while sales declined4.6% to 14.3 billion kroner. Thecompany attributed much ofthat weakness to currencymoves. The U.S. dollar weak-ened significantly against thekroner during the period, re-ducing Lego’s overseas salesafter being converted into itshome currency.

Excluding foreign-exchangemoves, revenue was flat forthe first six months of theyear, compared with a 6% cur-rency-adjusted fall a year ear-lier. That drop was Lego’s firstsales decline in 13 years. Legoat the time promised to speed

BY SAABIRA CHAUDHURI

Lego Tempers Growth AmbitionsA depiction of Windsor Castle, made with Lego’s toy bricks. The company’s first-half profit declined 10%, while its sales sank 4.6%.

PETERNICHOLLS/RE

UTERS

tightening their belts on tradi-tional ad campaigns and de-manding a wider suite of ser-vices, such as website creationand data science.

Facebook Inc. and AlphabetInc.’s Google, meanwhile, havegrabbed the lion’s share of thedigital-advertising market andconsulting firms such as Ac-centure are encroaching onMadison Avenue’s turf.

The changes have plungedcreative agencies, traditionallystaffed with copywriters andartists, into a race to attractengineers and other tech talent.

These agencies also havebeen cutting costs and allowingclients to work with staff thathad been previously siloed.

On Tuesday, WPP loweredthe guidance for its operatingmargin for this year, saying itplanned to invest more in re-structuring the business andincentivizing staff in its faster-growing units.

In an interview after his ap-pointment as CEO Monday, Mr.Read said he has no plans tosell off or merge flagship cre-ative agencies, many of whichare based in the U.S.

The North American marketwas weaker in the secondquarter, Mr. Read said, in partbecause U.S. companies havebeen slower to cut costs thanEuropean peers strained byyears of anemic economicgrowth.

North American clients alsohave been slower than those inthe U.K. and some other partsof the world to move theirbudgets to less traditional me-dia, Mr. Read said. In the U.S.,digital ads accounted for 44%of total ad spending last year,according to eMarketer. Thatpercentage was 61% in the U.K.and 60% in China.

“Many clients have beenquestioning the budgetsthey’re spending on traditional[ads] over the last 24 months,”Mr. Read said. “It hasn’t hap-pened in one quarter.”

Shares inWPP PLC dropped8% in New York Tuesday as thead industry’s upheaval took atoll on the world’s largest ad-vertising company, underscor-ing the challenges facing newChief Executive Mark Read.

The advertising giant’s sec-ond-quarter results showed aweak performance in NorthAmerica, as the company’s sta-ble of creative agencies—in-cluding J. Walter Thompson,Ogilvy & Mather and Young &Rubicam—struggled. Like-for-like net sales—a figure closelywatched by analysts to mea-sure the company’s underlyingperformance—dropped 3.3% inNorth America over a three-month period ended June 30.

“I’m not happy with thestate of our creative agenciesin North America,” said Mr.Read. “I think they could bestronger both reputationallyand in the quality of the work.”

The advertising world iswrestling with a seismic shiftto digital ads from print andtelevision. Advertisers are

BY NICK KOSTOV

WPP Reports WeakNorth America Sales,Pulling Shares Lower

Not Adding UpShares of WPP tumbled Tuesdayafter second-quarter resultsshowed a weak performancein North America.

Source: SIX

THEWALL STREET JOURNAL.

a share£13.0

11.0

11.5

12.0

12.5

June July Aug.

Stock performance

Tuesday£11.97t6.3%

’18

World-Leading Cyber AI

BOUYGUESFIRST-HALF2018 RESULTS

NET PROFITUP 18%a

OUTLOOKCONFIRMED

(a) Versus first-half 2017(b) Excluding a capital gain of €28 million in 2017 on the sale of 50% of Nextdoorand remeasurement of the residual interest

(1) Up 5% like-for-like and at constantexchange rates(2) Including non-current charges of €11mat TF1 and non-current income of €91m atBouygues Telecom(3) The difference from end-June 2017 mainlyreflects the acquisition of the Miller McAsphaltgroup by Colas and of aufeminin by TF1

• BOUYGUES TELECOM: GOOD COMMERCIALPERFORMANCE AND ROBUST GROWTH INRESULTS

• CONSTRUCTION BUSINESSES: BACKLOGAT RECORD LEVEL AND IMPROVEMENT INSECOND-QUARTER CURRENT OPERATINGPROFIT YEAR-ON-YEAR

First-half 2018 highlights:

• continued good commercial performance atBouygues Telecom and sharp improvement in itsfinancial results;

• backlog in the construction businesses stood at a recordlevel of €33.7 billion at end-June 2018, up 9% year-on-year and up 13% at constant exchange rates.Anumber ofmajor contracts were signed during the second quarter.

The Group reported current operating profit of€303 million in first-half 2018 versus €347 million infirst-half 2017. This reflects a rise in profitability atBouygues Telecom and current operating profit in theconstruction businesses, which was still impacted bypoor weather conditions in the first quarter.

The Group’s operating profit was €383 million versus€379 million in first-half 2017 (including non-currentincome of €80 million in first-half 2018 versus €32 millionin first-half 2017).

OUTLOOK: BOUYGUES EXPECTS TO CONTINUE TOIMPROVE ITS PROFITABILITY IN ����The outlook for 2018 announced with the first-quarterresults release is confirmed.

• Benefiting from an upbeat environment in France andinternational markets, the construction businesses willcontinue to be selective and focus on profitability ratherthan volumes. The current operating profitb and currentoperating marginb of the construction businesses areexpected to improve versus 2017.

• TF1 confirmed its targets to improve profitability.

• Bouygues Telecom is experiencing profitable growthmomentum with a free cash flow target of €300 millionfor 2019. Sales from services are expected to growby more than 3% in 2018 versus 2017, with anEBITDA/sales from services margin higher than in 2017and gross capex of around €1.2 billion.

Consult the full press release and results presentation on bouygues.comInvestor Relations: investors@bouygues.com

@GroupeBouygues

Photo credits: Hanging gardens of the New Futura twin towers in Singapore.Photographer: Arnaud Février. Architects: ADDP – SOM. Landscaper: Belt Collins International.

CONSOLIDATEDKEY FIGURES

SALES€m

15,743 +4%1

CURRENTOPERATING PROFIT€m

303 -€44m

OPERATING PROFIT€m

3832+€4m

NET PROFITATTRIBUTABLETO THE GROUP€m

260 +€40m

NET DEBT€m

(5,042) -€777m3

B4 | Wednesday, September 5, 2018 * * THEWALL STREET JOURNAL.

nese alternatives made by thelikes of Xiaomi Corp., OppoTechnologies Ltd. and HuaweiTechnologies Co.

Chinese brands accountedfor the majority of the globalsmartphone market for thefirst time last year, accordingto TrendForce, which tracksdevice sales. That compareswith 32% in 2013. The Chinesephone makers have undercutthe South Korean tech giant onprice, while offering compara-ble or better features on theirsmartphones.

India is on pace to surpassthe U.S. next year as theworld’s second-largest smart-phone market after China. To-day, just 22% of Indians own asmartphone.

Xiaomi is manufacturing infour spots across India, witharound 10,000 employees. It istrying to persuade its partssuppliers to set up in India.China’s Vivo Electronics Corp.spent more than $300 millionto sponsor India’s main cricketsports league through 2022.

Oppo makes around 15 mil-

lion phones a year in its fac-tory near New Delhi.

“We see India as a vibrantsmartphone market, which isgaining constant traction,”said Will Yang, brand directorof Oppo India.

Sarita, a 36-year-old familycook in New Delhi who goes by

one name, is one of Oppo’snewest customers. She got herfirst smartphone two monthsago and said the Oppo is a bigupgrade from the Samsungfeature phone she had been us-ing for years. She can look uprecipes on YouTube and videochat with family. The selfiesand food photos she took onher old phone all seem blurrynow that she has become usedto a better screen and camera.

“In every way, my newphone is more beautiful thanmy last one,” she said.

None of her friends or fam-ily owns an iPhone or evenconsidered it because startingprices are so high. The $170Oppo was already stretchingher budget and an iPhone usu-ally costs more than twice thatprice. The iPhone had just 1%market share in India in thequarter ended June 30, accord-ing to research firm Counter-point Technology.

Samsung is spendingaround $700 million on itssmartphone factory near NewDelhi. The company’s de facto

leader, Lee Jae-yong, flew intoIndia this summer to cut theribbon, flanked by IndianPrime Minister Narendra Modiand South Korean PresidentMoon Jae-in.

Samsung’s Mr. Hong said itsphones are fully India-made,unlike those of rivals whichimport some parts. For thatreason, Mr. Modi has chosen touse a Galaxy handset.

India is one example ofgrowing competition incheaper smartphones. Accord-ing to Canalys, twice as manyinexpensive phones, which arepriced at $200 and below, wereshipped in the first half of thisyear as expensive ones, pricedat $500 and above. In 2013,both markets were about even.

“The global smartphonemarket has peaked, but emerg-ing markets are growing,” saidTarun Pathak, analyst at re-search firm Counterpoint. “Thebattle for the next billion con-sumers is more important thanthe premium market.”

