* * * * * FRIDAY, AUGUST 10, 2018 ~ VOL. CCLXXII NO. 34 WSJ.com HHHH $4 .00

DJIA 25509.23 g 74.52 0.3% NASDAQ 7891.78 À 0.04% STOXX600 390.05 À 0.1% 10-YR. TREAS. À 9/32 , yield 2.935% OIL $66.81 g $0.13 GOLD $1,211.90 g $0.70 EURO $1.1526 YEN 111.08

SanctionsHit Ruble,RussianStocksTrump administrationoffers few details onnew U.S. action,sparking uncertainty

budget for fiscal year 2020,which begins in October 2019,though Mr. Pence didn’t offerestimates of the costs in-volved.

As the vice president spoke,

Israel Answers Barrage of Rockets From GazaWith Airstrikes

RISING TENSIONS: Smoke billows from a building in Gaza City that was hit by Israeli airstrikes on Thursday, in response to 180rockets and mortars fired into Israel from the Gaza Strip. The clashes threatened to disrupt truce talks between Israel and Hamas. A5

Congress in 2018 are pushinga muscular gun-controlagenda that represents awholesale repositioning onthe hot-button issue. In thisyear’s midterm election, guncontrol has become a partylitmus test from which fewdissent, alongside abortionrights and support for same-sex marriage.

Six years ago, when theDemocratic CongressionalCampaign Committee advisedcandidates in rural districtsto show themselves withguns in their TV ads, the Na-tional Rifle Association madecampaign contributions to 30Democratic House candi-dates. This year, the NRA isfinancially backing just three.

The House Democrats’campaign arm counts 63 can-didates on its “Red to Blue”list of promising challengerstrying to flip GOP House

PleaseturntopageA7

During her 2010 U.S.House campaign, DemocratAnn Kirkpatrick of Arizonahighlighted her “A” ratingfrom the National Rifle Asso-ciation. She opposed gun-control measures and regaledconstituents in her largelyrural district with stories ofhunting with her father.

In 2018, Ms. Kirkpatrick isrunning to return to theHouse espousing a gun-con-trol platform that is amongthe country’s most aggres-sive. She is for universalbackground checks and a banon guns described as assaultweapons. She disavows herlongstanding position as a“proud gun owner,” sayingshe gave away the huntingrifles inherited from her fa-ther. “I do not have any gunsin my home,” she says.

Democrats running for

BY REID J. EPSTEIN

CONCRETEHOUSES’SEXY SIDE

MANSION, M1

SPIKE LEE’SNEW FILM

RUNS ON FURY

LIFE & ARTS, A10

inary kingdom in the movie—inone spot because drivers wereslowing to look at it but thatotherwise it was a hit.

“I was just excited,” he saysof his most attention-gettingforay into the genre of roadwayrepartee. He followed with“You’re not a firework. Don’tdrive lit” on the Fourth of Julyand “Seatbelt sings: Don’t youforget about me,” inspired bythe band Simple Minds, in Au-gust.

“I’m kind of known as ‘thesign guy’ now,” he says.

As summer car travelersare noticing, state transporta-tion officials have become abit of a trip. Traffic specialistswho once stuck to dispatcheslike “Westbound I-70 left laneclosed at Wentzville Parkway”are spicing up electronic bill-boards with snark, dad jokesand the occasional eyebrow-raiser.

The Missouri Department ofPleaseturntopageA7

Daniel Taylor, a traffic-oper-ations specialist at the VirginiaDepartment of Transportation,was lying in bed at home onenight in March, jotting downideas for highway safety signs.

“Which is a little odd,” hesays.

Inspiration struck. Why notuse the “Black Panther” movieto nag drivers? Days later, 120large electronic billboardsalong major Virginia interstatesbeamed the bulletin: “WakandaDriver are You? Safety is King.”