—Vibhuti Agarwalcontributed to this article.

Samsung Electronics Co. isbuilding the world’s largestphone factory in India in an ef-fort to tap the industry’sgreatest opportunity forgrowth: cheap smartphones.

After waging a decadelong

battle with Apple Inc. for theworld’s most affluent consum-ers, the South Korean electron-ics giant is now looking tofend off Chinese companiestrying to dominate the marketfor inexpensive phones. Thatmarket is twice the size of thehigh-end market but offerslower profitability.

India is a critical battle-ground because it is still rap-idly growing and the country’sdemographics mirror othercountries primed for growth.Just over half of the globalpopulation has a smartphone,and that figure will rise to 77%by 2025, an addition ofroughly two billion new smart-phone users, according toGSMA Intelligence, a mobile-industry researcher.

“This is the right place tohave the manufacturing hubfor the world,” said H.C. Hong,chief executive of SamsungElectronics in India, about thecompany’s new facility in aNew Delhi suburb, which willdouble Samsung’s capacity tomake smartphones in Indiawhen finished in 2020. Theplant has a projected annualcapacity of 120 million hand-sets, or roughly one of every13 phones in the world. Around30% of those will be exported.

Samsung mobile executivesbelieve the Indian market willbe key to success—or failure—in other emerging markets. Itneeds to make a stand in Indiato show its hardware can wardoff more budget-friendly Chi-

By TimothyW. Martinin Seoul and Eric

Bellman in New Delhi

Phone Battle Heats Up in IndiaNew Samsung factoryis intended to supplyhuge potential marketfor cheaper handsets

South Korean President Moon Jae-in and Indian Prime Minister Narendra Modi on a July trip to a Samsung Electronics factory.

YONHAP/EPA/SHUTTER

STOCK

Note: 2018 figures for the first half of the year

%

Below $200 $200-$499 $500+

2013 ’14 ’15 ’16 ’17 ’180

25

50

75

100

Low-End EmergenceInexpensive smartphones areclimbing in the world market.

Source: Canalys

THEWALL STREET JOURNAL.

Share of global shipments,by phone cost

BEIJING—Ride-hailing giantDidi Chuxing Technology Co.,under fire after the recent kill-ings of two female passengers,said it would expand safetymeasures and upgrade cus-tomer service by adding 3,000employees.

The company said it was up-grading an emergency functionbutton on its mobile app to al-low passengers to report inci-dents directly to police andwould soon start testing audiorecording of rides.

“Didi will do its best tostrictly hold the bottom line ofsafety and to effectively cooper-ate with the regulatory require-ments raised by the authori-ties,” it said in a statement.

Didi also said it was buildinga new customer-service systemand increasing its in-house cus-tomer-service staff by 3,000people to 8,000 people by theend of the year. The companycurrently has 5,000 in-housecustomer-service staff and10,000 customer-service sub-contractors, it said.

To implement the new mea-sures smoothly, the companysaid it would halt all of its ride-hailing services in China be-tween 11 p.m. and 5 a.m. for oneweek starting Sept. 8.

Over the past week, Didi hasfaced government criticism andpublic outrage after a femalepassenger using the company’scarpool service was killed, thesecond such incident in threemonths.

Didi has indefinitely haltedits carpool service, which bothvictims had been using, andfired two executives in the wakeof last month’s fatality.

In the latest killing, policesaid Didi’s customer servicedidn’t respond for hours to re-quests for help made by the vic-tim’s friend until police inter-vened.

BY YOKO KUBOTA

Didi IsBoostingSafetyMeasures

TECHNOLOGY WSJ.com/Tech

NY

B6 | Wednesday, September 5, 2018 THEWALL STREET JOURNAL.

in 2016 restricting lenders’ability to make interest-onlyhome loans. A new rule re-quired a portion of most loansto be amortized.

“Lower indebtedness in-creases the resilience of house-holds to shocks and reduces therisk of the Swedish economybeing negatively affected as aresult of unforeseen events,”the agency said in a news state-

ment at that time.The end of the housing

surge last year sent tremorsthrough the market and ham-mered shares of listed compa-nies in the Swedish home-building business, such as JMAB and Oscar Properties Hold-ing AB. To shore up its bal-ance sheet, Tobin Propertieshad to take several steps in-cluding issuing 7.5 million new

shares to Klövern AB. Themove made Klövern the larg-est shareholder of Tobin.

Still, some developers saythat they see benefits from themarket cooling. Skanska AB, aglobal developer and builderbased in Stockholm, discour-ages buying by speculators,said Claes Larsson, an execu-tive vice president with thefirm.

When speculators buy mul-tiple units, they wind up com-peting with Skanska as it triesto sell other units in the proj-ect, Mr. Larsson explained.“We try to actually preventthat from happening,” he said.

Many developers shelvednew projects when the down-turn hit. With the marketshowing mixed signals, someof these companies havestarted to dust off their plans.

“Based on our view of themarket and the maturity ofour pipeline we are planningnew housing projects first in2019,” said Rosen Lindow, aTobin spokeswoman in anemail.

—Kim Mackraelcontributed to this article.

initially gave developers littlechoice but to focus on energyefficiency. “But now it’s an ab-solute part of the culture, at asocial and political level,” saysStaffan Unge, head of Swedenfor Barings Real Estate, partof global investment managerBarings LLC.

Developer Aspelin RammEiendom AS started buildinggreen a decade ago “to gain anedge over the competition,” ac-cording to Chief Executive Gun-nar Bøyum. Now the firm viewsit as essential as it redevelopsone of downtown Oslo’s mostprominent office buildings inpartnership with local insurerStorebrand. “Without it, youdon’t get the right tenants, in-

Houston-based Hines madeits first foray into the Finnishmarket last year by acquiringKasarmikatu 21 in Helsinki, amodestly sized seven-story of-fice building by the standardsof one of the world’s largestdevelopers.

But Hines likely will exportthe lessons learned from theproject in terms of its greendesign and materials to devel-opments in other cities. That isbecause Finland and other Nor-dic countries are on the cuttingedge when it comes to energyefficiency and environmentallyfriendly design, materials andreal-estate technology.

“The Nordic countries seemto have prioritized sustainabil-ity perhaps a little bit soonerthan other markets in ourportfolio,” said Daniel Chang, aHines managing direc-tor. “These elements can con-tinue to help us cross-pollinatebest practices across the firm.”

The Nordic countries areemerging as trend setters inso-called sustainable or“green” technology, accordingto brokers, developers and ar-chitects. On a city-planninglevel, the region is becomingknown for walkable down-towns, high levels of recyclingand such features as special el-evated roadways and ferry ser-vices for bicycles alone. In theFinnish capital, they are evenpioneering driverless publictransport to battle car use.

In real-estate development,major cities such as Helsinki,Copenhagen, Stockholm andOslo have been pioneers in re-ducing energy consump-tion, using high percentages ofrecycled materials and green-house-gas-friendly com-pounds, as well as harnessingnatural resources such as thesun, seawater and ice for heat-

BY ISOBEL LEE

Soft Landing?Housing prices have stabilized in Sweden after a dive beginning last year.HOX Index*

THEWALL STREET JOURNAL.Source: Valueguard

*A price index of apartments and single family houses in Sweden

240

140

160

180

200

220

’13 ’14 ’15 ’16 ’17 ’182012

ing and cooling. Oslo’s newstate-of-the-art airport, whichopened last year, stores wintersnow under sawdust year-round for air conditioning.

Real-estate developers andinvestors in other parts of theworld are following closely be-hind because of the clear linkthat is forming in the Nordicsas well as other cities betweengreen buildings and value. Op-erating costs are lower be-cause less needs to be spent toheat buildings in the winter,cool them in the summer andkeep them lighted year-round.

Just as important, tenantsare willing to pay higher rentsto work and live in buildingswith fresher air. Many busi-

nesses trying to attract youn-ger workers say they increas-ingly are recognizing theimportance of green officespace as a recruiting tool.

Investors are willing to paymore for these properties. In-deed, some of the big pensionfunds and other major institu-tions in the Nordic regionwon’t buy property that fallsbeneath top sustainabilitystandards, according to bro-kers and analysts. “In thesemarkets, green building hasgone from a ‘nice to have’ to a‘must have,’ ” said Erik Høvikof Nordic advisory PangeaProperty Partners.

The Nordic region’s infa-mously long and cold winters

vestors, or even financing,” Mr.Bøyum says. “Constructioncosts a little bit more, but youalways get that back.”

Foreign businesses thathave established beachheadsin the Nordics are playing aleading role in exporting thegreen technology to otherparts of the world.

German grocer Lidl won aglobal award last year for themost sustainable retail build-ing in the world with one ofits Swedish stores, featuringsolar cells and free chargingstations for electric cars andbikes. The Europe-wide re-tailer, which expanded into theU.S. last summer, says theprogress it made in the smalltown of Växjö will help createthe supermarkets of the futureacross its global footprint.