Mr. Taylor says the agencydid have to turn off the mes-sage—which refers to the imag-

BY JENNIFER LEVITZ

Warning: Puns Ahead.Traffic Officials Get Creative

i i i

The best one-liners are on road signs;

‘lobstahs, not speeding tickets’

Someone’s having fun

the Pentagon released a 15-page report outlining a frame-work for Space Force, aimingto “improve and evolve spacewarfighting.” The plan out-lined aspects of the effort in-

For Democrats, GunsAre New Litmus TestAlmost all 2018 House candidates push for

firearms limits, squeezing out dissenting voices

Cheaper, but NotCheap Enough

S&P 500 price/earnings ratio,trailing 12 months

THEWALL STREET JOURNAL.Source: FactSet

22

18

19

20

21

times

2017 ’18

Stock valuations have fallen totheir lowest levels in months,but many investors remaincautious over tech’s surge. B12

Newly announced U.S.sanctions—and the potentialfor a second round of actionsin 90 days—roiled Russia’scurrency and blue-chip stocksas the country braced for fur-ther economic pain amid un-certainties over the Trumpadministration’s commitmentto enforcement.

In Moscow, the ruble shedas much as 5% against the dol-lar on Thursday and stocksplunged as much as 9%, led bystate banks and national car-rier PJSC Aeroflot-RussianAirlines, which risk losing ac-cess to U.S. markets if thesanctions escalate. In Wash-ington, the administration re-mained notably silent on theaction and offered few detailson the severity of the prospec-tive punishments.

The sanctions stem from aMarch nerve-agent attackagainst a former Russian spyin the U.K. The U.S. and Britainhave held Russia responsiblefor the attack. Moscow has re-peatedly denied involvement.

The sanctions are man-dated by a U.S. law that re-quires action over the use ofchemical and biological weap-ons—but President Trump

PleaseturntopageA6

By Anatoly Kurmanaevin Moscow

and Courtney McBridein Washington

cluding an “acceleration” ofspace technology, the creationof a space-developmentagency for next-generationspace capabilities, and the cre-ation of a pool of “space ex-perts” who are trained, pro-moted and retained as “spacewarfighting professionals.”

The paper was short onsome important details, suchas the estimated cost of thebranch and why it was neededso quickly.

In a briefing Thursday withreporters, Deputy Defense Sec-retary Pat Shanahan at firstsaid the Pentagon had a pre-cise cost estimate for the newforce that wouldn’t be madepublic until November. Later,however, he said the costwasn’t known but could be as-sumed to be “in the billions”of dollars.

The creation of the forcePleaseturntopageA4

WASHINGTON—Army. AirForce. Navy. Marine Corps.Coast Guard.

Space Force?Vice President Mike Pence

laid out a plan Thursday toput President Trump’s stampon the U.S. armed forces bycreating a military commanddedicated to space.

“The time has come to es-tablish the United StatesSpace Force,” Mr. Pence saidat the Pentagon before seniordefense-department leadersand military commanders,many of whom have expressedskepticism about the estab-lishment of a sixth militarybranch.

The new force, which re-quires legislation to create,would be led by a four-starcommander, Mr. Pence said. Itwould be funded in the federal

BY NANCY A. YOUSSEF

PenceOutlines Plans forU.S. Space Force

RedstoneWould Limit Viacom Salecopy of the confidential trustreviewed by The Wall StreetJournal.

The trust, details of whichhaven’t been disclosed previ-ously, prohibits the trusteesfrom entering into any mergerthat would leave shareholdersin National Amusements, Mr.Redstone’s holding company,with less than 30% of the vot-ing control of the resultingbusiness.

The restriction could com-plicate efforts to sell CBS or Vi-acom, especially to large com-panies, in which case coming

away with a substantial stakewould be challenging.

That and other provisions ofthe trust may have significantimplications for CBS and Via-com investors, particularly at amoment when the media indus-try is awash in deals and bothcompanies are considered po-tential takeover targets.

Mr. Redstone’s trust hasemerged as a flashpoint in thelegal battle playing out in Del-aware Chancery Court be-tween CBS and NationalAmusements over control ofthe television company.

CBS is pushing to diluteNational Amusements from itsnearly 80% voting stake cur-rently to about a 20% stake byissuing a special dividend. Na-tional Amusements moved toblock any special dividend bychanging CBS’s bylaws to re-quire a 90% supermajorityvote for such a change. Thetwo sides have been goingthrough court proceedingsand a trial in the case is set

PleaseturntopageA2

Sumner Redstone doesn’twant his heirs to have an easytime selling off his family’scontrolling stakes in mediacompanies Viacom Inc. andCBS Corp. And he put it inwriting in his estate-planningdocuments.

The trust that will controlViacom and CBS when the 95-year-old media mogul dies oris deemed incapacitated placessevere restrictions on thetrustees’ ability to sell thecompanies, according to a

BY KEACH HAGEY

INSIDE

Vice President Pence outlined a sixth military branch for the U.S.

SAULLOEB/AGENCE

FRANCE-PRESSE/GETTYIMAGES

� Viacom’s revenue declined inthe latest quarter.................... B2

CONTENTSBusiness News.. B3,6Crossword............... A11Heard on Street... B12Life & Arts....... A10-11Mansion............. M1-10Markets............. B11-12

Opinion.............. A13-15Sports........................ A12Streetwise................. B1Technology............... B4U.S. News............. A2-4Weather................... A11World News... A5-6,16

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

>

What’sNews

� Newly announced U.S.sanctions—and the potentialfor a second round of actionsin 90 days—roiled Russia’scurrency and blue-chipstocks as the country bracedfor further economic pain. A1� Pence laid out a plan toput Trump’s stamp on theU.S. armed forces by creat-ing a military commanddedicated to space. A1� An intense exchange offire between Israel’s militaryand militants in Gaza threat-ens to disrupt efforts to strikea long-term peace deal. A5�Airstrikes onamarket innorthernYemen killed dozens,including at least 29 childrenin a school bus, drawing in-ternational condemnation.A5� Puerto Rico acknowl-edged in a document filedto Congress that the deathtoll from Hurricane Mariamay have exceeded 1,400. A3�The government’s caseagainst Manafort neared itsendwith testimony about loanapplications that allegedly con-tained false information. A4� Prosecutors have soughtdocuments fromTrumpdonorFranklinHaney about his busi-ness dealings with Cohen. A4� Japan returned to solidgrowth in the latest quarter,and economists said growthwas likely to continue. A6�Argentina’s Senate re-jected a bill to legalize elec-tive abortions, an issue thatsharplydivided thenation.A16� Venezuela accused twoopposition lawmakers ofbeing part of an alleged plotto assassinate Maduro. A16

The trust that will con-trol Viacom and CBS

when Sumner Redstonedies or is deemed incapaci-tated places severe restric-tions on the trustees’ abilityto sell the companies. A1� Viacom’s revenue fell,hurt by lower interna-tional sales in its filmed-entertainment division. B2� Economists are raisingprojections for U.S. economicgrowth for 2018, but manybelieve the boom won’tlast much beyond that. A2�New York City’s curbs onUber, Lyft and Airbnb showhow regulation remains animmense risk for tech stars.B1� The Nasdaq notched itseighth straight session ofgains, shrugging off declinesin othermajor indexes.B1, B11� Saudi Arabia has pressedindependent energy ana-lysts to alter their estimatesof its oil production. B1� A U.S. judge authorizedthe seizure of Citgo Petro-leum to satisfy a Venezue-lan government debt. B1� Tribune terminated its$3.9 billion merger dealwith Sinclair and sued therival TV-station owner. B2�RiteAid investorswill lookto the firm for a new planto compete after the Albert-sons deal was called off. B3� Third Point is pushingfor a sale of Campbell Soupwith the help of an heir to thesoup company’s founder. B2� Samsung’s newest flag-ship device looks muchlike last year’s model, re-flecting slowing innova-tion in smartphones. B4

Business&Finance

World-Wide

EMADAWAD/DPA

/ZUMAPRESS

A2 | Friday, August 10, 2018 * * * * THEWALL STREET JOURNAL.

U.S.WATCH

or is deemed incapacitated,according to the documentsthe Journal reviewed.

The section also spells outthat Mr. Redstone has the“sole and exclusive power” tovote the stock in the trust dur-ing his lifetime.

The trust owns 80% of thevoting stock of NationalAmusements, while Shari Red-stone, his daughter, owns theremaining 20%. NationalAmusements, in turn, ownsnearly 80% of the voting stockof CBS and Viacom.

National Amusements hassaid it decides how to vote theholding company’s CBS andViacom controlling stakesthrough a vote of its seven-member board, on which Mr.Redstone casts a single vote.However, Mr. Redstone has theright to replace all members ofthe board.