Meanwhile, domestic playersin the Nordics are coming upwith new ideas. Data-center de-velopers, for example, arewatching efforts by Swedishventure Stockholm Data Parksto capture excess heat pro-duced by the centers and chan-nel it to heat city homes. Thesystem, which has run a suc-cessful pilot project, hopes towarm 10% of all city homes by2035. “We’ve found a way touse the electricity twice,” saysErik Rylander, head of data-center cooling and heat recov-ery at local energy companyStockholm Exergi, one of theconsortium’s founding partners.

Entra ASA, one of Norway’sbiggest property investors, ishoping to develop buildingsthat produce more energythan they consume over theirlives, including constructionand demolition, according toCEO Arve Regland. The firm’snext project, the €390 million(about $450 million) Power-house Brattørkaia in Trond-heim, which will use seawaterfor cooling, will be the firstnew energy-positive buildingin the country, he said. “If wecan already create energy-pos-itive real estate with the cur-rent technology, just thinkwhat we’ll be capable of in thefuture,” Mr. Regland said.

Nordic Nations Lead Green TrendDevelopers find silverlining in frigid winters:environmentallyfriendly technology

Hines likely will export lessons on green design and materials from its Kasarmikatu 21 building.

NORDICGREEN

INTERNATIONAL PROPERTY REPORTScandinavia

rates rising, it’s not clearwhether the cooling will leadto market stability, a nosediveor a return to the races.

In Canada, the governmentpolicy changes have helpedslow the pace of householdborrowing and damped thecountry’s housing market, par-ticularly during the first quar-ter of this year.

The story of the Swedishhousing market until last yearwas one of steadily risingprices for over two decades.The surge was especially pro-nounced between 2013 and2017, with the market beingfueled by Sweden’s strongeconomy, liberal immigrationpolicies and low interest rates.

As housing prices swelledto rival some of the highest inEurope, developers stepped upconstruction. By late 2016,well over 10,000 new dwell-ings were being completed perquarter, compared with fewerthan 5,000 in 2011, accordingto Kepler Cheuvreux.

Such froth prompted theSwedish national securitiesregulator, Finansinspek-tionen, to start taking action

The closely watched Swed-ish residential market, whichhit a slump in late 2017 afteryears of sharp growth, may bein for a soft landing.

The escalating rise in val-ues came to an end last yearwhen prices of apartments andsingle-family homes in largeSwedish cities fell 9% betweenAugust and December, accord-ing to an index compiled bydata firm Valueguard. The de-cline comes amid governmentmeasures designed to cooldown the white-hot marketand a glut of new supply pro-duced by developers eager tocash in on price increases ofmore than 50% in less thanfour years.

But prices have stabilizedthis year. The Valueguard in-dex in July was up about 2.9%from the low it hit in Decem-ber.

To be sure, the market stillhas thousands of for-salehomes to digest. But theSwedish economy is growing,unemployment is down, con-sumer confidence is up and in-terest rates are at historicallylow levels, analysts point out.

“We see the current down-turn as a price adjustmentrather than a crash,” said Kep-ler Cheuvreux in a recent re-port on the Swedish residen-tial market.

The ups and downs of Swed-ish housing have gained globalattention because the marketthere resembles those in othercountries where bubblelikeconditions have prompted ac-tions by government and finan-cial institutions.

In Australia, for example,regulators and banks have im-posed restrictions on suchthings as foreigners buyinghomes and banks making in-terest-only loans. Meanwhile,Canada’s federal and regionalgovernments have taken mul-tiple steps in recent years tocool runaway housing marketsincluding taxes targeting for-eign buyers.

Now many of these govern-ment actions seem to be hav-ing their intended market im-pact. However, with interest

BY PETER GRANT

Swedish Home Prices Begin to Stabilize

The end of the housing surge in Sweden last year sent tremors through the market and hammered shares of listed home-building firms.

HOSSEIN

SALM

ANZADEH/TT/ASSOCIATEDPRESS

When Norway’s trillion-dol-lar oil fund decided to startbuying commercial property in2010, its managers figuredthat it would focus primarilyon about a dozen of theworld’s top cities.

Eight years later, the fund’sproperty arm, Norges BankReal Estate Management, isnearing that goal. Last year, itpaid $823 million for a major-ity stake in a set of five retailand office properties in Tokyo,adding that city to a list thatnow includes nine principalcities in the U.S., U.K., France,Germany and Switzerland.

Norges is now exploringpossible deals in Singapore,but hasn’t identified “manymore important cities”, ac-cording to Karsten Kallevig,chief executive of Norges BankReal Estate Management.

“We’ve come to a conclu-sion that in order to investthis amount of capital in a sig-nificant way, there are reallyonly a handful of cities glob-ally where we can achieve thatscale,” Mr. Kallevig said in an

interview.Norges’s real-estate strategy

is of interest to investors, sell-ers, brokers and other real-es-tate industry officials through-out the world. The fund, whichtwo years ago decided to in-crease its allocation to prop-erty to a maximum of 7% from5%, has been involved in someof the world’s most high-profiledeals in recent years.

There is no sign of its appe-tite ebbing, even with the cur-rent bull market in commercialproperty in its ninth year. Someinvestors who are very sensi-tive to market timing havemoved to the sidelines, worriedthat the good times may cometo an end soon.

Norges is among a numberof huge sovereign funds thatare becoming more active incommercial property invest-ment throughout the world.Japan’s $1.5 trillion govern-ment pension fund has beenselecting managers for real es-tate, as well as private-equityand infrastructure invest-ments. The Qatar InvestmentAuthority and Australian Fu-ture Fund also have been moreactive.

The Norges fund’s invest-ment approach to property in-vesting has evolved over thelast eight years, said Mr. Kal-levig, a former head of Japanfor Grove International Part-ners who joined Norges Bankin 2010 and became CEO ofreal estate in January 2016.

The fund debuted in Londonreal estate, taking a 25% sharein the Crown Estate’s RegentStreet portfolio. Its other high-profile deals have included thebillion-euro acquisition of an of-fice building in Paris at 9 PlaceVendôme in 2016, plus a 44%minority stake in a portfolio of11 office properties in New YorkCity for $1.56 billion in 2015.

While asset classes wereinitially only offices and retail,that is changing too. “We’veinvested in logistics assets, butare unlikely to go down the al-ternatives route,” Mr. Kallevigsaid, referring to niche assetclasses like student housing orassisted living.

The fund has shunned theNordics region to date. Itdoesn’t invest in Norway inline with the managementmandate laid down by theMinistry of Finance, the formalowner of the fund. The govern-ment stipulates that the fund’scapital is to be investedabroad, to avoid overheatingthe Norwegian economy and toshield it from the effects of oil-price fluctuations.

Norges’s real estate returnfor 2017 was 7.5%. Mr. Kallevigsaid it helps that there is notmuch competition when itcomes to the large deals thatthe fund seeks.

BY ISOBEL LEE

NorwayOil FundExploresMore Deals

The fund has beeninvolved in some ofthe most high-profiledeals in recent years.

THEWALL STREET JOURNAL. * * * * * Wednesday, September 5, 2018 | B7

Scandinavia and a new soccerstadium.

In August, Fabege an-nounced plans to try to repeatits success at Arenastaden bydeveloping a sprawling newbusiness district in the Flem-ingsberg area south of Stock-holm over the next 10 to 15years. When finished, it willhave enough office space for50,000 workers, 50,000 resi-dents and 50,000 daily visi-tors, according to ChristianHermelin, Fabege’s chief exec-utive.

The project also will helpaddress the traffic jams in thearea when workers who live inthe southern part of the city

travel to the business districtsof the north. “Today the aver-age employee in Stockholm isspending more time getting towork than they have holidays,”said Mr. Hermelin. “And inStockholm, we have manymore holidays than you do inthe U.S.”

The Stockholm office mar-ket held up better than that ofmany other European cities af-ter the 2008 global financialcrisis. It also has experiencedimpressive growth in occu-pancy and rents since the debtcrisis in Southern Europeended, according to PeterWiman, head of Sweden re-search for Savills. “As soon as

The Arenastaden development includes Fabege’s office buildings, the Mall of Scandinavia and a new soccer stadium.

ANDRE

ASSA

NDSTRÖ

M/BILDBY

RAN/ZUMAPR

ESS

[the debt crisis] was settled,the market really started mov-ing upwards,” he said.

Office vacancy in Stockholmoverall is 6.6% and only 2% inthe central business district,JLL said. The technology sec-tor is particularly strong. Forexample, co-working giant We-Work is planning to open itsfirst Stockholm operation inearly 2019.

Prime office rent in Stock-holm’s central business dis-trict was over 7,000 kronor asquare meter a year at the endof the first half, comparedwith less than 5,000 in 2015,JLL said.

On the supply side, the resi-dential boom, which endedlast year, has helped the officemarket. While it lasted, devel-opers converted numerousolder office buildings to apart-ments.

Historically, developers inStockholm have added new of-fice stock at an annual rate ofabout 1% to 1.5% of total sup-ply. But in the last five yearsthat number has been “closeto zero or even negative” be-cause of conversions, GreenStreet’s Mr. Papadakos said.

“Whenever possible [inSweden] when you have an ob-solete office building, it wouldmake much more economicsense to convert it to residen-tial,” he said. Similar conver-sion booms in other cities,such as Sydney, Australia,have helped those office mar-kets also stay strong.

Market bulls worry aboutnew space being added. Over160,000 square meters ofspace currently is in the devel-opment pipeline, up from100,000 square meters lastyear, JLL said.

But many expect tenants toabsorb this space steadily.“We’re more likely to see aslowdown to other Europeanlevels in terms of rent growthas opposed to an absolute cor-rection in rents, let alone a bigfall,” Mr. Papadakos said.

Investors Ride Stockholm’s Office BoomUnlike the residentialmarket, demand issteady in the Swedishcapital’s business area

Fabege’s sale earlier this yearof Uarda 6, an 18,000- square-meter building the companycompleted in 2017, to an open-ended real-estate fund man-aged by Frankfurt-based UnionInvestment. The deal valuedthe property at 1.2 billion kro-nor, Fabege said.

Also, Skanska AB last yearsold its Sthlm Seaside projectto Vasakronan, a Swedishproperty company, for about900 million kronor. That12,500-square-meter building’stenants include gaming com-panies Arrowhead Game Stu-dios and Yggdrasil Gaming.

Still, amid these positivesigns, the Swedish office mar-

ket faces challenges. “Eventhough we witness a contin-ued rental growth, we also getsignals from tenants that thewillingness to pay has reachedthe limit,” said Cecilia Gun-narsson, JLL’s head of re-search in Sweden.

Also, the availability ofsites for new development islimited by Stockholm’s water-inundated geography andstrict government restrictionson height and mass in histori-cal areas. Developers havebeen increasingly focusing onsuburban and industrial sites,like the Arenastaden develop-ment, which includes Fabege’soffice buildings, the Mall of

Late last year, when Swed-ish home prices were plum-meting, some short sellers tar-geted Fabege AB, a largeStockholm office landlord, onthe belief that the weakness inresidential would spread tocommercial property.

It was a bad bet. LatelyFabege’s shares have beentrading above 120 Swedishkronor a share ($13.19), upfrom under 90 Swedish kronorlate last year.

“Everyone who has beencautious on the Swedish com-mercial real-estate names hasbeen wrong,” said Peter Pa-padakos, an analyst withGreen Street Advisors. “Ev-eryone who has been seeingthe low [office] vacancy andassumed that rental growthwill continue has continued tobe right.”

The Swedish real-estate in-dustry is demonstrating thatresidential and commercialproperty markets march todifferent drummers. Whilehome prices have fallen andinvestor sentiment in thatmarket has done an about-faceafter years of growth, office-building owners are beingbuoyed by expanding tenantdemand in a high-growtheconomy.

Investors buying officeproperty in Stockholm’s cen-tral business district are pay-ing top prices. In the secondhalf of this year, buyers weregetting yields in the low 3.5%range, according to JLL, acommercial-property-ser-vices firm. That is down from5% in 2011 and over 4% in2014, the firm said. Yields fallin commercial property as val-ues rise.

Recent deals include

BUSINESS NEWS

BY PETER GRANT

sisted calls from activists andstate officials to divest itself ofpolitically controversial invest-ments. Cities in California havecomplained about how much itcosts them to participate in theCalpers system. When the fundelected to lower its investment-return assumptions in 2016, itchose to phase in the changegradually to soften the impactof higher yearly pension costson local governments.

But in the state’s capital ofSacramento, Calpers’s supportfor a new tower is winningpraise. The site, 301 CapitolMall, is located along the roadthat runs between the Califor-nia State Capitol building andthe city’s Tower Bridge.

“The development of 301Capitol Mall would be trans-formative for our capital re-gion,” said Amanda Black-wood, chief executive of theSacramento MetropolitanChamber of Commerce.

This isn’t the first timeCalpers has considered a fixfor the empty, block-long par-cel. During the previous real-estate boom, Calpers plannedto build twin 53-story condo-minium towers in partnershipwith a local developer, pledg-ing $100 million for the proj-ect. That plan fell apart in2007, and Calpers then askedthe real-estate firm CIM Groupto manage the project.

The next year the marketcratered and the fund’s real-estate holdings plummeted,costing the pension fund bil-lions in losses.

The investment in 301 Capi-tol Mall remained a part of itsportfolio over the past decadeeven as the site’s value fell.The assessed value of thedowntown Sacramento prop-erty has dropped 24% since2007, according to the Sacra-mento County Assessor’s Of-fice. Investment returns for301 Capitol Mall LP have beennegative in six of the pastseven years, according to Calp-ers’s records.

The plan that went beforeCalpers’s board earlier thissummer featured offices, con-dos, retail stores and an ele-vated public park, according toa person familiar with the situ-ation. A real-estate advisoryfirm, RCLCO, prepared a memofor board members saying thatthe 5.8% return target was anaggressive projection for thelocal market, according to peo-ple familiar with the matter.The memo stated that thosereturns were nonetheless toolow to make up for the risk in-volved in the project, but non-financial factors could justifythe investment, these peoplesaid.

The directors opposed tothe idea had varying concerns,said people familiar with thematter, including worries thatmoving ahead after receivingmixed guidance from an out-side consultant would open theboard to scrutiny and thatstarting a big developmentproject at this point in the eco-nomic cycle would exposeCalpers to market volatility.

Sacramento officials arecheering a decision by the Cal-ifornia Public Employees’ Re-tirement System to build whatwould be the tallest tower inits hometown. But some insideCalpers’s boardroom are con-cerned the 550-foot projectrepresents too much risk.

During a private meetingearlier this summer, threeCalpers directors voted againsta new $550 million commit-ment to the proposed office-condominium-retail complex,according to people familiarwith the situation. Calpersabandoned a previous develop-ment plan for the same site in2007.

The dissent came afterboard members reviewed amemo from an outside consul-tant that raised some concernsabout the project’s return fore-casts, these people said. Thespecific votes and memo ha-ven’t been previously reported.A majority of other membersof the 13-person board agreedto support the project as longas it yielded a 5.8% return and40% of the office space waspre-leased.

“Should this project go for-ward with development, webelieve it will be a successfulinvestment for the fund and aniconic building,” Calpers saidin a written statement.

Competing pressures of lo-cal politics and investment of-ten collide at the nation’s larg-est public retirement systems,which are responsible for ben-efit obligations to firefighters,police officers, teachers andother public workers.

These funds are under pres-sure to hit aggressive returntargets as a way of closingwidening funding gaps. Theyare also heavily dependent onlocal political support, relyingon government contributionsto supplement investment in-come. Their boards are typi-cally staffed by political ap-pointees, union officials andlocal business leaders.

In California, Calpers hasn’talways made decisions thatwere popular locally. It has re-

BY HEATHER GILLERSAND DAWN LIM

Calpers Board Splits OverBuilding Sacramento Tower

The vacant lot where Calpers wants to construct its Tower

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INTERNATIONAL PROPERTY REPORT | SCANDINAVIA

B12 | Wednesday, September 5, 2018 * * * * * * THEWALL STREET JOURNAL.

BANKING & FINANCE

which large quantitative firmsbuy and sell is difficult to ver-ify, and those levels frequentlychange based on the marketand exact strategy each fundis running.

The use of stop losses byalgorithmic traders hasevolved as well to be morefluid and difficult to pinpoint.Instead of setting an explicitsell order, programs take datapoints from moving markets,such as volatility and momen-tum trends, to determinewhen to reduce positions.

For example, short-termand long-term funds willweigh market signals differ-ently, traders say. That leadsthem to behave differently interms of when and what to

trade.Also, rather than exiting

from a position completelywhen a stop is hit, many algo-rithms are programmed to re-duce their holdings gradually.Because of this, some trend-following funds dispute theidea that their actions aremaking market selloffs worse.

“They all don’t want to betrying to get out of the posi-tion at the same time,“ saidJeff Malec, managing partnerat RCM Alternatives. “They’regoing to use technology tomitigate that.”

One thing is clear: Fundsthat chase trends and use al-gorithmic strategies havegrown and can more easilyprogram sell stops in the fu-

tures market, thanks to in-creasing automation.

Trend-following funds areoften synonymous with so-called commodity-trading ad-visers, or CTAs, though theycan use a variety of strategies.In the past decade, theamount of money managed byCTAs has risen by 47% toroughly $367 billion, accord-ing to first-quarter data fromBarclayHedge Ltd. Algorithmicstrategies account for 88% ofthose assets.

Attempts by traditional in-vestors to decipher trend-fol-lowing funds’ methodologiesand figure out which levelsthey will trade at have also in-creased.

“People have always specu-

lated, but there’s better datanow,” said Kathryn Kaminski,chief research strategist andportfolio manager at Al-phaSimplex Group LLC.

That, in turn, can amplifymarket moves as a widerrange of institutional investorsare trying to position for whatthe trend-following fundsmight do. Eric Armitage, chiefexecutive of London-basedEast Alpha, started buildingmodels for BP PLC in 2001 tohelp the company understandwhat algorithmic strategieswere doing.

“Having worked for somevery large fundamental shops,they are all very cognizant ofthis activity,” Mr. Armitagesaid.

daughter of Uzbekistan’s for-mer president and didn’t re-port the suspicious transac-tions to regulators for severalyears, the prosecutors said. In2016, Amsterdam-based Vi-mpelCom, now called VEONLtd., paid $795 million to theU.S. and Netherlands to settlethe matter.