National Amusements’ law-yer, Meredith Kotler, said incourt Wednesday that CBS’s in-terpretations of the trust pro-vision were incorrect. “If theythink that provision would pre-

clude trustees after Mr. Red-stone’s lifetime from doingsomething, they’re wrongabout that, because the trust-ees can amend it,” she said.

Mr. Allerhand was skepticalthat National Amusements’concept of modifying the trust

would work. And he linked theissue of the trust and its com-plications to the legal matterat hand in the Delaware case:CBS’s push to dilute NationalAmusements from a nearly80% voting stakeholder toabout a 20% stake through aspecial dividend.

“If their supposed fix is notdoable, then we may have comeacross actually the most com-pelling reason for the specialdividend that could ever be ar-ticulated,” Mr. Allerhand said.

Mr. Redstone, who in recentyears has fallen into such illhealth that he can no longerspeak much beyond grunts,said as recently as 2012 to theJournal that his estate-planningdocuments barred his trustfrom selling his family’s con-trolling interest in CBS or Via-com “unless they start doingterribly, which they will not.”

Patrick Connor, a trust andestates lawyer at Husch Black-well, said it is possible toamend a trust after the trust’screator dies through a varietyof means, from asking a judge

to amend it to setting up anew trust and putting the oldassets into it.

“What used to be irrevoca-ble trusts are much less irrev-ocable these days and easierto change,” he said.

Ms. Redstone, who rose tobecome the de facto leader ofNational Amusements in a2016 power struggle, haspushed for CBS and Viacom tomerge as the first step in anyreorganization. She says hergoal is to give the companiesgreater scale in hopes of bet-ter competing amid a consoli-dating media industry. Shepressed the companies to ex-plore a combination in 2016,and again earlier this year,only to be met with resistancefrom CBS both times.

CBS has alleged in legal fil-ings that Ms. Redstone re-sisted potential suitors forCBS. National Amusementshas denied the allegations.

The scope of Mr. Redstone’spower at National Amuse-ments, and his ability to influ-ence events in his deterioratedstate, have become a bigger fo-cus of the legal battle. Dela-ware Chancery Court JudgeAndre Bouchard said Wednes-day that the question of “whois calling the shots” at theholding company would haveto be addressed in the case.

Mr. Allerhand said that thisyear, for the first time, Na-tional Amusements refused toconfirm a provision in CBS’slatest quarterly report to theSecurities and Exchange Com-mission saying that NationalAmusements is controlled byMr. Redstone. Ms. Kotler saidNational Amusements was sim-ply trying to avoid beingtrapped by CBS into broad as-sertions.

—Peg Brickleycontributed to this article.

for October.At a court hearing Wednes-

day, CBS lawyer Joseph Aller-hand said only a handful ofpeople have laid eyes on thetrust document.

“We believe there are termsof the trust that are fairly de-scribed as bombshells,” Mr.Allerhand told the judge, with-out specifying what the provi-sions were. He added that thetrust has “huge consequencesto investors of this company.”

He pointed to a specificsection of the trust document,but didn’t spell out in court itscontents. The section dealswith the restrictions on sellingNational Amusements or itsassets after Mr. Redstone dies

ContinuedfromPageOne

TrustHampersCBS Sale

A forum that GenentechInc. drug researchers heldwith the company’s seniorleadership eventually allowedfor a new molecule to moveinto later-stage testing. AManagement article Thursdayabout welcoming ideas fromemployees incorrectly said theforum led to creation of a newmolecule.

LPL Financial HoldingsInc. isn’t a member of theAmerican Securities Associa-

tion. A Banking & Finance arti-cle Wednesday about proposedcurbs on stockbroker adviceincorrectly said LPL is one ofthe trade group’s members.

Santa Monica, Calif., hasissued more than 1,000 ticketsto people for various infrac-tions while riding scooters.The Keywords column aboutthe scooter-sharing industryin the Exchange section July21 incorrectly said the ticketswere for riding on sidewalks.

Readers can alert The Wall Street Journal to any errors in news articles byemailing wsjcontact@wsj.com or by calling 888-410-2667.

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economy buzzing for another12 months,” said Bernard Bau-mohl, chief economist of theEconomic Outlook Group. “Be-yond that, however, I expect tosee dark clouds forming thatwould signal a recession isnear.”