Other infractions rangedfrom poor client record-keep-ing to helping a Suriname cli-

ent launder money throughelectronic payment terminals.

Danish authorities havebeen investigating DanskeBank since a whistleblowerflagged issues at its Estonianbranch in 2013. The FinancialTimes reported Tuesday thatconsultants had found that upto $30 billion of Russianmoney flowed through theBaltic branch, far higher thanpreviously thought. In a state-

Banking group ING GroepNV has agreed to pay a recordEuropean fine of €775 million($899.8 million) to settle aninvestigation by Dutch prose-cutors into money launderingfailings, as watchdogs try tostaunch flows of illicit moneyafter a spate of high-profilescandals .

Also Tuesday, Danish lenderDanske Bank saw its sharestumble more than 6% follow-ing a report that local prose-cutors had uncovered a higherthan expected tally of alleg-edly illegal Russian moneymoving through its Estonianbranch.

Banks around the world areunder increasing pressure toclamp down on the trillions ofdollars’ worth of illegal moneyflowing through the financialsystem. The U.S. has led theway in policing banks in thepast decade. Since 2008, it has

BY MARGOT PATRICKAND MAX COLCHESTER

imposed around $23.52 billionin fines, according to consul-tants Fenergo, hitting lenderswhose ineffective systems offi-cials say have let clients laun-der money out of countriessuch as Mexico, Russia andVenezuela.

In contrast, European regu-lators and prosecutors ex-tracted $1.7 billion over suchbreaches in the same period,including Tuesday’s ING fine,according to the consultants.

The EU’s anti-money-laun-dering laws are policed by apatchwork of local regulators,which critics say leaves itopen to criminal abuse.

More recently, local regula-tors have toughened theirstance after embarrassing dataleaks from whistleblowers oncompany money launderingand tax avoidance and criti-cism that the authorities havebeen too meek in pursuingsuch transactions.

ING shares fell 2.6% Tues-day following the announce-ment as Dutch prosecutorssaid it had been “seriously de-ficient” as a gatekeeper of thefinancial system. The bank, forinstance, handled bribes paidby telecommunications com-pany VimpelCom Ltd. to the

ment, Danske said it wasn'table to verify the number. Thebank expects to publish thefindings of an internal investi-gation into the matter laterthis month.

“The main concern for in-vestors remains whether theU.S. regulator becomes in-volved,” Citigroup analystssaid. So far Danish and Esto-nian authorities are leadinginvestigations, but U.S. in-volvement could see any even-tual fines increase substan-tially, analysts said.

U.S. authorities have al-ready heavily punished Euro-pean banks for failings inmoney laundering compliance.In 2014, French lender BNPParibas SA pleaded guilty andpaid $8.97 billion to U.S. au-thorities to settle charges itdisguised transactions withclients in sanctioned coun-tries. Britain’s HSBC HoldingsPLC in 2012 paid $1.9 billion tosettle U.S. charges that in-cluded allowing Mexican drugcartels to launder moneythrough the bank.

The Danske debacle high-lighted concerns about Rus-sian customers using Nordicand Eastern European banksto shuffle funds.

ING Fined in Laundering ProbeBanks world-wide areunder pressure toclamp down on illegalfunds in the system

PenalizedEuropean banks have racked up some of the largest-everfines and settlements over money-laundering and sanctions.

Source: company filings and regulators THEWALL STREET JOURNAL.

BNP ParibasFined 2014

HSBC2012

Commerzbank2015

ING2018

Crédit Agricole2015

$8.90 billion

1.90

1.50

0.90

0.79

On Feb. 5, the Dow JonesIndustrial Average suffered itsworst one-day point-decline inhistory amid a tumultuousweek for global markets. Al-though the blue-chip index hassince erased that loss, someinvestors are still trying topuzzle out what caused such adrop.

One possible culprit: a cas-cade of automated stop-losssell orders by trend-followinginvestment funds that startedin London and then fed intothe steep rout in U.S. stocks.In the following days, thedownward lurch promptedselling to spread to other as-sets such as oil futures.

This was the conclusion ofan analysis of that fraughtweek by Bridgeton ResearchGroup LLC, which runs com-puter models predicting trad-ing patterns of algorithmicstrategies.

Stop-loss orders, or sellstops, are standing directivesto sell a position—say, a stockor exchange-traded fund—once prices fall below a cer-tain level. They have long beena tool for investors to auto-matically shut down a losingbet.

But the growing influenceon markets of algorithmictraders and trend-followingfunds, which use such auto-matic directives, potentiallymakes markets more vulnera-ble to sharp swings if every-one starts to sell at once. Suchstrategies tend to have sellstops around the same levelsacross stock, bond and com-modities futures.

“So many of these algo-rithms are doing the samething. Their behavior becomeslike human groupthink,” saidPeter Hahn, co-founder ofBridgeton.

Whether humans or ma-chines tend to be the origina-tors in major market declinesis a longstanding debate onWall Street.

Many analysts believe fun-damental data, such as an eco-nomic release or news report,is what causes investors torun for the exits, while stop-losses add momentum andvolatility to the move. Othersbelieve a wave of automatedselling can just as easily bewhat prompts investors tosell, absent any fundamentalreason to bail.

Traders have pointed tostop-loss orders in previousmarket plunges, such as in Au-gust 2015, when a surprise de-valuation of the Chinese yuansent markets into free fall. TheSecurities and Exchange Com-mission listed stop-loss ordersas a potential aggravator ofmarket losses in the “flashcrash” of May 2010.

There is no definitive an-swer in the debate. The esti-mate of the effect of stop-losses by Bridgeton—whichprovides research on differentalgorithmic strategies, such asdaily positioning and buy andsell levels—was based on thefirm’s in-house models built totrade like major trend-follow-ing funds.

However, the exact prices at

BY STEPHANIE YANG

Automated Trades Seen Worsening Swings

‘So many of these algorithms are doing the same thing. Their behavior becomes like human groupthink,’ Bridgeton’s Peter Hahn says.

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Pressure instock marketsleaks intocommoditiesin the daysfollowing.

S&P 500 futures

DAX futures Nikkei 225 futures WTI crude-oil futuresFTSE 100 futures

Algorithms that chase trendsget signals to sell if they arelong and the marketfalls—orders known asstop-losses or sell stops.These orders are meant tolimit losses, but could becompounding them as fundspile on. Human investors alsocan fuel declines, either bytriggering stop-losses ortracking trend followers.

Note: Market data are in 30-minute intervals, which omit some intraday levels. Some annotations have been adjusted to more clearly denote where stops were hit.Sources: Bridgeton Research Group LLC (sell levels); Thomson Reuters (prices) James Benedict/THEWALL STREET JOURNAL.

2900

2500

2600

2700

2800

Feb. 1 2 5 6 7 8 9Jan. 30 31

Jan. 30 Feb. 9 Jan. 30 Feb. 9Jan. 30 Feb. 9 Jan. 30 Feb. 9

Analysisshows sellstops hitstarting asearly asJanuary.

$67

58

a barrel

Bridgeton Research Group analysisestimates algorithms likely sold hereand exacerbated the market rout.

Stock futures hit last sellstop near market lows.

Indexes hit sell stops nearly in sync

7600

6800

13500

11500

24000

20000

cured creditors.Under a liquidation process

known as “an assignment forthe benefit of creditors,” get-ting that remaining cash to theunsecured creditors could takesix to 12 months, Mr. Taylorsaid in the email. Most ofTheranos’s two-dozen remain-ing employees worked theirlast day on Friday, Aug. 31.Only Mr. Taylor and a handfulof support staff remain on thepayroll for a few more days.

The action followed a failedbid to sell the company. Overfour months, investment bankJefferies Group LLC reachedout on Theranos’s behalf tomore than 80 potential buyersand executed nondisclosureagreements with 17 of thoseparties, the email said, adding:“We assisted those partieswith diligence and had numer-ous follow-on conversations.”

The big-name investors whopoured money into Theranoswill get nothing. All told, in-vestors in Theranos have lostnearly $1 billion.

Theranos’s founder andchairman, Ms. Holmes, and herex-boyfriend, Ramesh “Sunny”Balwani were indicted on ninecounts of wire fraud and twocounts of conspiracy to com-mit wire fraud in June. Mr.Balwani was Theranos’s presi-dent and chief operating offi-cer until he retired from thecompany in May 2016. If con-victed, they each face a maxi-mum sentence of 20 years inprison and a fine of $250,000,plus restitution to those foundto have been defrauded, oneach count.

The indictments followedmonths of reporting by TheWall Street Journal that raisedquestions about the company’stechnology and practices.

Before the charges werefiled, Theranos announcedthat Ms. Holmes had steppeddown as chief executive andthat Mr. Taylor, the company’sgeneral counsel, has been ap-pointed to also serve as CEO.Mr. Taylor will remain at thecompany for several weeks,according to a person familiarwith the matter.

ContinuedfrompageB1

Citigroup Inc. Chief Finan-cial Officer John Gerspachwill retire next year, ending anearly 10-year run as thebank’s top finance executive,the firm announced Tuesday.

Mr. Gerspach, 65 years old,will end his tenure as thebank’s CFO on March 1, 2019,according to an email ChiefExecutive Michael Corbat sentto employees that was viewedby The Wall Street Journal.Mr. Gerspach has served asCitigroup’s CFO since July2009, making him the lon-gest-serving finance chief cur-rently at any major U.S. bank.

He will be succeeded byMark Mason, 47, the financechief of Citigroup’s Institu-tional Clients Group, the sideof the bank that includes in-vestment banking and trad-ing.

Mr. Gerspach became CFOwhen Citigroup was a posterchild for the financial crisis.Its high-profile problems pro-liferated over the followingyears, with the bank marredby two failed stress tests,problems in its Mexico sub-sidiary and a big mortgage-securities settlement with theJustice Department. But in re-cent years, the bank has im-proved its relationships withregulators and dramaticallyslimmed down its once-bloated operations.

Mr. Gerspach has been thebank’s face to investors andanalysts, often speaking atconferences and sharing themic with Mr. Corbat duringearnings calls. He is knownfor a dry sense of humor,sprinkling his speech with“gee whiz” and “gosh darn it.”

By ChristinaRexrode andMicah

Maidenberg

CitigroupCFO PlansTo RetireMarch 1

TheranosTo DissolveOperations

THEWALL STREET JOURNAL. * * * * Wednesday, September 5, 2018 | B13

MARKETS

Shares of farming- and heavy-equipment maker Deere & Co. declined $2.10, or 1.5%, to $141.70.

KCMCG

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Material WeaknessShares of materials companies in the S&P 500, which haveslumped this year on worries about trade, were among Tuesday'sbiggest decliners.

THEWALL STREET JOURNAL.Source: FactSet

0

–1.5

–1.0

–0.5

%

9:30 10 11 noon 1 2 3

S&P 500 materials

S&P 500

fect elevated prices can haveon official inflation figures.

The disease may havespread farther than is known.Wantanee Kalpravidh, a spe-cialist in animal-disease con-trol at the Food and Agricul-ture Organization of theUnited Nations who is workingwith China to try to containthe spread, said it can taketwo to three weeks before itstarts killing affected animals.

—Zhou Weicontributed to this article.

Ministry of Agriculture andRural Affairs said in an inter-view published on the govern-ment’s website.

Feng Yonghui, chief analystat Chinese swine-industry re-search company Soozhu, saidthe disease would hurt de-mand as people avoided eatingpork, though the impact couldbe limited because the virusdoesn’t affect humans. Headded that pork prices are acontinuing source of concernfor Beijing because of the ef-

the disease has been found. Inaddition, infected farms arequarantined.

African swine fever isn’tharmful to humans but is usu-ally fatal for pigs. It is highlycontagious, putting at riskChina’s more than 400 millionpigs. China isn’t only theworld’s largest pork producer,but also the biggest consumer.

While stopping the spreadof the disease will be arduous,the epidemic remains control-lable, a representative for the

have risen as supplies tight-ened due to restrictions onmoving pigs around the coun-try, while in the north an in-crease in the number of pigsgoing to slaughter and a short-age of processing capacityhave hurt prices, said ChenjunPan, a senior industry analystat Rabobank.

The ministry said it hadculled more than 37,000 pigsand that the animals arebanned from leaving or tran-siting through provinces where

AUCTIONRESULTSHere are the results of Tuesday's Treasury auctions.All bids are awarded at a single price at themarket-clearing yield. Rates are determined by the differencebetween that price and the face value.

13-WEEKAND26-WEEKBILLS

13-Week 26-WeekApplications $138,390,914,300 $127,459,123,400Accepted bids $48,000,170,300 $42,000,123,400" noncomp $927,630,800 $718,185,400" foreign noncomp $105,000,000 $300,000,000Auction price (rate) 99.470431 98.867556

(2.095%) (2.240%)Coupon equivalent 2.135% 2.297%Bids at clearing yield accepted 25.14% 40.90%Cusip number 912796PE3 912796QZ5

Both issues are datedSept. 6, 2018. The 13-week billsmature onDec. 6, 2018; the 26-week billsmature onMarch 7, 2019.

FOUR-WEEKBILLSApplications $147,584,519,600Accepted bids $55,000,477,600" noncompetitively $941,563,200" foreign noncompetitively $303,000,000Auction price (rate) 99.846778

(1.970%)Coupon equivalent 2.000%Bids at clearing yield accepted 61.33%Cusip number 912796QB8

The bills, datedSept. 6, 2018,mature onOct. 4, 2018.

U.S. government bondprices fell Tuesday as inves-tors awaited a heavy supply ofcorporate bonds this month,and manufacturing datashowed factory activity accel-erated in August.

The yield on the benchmark10-year Treasury note rose to2.902%, the highest since Aug.9, from 2.853% on Friday.Yields rise as bond prices fall.

On Tuesday, some investorssold government bonds toraise cash to buy into higher-yielding company bond offer-ings, which could include debtsales by Pfizer Inc. and Uni-

lever, analystssaid.

S e p t embe rtends to be amonth when

companies try to raise moneyin the bond market, as mostparticipants in the financialmarkets have returned fromsummer holidays.

Yields extended their riseafter the Institute for SupplyManagement said Tuesdaythat its manufacturing indexrose to 61.3 in August from58.1 in July. Numbers above 50indicate activity is expandingacross the manufacturing sec-tor. Economists surveyed byThe Wall Street Journal hadexpected a 57.5 reading for Au-gust.

The unexpectedly strongreading led to a surge in in-vestor expectations that theFederal Reserve will be able toraise interest rates at leasttwo more times this year. Pol-icy makers have raised ratestwice this year and have pen-ciled in two more increases.

Fed funds futures, which in-vestors use to bet on the di-rection of central bank policy,indicate the probability theFed will raise interest rates atleast two more times this yearwere 75% late Tuesday com-pared with 67% a month ago.

The strength of the econ-omy, combined with a robustlabor market, makes it likelythat the Fed continues to takean aggressive approach toraising interest rates, saidThomas di Galoma, head ofTreasury trading and manag-ing director at Seaport GlobalHoldings.

“There’s a very good chancewe’re going to start seeing anupward movement in yields,”Mr. di Galoma said. “I don’tthink rates can stay wherethey are.”

BY DANIEL KRUGER

TreasurysDecline onOdds forRate Hikes

CREDITMARKETS

million in June, said people fa-miliar with the matter.

President Trump’s decisionin May to pull the U.S. out of a2015 international agreementto curb Iran’s nuclear programset the stage for the reimpos-ing of economic sanctions onthe Islamic Republic, withmeasures directly targetingthe country’s oil industry setto take effect in November.

At the same time, risingproduction from OPEC and itsallies, including Russia, hasbeen helping to keep a “cap onprices,” said Christyan Malek,an oil analyst at JPMorganChase. OPEC and Russiaagreed in late June to beginramping up crude productionafter more than a year of hold-ing back output.

Among refined products,gasoline futures for Octoberdelivery fell 0.1% to $1.9942 agallon.

The Gulf area accounts forabout one-sixth of U.S. oil pro-duction and 45% of its refiningcapacity, said analysts atBrown Brothers Harriman in aresearch note. “This is helpingoil prices extend last week’s5.4% rally,” it said.

While the storm was thekey factor that drove priceshigher Tuesday, Tamas Varga,an analyst at brokerage PVMOil Associates, noted that inLibya “a week of violence be-tween rival militias in the cap-ital of Tripoli is also makingoil bears cautious,” while signsthat Iran oil exports are al-ready declining due to U.S.sanctions also provided bullishsupport.

Officials at the state-runNational Iranian Oil Co. provi-sionally expect crude ship-ments to drop to around 1.5million barrels a day in Sep-tember, down from around 2.3

nonetheless dump up to 8inches of rain in some areasand might cause flash flooding.

Phil Flynn, an oil analyst atPrice Futures in Chicago, saidinvestors’ focus on the stormhas set aside for now other-wise bearish indicators for oilprices, including dollarstrength, simmering fears of aU.S.-China trade war and ris-ing production from major oilproducers from the Organiza-tion of the Petroleum Export-ing Countries.

The storm halted about 9%of offshore oil production inthe Gulf of Mexico as workerson platforms were forced toevacuate for safety reasons,said the government’s Bureauof Safety and EnvironmentalEnforcement. It said at least54 offshore oil and gas produc-tion platforms, or 8% of all theplatforms in the Gulf, wereevacuated.

U.S. oil prices rose Tuesdayas tropical storm Gordon bar-reled through the eastern Gulfof Mexico, forcing offshore oilproducers to cut productionand sparking concerns refineryactivity may also be affected.

Light, sweet crude for Octo-ber delivery settled 0.1%higher at $69.87 a barrel onthe New York Mercantile Ex-change. Brent crude, the globalbenchmark, ended virtuallyunchanged at $78.17 a barrel.

The National Hurricane Cen-ter said tropical storm Gordonis forecast to be upgraded to ahurricane by the time the eyeof the storm reaches landfallnear the Louisiana-Mississippiborder Tuesday evening. Itsaid the storm could weakensignificantly once it moves in-land but said Gordon could

BY DAN MOLINSKIAND CHRISTOPHER ALESSI

Storm inGulf ofMexico Lifts Oil Pricesket currencies. The rout hasbeen fueled by worries thatmany of these countries haveaccumulated too much dollar-denominated debt, and may nothave enough currency reservesto protect them from investorruns, analysts said.

These concerns are being ex-acerbated by expectations forthe Federal Reserve to continueraising rates and by tensionsbetween the U.S. and its majortrading partners, whichthreaten to slow global com-merce. Rising rates typically at-tract investors to a currency.

The dollar maintained itsgains after the Institute forSupply Management said itsmanufacturing index rose to61.3 in August from 58.1 in July.Readings above 50 indicate ac-tivity is expanding across themanufacturing sector.

The dollar rose Tuesdaywith the U.S. economy continu-ing to exhibit strength amidrising concerns about thestresses enveloping someemerging markets.

The WSJDollar Index,which mea-sures the U.S.

currency against a basket of 16others, rose 0.4%, climbing fora sixth consecutive trading ses-sion to 90.03. The dollar rose0.3% against the euro to itshighest level against the 19-na-tion currency since Aug. 23.

Investors continued to buydollars Tuesday as measures bypolicy makers in Argentina,which has raised its interestrates to 60%, failed to assuageconcerns about emerging-mar-

BY DANIEL KRUGER

U.S. Dollar Gains AfterStrong Economic Data

CURRENCIES

Average dropped 12.34 points,or less than 0.1%, to 25952.48,notching its third consecutiveloss. The index earlier fell asmuch as 159 points. The S&P500 shed 4.80 points, or 0.2%,to 2896.72 and the NasdaqComposite lost 18.29 points, or0.2%, to 8091.25.

Activity was relativelymuted as trading resumed fol-lowing the Labor Day holiday.

Analysts said they expecttrade to remain in focus thisweek, with talks over theNorth American Free TradeAgreement slated to resumeWednesday. President Trump’sweekend threats to leave Can-ada out of a new Nafta keptstocks in Europe and Asia sub-dued on Monday.

The outcome of Nafta talks“will give us a hint of whetherthese trade conflicts are more

and more concentrated [onChina], or whether there isstill a global element,” saidWitold Bahrke, a senior macrostrategist at Nordea AssetManagement, adding that ifthose tensions are limited tothe U.S. and China, the impacton global growth will likely besmaller.

Shares of materials and in-dustrials companies, whichhave struggled for ground thisyear amid investors’ uncer-tainty over trade policies,were hit by fresh selling Tues-day.

Mining company Freeport-McMoRan lost 57 cents, or4.1%, to $13.48 following met-als prices lower, while alumi-num-products maker Arconicdeclined 29 cents, or 1.3%, to22.09, and farm- and construc-tion-machinery maker Deere &

Co. fell 2.10, or 1.5%, to 141.70.Meanwhile, declines in Nike

weighed on the Dow industri-als. The sportswear giant’sshares shed 2.60, or 3.2%, to79.60 after the company saidit would feature Colin Kaeper-nick, the National FootballLeague quarterback who ledplayer protests during the na-tional anthem, in a new adver-tising campaign.

Amazon.com jumped 26.80,or 1.3%, to 2,039.51, brieflytopping the level needed topush its market value above $1trillion. The stock ended off itshighs for the day but remainsup 74% for the year.

In currency markets, theWSJ Dollar Index—which mea-sures the dollar against a bas-ket of 16 currencies—added0.4%, notching its longest win-ning streak since December,

when it rose for seven consec-utive sessions.

The dollar has strengthenedin recent months, puttingpressure on emerging markets,amid signs of a strong U.S.economy. American factory ac-tivity accelerated at a fasterpace than economists expectedin August, data from the Insti-tute for Supply Managementshowed Tuesday.

Investors will be closelywatching other data releasesthis week, including Friday’smonthly jobs report.

Elsewhere, the Stoxx Eu-rope 600 fell 0.7%, notching itsthird decline in four sessionsand finishing at its lowestlevel since mid-August. EarlyWednesday, Japan’s NikkeiStock Average was down 0.3%and Hong Kong’s Hang SengIndex was down 1%.

U.S. stocks began Septem-ber with declines as investorslooked ahead to a busy weekof trade negotiations and eco-

nomic data.S t o c k s

drifted lowershortly afterthe opening

bell, then pared declines in thefinal hours of trading, with theDow Jones Industrial Averageerasing nearly all of its lossesfor the day.

The Dow Jones Industrial

BY RIVA GOLDAND AKANE OTANI

Stocks Fall Ahead of Nafta TalksRetreat is led bycompanies affected bytrade as investors fretabout U.S. policy

TUESDAY’SMARKETS

Pork prices are rising inChina as Beijing struggles tocontain the spread of Africanswine fever, while a trade battle

with the U.S.will make itharder to re-place do-

mestic supply with imports.Since Thursday, three out-

breaks of African swine feverhave been identified in Anhuiprovince west of Shanghai—where around 15 million pigslive—bringing the total toseven.

The first outbreak was dis-covered in Liaoning provincenear the North Korean borderat the beginning of August. Inthe most recent outbreak, 83pigs have died from the dis-ease, but more are beingculled. Beijing has tightenedrules on moving live pigs toprevent the disease fromspreading further.

In the past, when pig popu-lations were hit by disease orshortages, China increasedpork imports. That won’t be ascheap or easy this time sinceBeijing has levied significanttariffs on U.S. products amidtrade tensions between theworld’s two largest economies.

Pork prices have risen onaverage around 8% in Chinasince the beginning of August,according to data from theMinistry of Agriculture andRural Affairs. Global prices ofsoybeans, an ingredient in pigfeed, fell last week in part be-cause of the potential impactof swine fever on Chinese de-mand, according to CapitalEconomics.

Prices in southern China

BY LUCY CRAYMER

Swine-Fever Outbreak Cuts China’s Pork Supply

Prices have risen in southern China as supplies tighten due to restrictions on moving pigs around the country.

DOMINIQUEPATTON/REU

TERS

COMMODITIES

B14 | Wednesday, September 5, 2018 * * * * THEWALL STREET JOURNAL.

HEARD ON THE STREETEmail: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Fed Doesn’tHave ReasonTo Step Back

Welcome back from sum-mer vacation! As far as theFederal Reserve is con-cerned, not much happenedwhile you were gone. Thatleaves them on track to keeptightening.

Oh sure, there was news.Trade tensions simmered.Turkey and Argentina raninto the shoals. British politi-cians allowed that nextyear’s Brexit will be very se-rious. Controversies swirledaround President Trump andwere stirred by him.

But the types of big wor-ries that have rattled mar-kets in summers past weren’tthere and the existing,mostly benign trends were.The economy keeps poweringalong and corporate profits,with the extra sweetener ofthis year’s tax cut, continueto swell. Inflation is trendingright at the Fed’s 2% target,and the unemployment ratekeeps drifting lower.

Anybody who on MemorialDay thought the Fed mightfind a reason to hit the pausebutton on rate increasesneeds to update his or herthinking. Investors have donethat to some extent. Fedfunds futures imply thechances of two more Fed rateincreases this year are about70%. That compares withabout 50% after the Junemeeting when the Fed lastraised rates.

Investors may need toraise those estimates as theyreturn to work refreshed.While there are some uncer-tainties hanging over theeconomy, the chances of itmaterially slowing down thisyear seem slim.

Next year, when the tax-cut stimulus starts to fade,tariff effects become morepronounced and Brexit isscheduled to occur, could bea different matter. But that isnext year. —Justin Lahart

by market capitalization—fi-nance, industrials and mate-rials—are heavily backed byBeijing.

The government has giventwo huge shots in the arm tothe country’s biggest public

Apple Inc. may have got-ten there first, but Ama-zon.com’s rapid ascent to a$1 trillion market valueshould put the iPhone makeron notice that its days as theworld’s most valuable com-pany are numbered.

On Tuesday, Amazon be-came the second U.S. com-pany to reach a market valueof $1 trillion. That happenedbarely a month after Applecrossed that threshold.

Amazon’s price didn’t holdthat level for long during arather rough day overall forstocks, but it is still notablehow quickly the e-commercegiant has covered ground. Atthe start of the year, Amazonwas valued at about $566billion while the iPhonemaker was worth about$860 billion. That is a 77%jump for Amazon comparedwith Apple’s 16% rise. Putanother way, the gap in mar-ket value between the twolargest tech giants has nar-rowed from 34% to about 9%in eight months.

Amazon’s meteoric risecomes from the fact that ithas harnessed its scale more

effectively than even its BigTech peers. Apple’s impres-sive growth over the pastdecade has come primarilyfrom the iPhone. None of theother products the companyhas launched since have hadanywhere near the same im-pact.

Amazon, meanwhile, hasmanaged to both signifi-cantly boost its already hugeretail business while alsobuilding sizable new ven-tures in devices, media and

advertising. The most nota-ble of those ventures hasbeen its cloud service, whichnow accounts for more than11% of total revenue andmost of its operating profit.

As a result, Amazon’s rev-enue growth since 2007 hasaveraged 28% a year com-pared with 22% for Appleand 20% for Google. Amazonalso has managed to fattenup its notoriously thin bot-tom line in the process. Op-erating income in the first

six months of this year to-taled $4.9 billion—triple thatof the year-earlier period.Wall Street also expects Am-azon to pass Apple in annualsales for calendar year 2019,according to analyst consen-sus figures compiled by Fact-Set.

This is one of those timeswhen investors count all themoney they could have madeif only they had bought ornot sold, but Amazon was nosure thing during its ascentand is still no low-risk bet. Amarket value of $1 trillionputs the stock a little over100 times forward earningscompared with 17 times forApple. Apple’s current multi-ple is the highest the stockhas fetched since 2010,though, while Amazon’s hasfallen by nearly 40% sincethe start of the year thanksto the company’s rising bot-tom line.

Amazon’s investors havenever been terribly sensitiveabout valuation anyway. Thecompany’s proven ability tokeep delivering the goodshas been well worth theprice. —Dan Gallagher

Chinese Companies Chug Ahead Despite Risks to GrowthWhat Chinese growth

slowdown? Some of China’sbiggest companies, particu-larly its banks, have beenposting their best earningsgrowth in years, despite allof the gloom around a tradefight with the U.S. and risingbond defaults.

The buoyant results don’tmean all is well for theworld’s second-largest econ-omy. Chinese listed compa-nies’ average earnings pershare have slowed from peakdouble-digit growth rates inlate 2016, but were still 8%higher in the first half, ac-cording to Wind Info. That,however, mostly reflects thehealth of state-owned firms:the top three Chinese sectors

companies in the past 18months—largely at the ex-pense of non-state-ownedcompanies, often unlisted,which account for abouttwo-thirds of economic out-put.

Forced factory closures inheavy industry, aimed at cut-ting overcapacity, have hitsmall, private businesseshard. But they have helpedboost profits at listed state-owned competitors likeBaoshan Iron & Steel Co.,which have gained both mar-ket share and pricing power.Healthier balance sheets forthe likes of Baoshan have inturn helped the state-ownedbanks that hold their debt.

Beijing’s crackdown on

shadow finance has given anadditional boost for the bigstate-owned banks—and an-other slap in the face forsmall private firms, whichoften have trouble securingbank loans at reasonablerates through official chan-nels.

As shadow-bank lendingevaporated early this year,weighted average lendingrates for traditional bankloans hit nearly 6%, theirhighest since mid-2015. Withdeposit rates still low andwholesale funding costsdrifting down, bank profitshave roared back: Their aver-age earnings per share roseover 4% on the year in early2018, according to Wind, the

best performance since 2014.Meanwhile, the private sec-tor’s financing problemshave worsened: Private in-dustrial firms’ profits wereequivalent to nine times in-terest payments in late 2017,but had shrunk to just seventimes by mid-2018.

Chinese stock marketsnow look cheap on the fun-damentals, but better fi-nances for state-owned com-panies have come at a steepcost for the economy as awhole—by crimping themore vibrant private sector.That bill is still likely tocome due in the form of sig-nificantly slower growth inthe quarters ahead.

—Nathaniel Taplin

Apple Won’t Be Biggest for Long

’15

Trading PlacesProfits as multiple of interestpayments for Chinese industrialcompanies

Source: CEICNote: All figures year to date.

2007

10

0

5

times

2010

State-owned

Private

Vedanta Resources hascome full-circle. The minerwas the first Indian companyto list on the London StockExchange 15 years ago. Nextmonth it will delist followingChairman Anil Agarwal’smove to take the companyprivate in a deal valuing it ataround $3 billion.

It is the end of an era. Ve-danta was one of severalmining companies fromemerging markets that listedin London during the com-modities boom, aiming to tapinto the city’s deep capitalwells. When things weregood for such companies,they were very good: Vedantahired Lionel Richie to singwhen it celebrated a decadeof being listed. Yet corporate-governance concerns werenever far away for some,while the end of the com-modities boom earlier this de-cade was another blow.

Was it all worth it? Per-haps early on, but its cumula-tive total return since the IPOamounts to 268% comparedwith 1,919% for the FTSE All-Share Index.

OVERHEARD

AppleAmazon

Catch UpRevenue per calendar year

THEWALL STREET JOURNAL.Sources: the companies (historical); FactSet (projections)*Consensus projections

$300

0

100

200

billion

2007 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18* ’19*

of eight days the central bankunexpectedly raised its inter-est rate, pushing it to 40% inearly May.

To stem the currency crisis,President Mauricio Macrisought financial support fromthe IMF. In June, the govern-ment and IMF agreed to a $50billion credit line, while thecentral-bank president, Feder-ico Sturzenegger, resigned and

was succeeded by Luis Caputo.While the move was initiallysupported by investors, Argen-tina’s peso continued to depre-ciate amid a rout in emerging-market currencies, makingpayments on the country’s for-eign debt more expensive.Catching investors by surprise,Mr. Macri last week went onTV to request that the IMFspeed up disbursements of the

bailout package to cover nextyear’s debt payments, causingthe peso to plummet even fur-ther and the central bank toraise its interest rate to 60%.This week, Mr. Dujovne plansto meet in Washington withthe IMF to request the fundsafter announcing spendingcuts and new taxes.

Beginning in 2016, Argentinarapidly took on debt to reinfuse

capital into a beleaguered econ-omy to finance a gradual ap-proach to unraveling the free-spending policies of Mr. Macri’spredecessor, Cristina Kirchner.That approach was intended toavoid social unrest as a resultof steep spending cuts.

But investors say the gov-ernment delayed unpopularfiscal tightening measures thatwould have made Argentina

less reliant on outside capital.Mr. Macri’s popularity is

sinking amid soaring inflationand an expected recession. Hisgovernment’s austerity mea-sures are politically riskyahead of next year’s electionas Argentines are already up-set about higher utility pricesand opposed to new taxes,while powerful unions will op-pose cuts to government jobs.

MARKETS

As rising U.S. interest ratesand the dollar’s resurgenceripple through emerging mar-kets, Argentina has beenamong the countries most-punished by investors. Therout, sparked by concerns thatthose relying heavily on dollarborrowing will feel the mostpressure, has left investorssaying the country must pass asustainable budget and com-municate a coherent economicstrategy that goes beyond call-ing on the International Mone-tary Fund for support.

On Monday, Finance Minis-ter Nicolas Dujovne announcedmeasures aimed at regaininginvestor confidence by reduc-ing the primary fiscal deficit to0% of gross domestic productin 2019 from a projected 2.6%this year. That will involve im-plementing a tax on exports,cutting the number of minis-tries and reducing spending onpublic-works projects and thegovernment’s payroll, movesthat will be politically risky asArgentina heads into an elec-tion next year.

Argentina’s currency is reel-ing, and its interest rates havebeen raised to 60%, pummel-ing investors who piled intothe country in recent years af-ter it cured a debt default.

Confidence in Argentina be-gan to wane after the govern-ment increased its inflationtarget in December, raisingquestions among investorsabout the independence of thecentral bank. That uncertaintywas compounded when thecentral bank cut its interestrate in January, despite infla-tion being well above the newtarget range. With pressure in-creasing on the peso, the cen-tral bank began to dip into itsreserves to support the cur-rency, selling $1.47 billion onApril 25, the biggest interven-tion in the spot market inyears. That had little impact,however, and over the course

BY JULIE WERNAUAND RYAN DUBE

Argentina Hit by Emerging-Market Rout

40

35

30

25

20

Ana Rivas/THEWALL STREET JOURNAL.

April 25Central bank sells $1.47 billion onthe spot market to support peso.

Dec. 28, 2018Argentine government raises inflation target.

May 8Argentina seeks creditline from IMF.

June 4Country replaces central-bankpresident, halts sale of dollars tosupport the peso.

Aug. 30Central bank liftspolicy rate to 60%.

Sources: Tullett Prebon Information (peso); National Institute of Statistics and Censuses (inflation, debt, reserves); Management & Fit survey, mostrecent of 1,600 people conducted July 11-26; margin of error: +/- 2.5 pct. pts. (approval rating); FactSet (indexes)

Argentina’s currencyhas lost more than 50% ofits value against the dollarso far in 2018.

Scale inverted to show the weakening peso

As pressure on the peso rose earlier this year, the centralbank sold reserves to support the currency.

President Macri's popularity is tumbling as inflationhas surged and a recession is expected.

The country's stocks have plunged as foreigninvestors depart.

Foreign-currency debt

$300

0

100

200

billion

’17 ’182016

January February March April May June July AugustDecember

Year-to-date returns, daily

20

–60

–40

–20

0

%

2018

MSCI Argentina

MSCIEmergingMarkets

S&P 500

Inflation rate, change from ayear earlier

32

24

26

28

30

%

2018

Mr. Macri’s approval

70

20

30

40

50

60

%

2018

Approve

Disapprove

Foreign-exchange reserves

$60

0

20

40

billion

2016 ’17 ’18

How many pesos one U.S. dollar buys

15