Mr. Baumohl isn’t alone inpredicting a slowdown. Busi-nesses that were enthusedabout the tax relief could hold

off hiring and investing in theface of trade uncertainty, sev-eral economists said.

“Prospects of trade war areeroding business confidencefrom the Tax Cuts and JobsAct,” said Kevin Swift, thechief economist of the Ameri-can Chemistry Council. Thechemicals industry is amongthose facing tariffs on im-ports.

The average forecast forgrowth in 2019 was 2.4%, littlechanged in recent months. By2020, the average forecasterprojects economic growth willslow to 1.8%. That is downfrom estimates earlier thisyear of 2%.

Trump administration offi-cials disagree with these pro-jections. The White House hassaid 3% growth or better can

U.S. NEWS

be sustained. Other govern-ment forecasters, includingthe Federal Reserve, Congres-sional Budget Office and Inter-national Monetary Fund allproject a slowdown from thegrowth rate of 2018. The Fed,for example, sees 2% growthin 2020 and 1.8% growth inthe long run.

Maintaining 3% growth orhigher could help the economygrow out of looming trillion-dollar budget deficits. More-over, if the administration’sgrowth forecast is maintained,the economy would double insize over the next 24 years. Atthe 1.8% rate forecast by econ-omists for the year 2020, itwould take 39 years.

At the root of the differingviews between the administra-tion and other forecasters is adebate about how tax cuts andregulatory rollbacks will affectgrowth. The administrationhas argued tax cuts and dereg-ulation will lead to lasting in-creases in worker productivityas firms invest more andgreater labor-force participa-tion, meaning more workerswith greater output.

Many other forecasters,however, think the tax cutsand spending increases re-cently passed by Congress willamount to only temporarystimulus, with effects fadingmuch like the stimulus spend-ing passed during the firstyear of the Obama administra-tion, which contributed to atemporary growth spurt be-fore giving way to lacklustergrowth.

Fed policy is another wildcard. Inflation, as measuredby the consumer-price index,is forecast to remain above2% through 2020, a backdropthat will require the Fed tocontinue raising short-terminterest rates in the nearterm, ending next year withits benchmark federal-fundsrate at about 3%. Higher Fedrates, while keeping inflationfrom moving too much higher,could also help tamp downgrowth.

The Journal’s survey of 57business, financial and aca-demic economists was con-ducted Aug. 3-7. Not everyforecaster answered everyquestion.

Economists are raising 2018growth projections after astrong second quarter, but dis-putes with U.S. trading part-ners, a fading boost from fis-cal stimulus and rising short-term interest rates lead manyto believe the boom won’t lastmuch beyond that.

The average estimate foreconomic growth this year in-creased to 3%, up from projec-tions of 2.9% last month and2.4% a year ago, according toThe Wall Street Journal’smonthly survey of privateeconomists. They also see theunemployment rate falling to3.6% by June, which would bethe lowest unemployment ratein nearly 50 years. The joblessrate in July was 3.9%.

Consumer spending andbusiness investment were ro-bust in the spring, thanks inpart to tax cuts that put moremoney in household pocketsand gave businesses a higherafter-tax return on their in-vestments.

“The tax cuts and jump infederal spending will keep the

BY JOSH ZUMBRUN

Economists Boost Near-Term Projections

Smoke Blankets California as Wildfires Continue to Burn

AFTER THE INFERNO: A woman sweeps the stairs leading to the burned-out ruins of a house in Redding, Calif. Firefighters battling the Mendocino Complex Fire, whichis the largest in state history, and another major blaze near Yosemite National Park say the wildfires will likely persist through September.

JOHNLOCH

ER/ASSOCIATEDPRESS

Business InflationMeasure Flat in July

A measure of business infla-tion showed signs of moderat-ing in July.

The producer-price index, ameasure of the prices busi-nesses receive for their goodsand services, was flat in Julyfrom a month earlier, the LaborDepartment said Thursday.

A core measure of prices,which excludes the volatile foodand energy categories, was up0.1% in July from the priormonth.

Rising oil prices and im-proved demand from U.S. con-sumers and businesses havehelped push the annual index foroverall prices higher over time.Even that measure took a pauseat 3.3% in July after clocking inat 3.4% in June.

The producer-price reportalso specifically tracks intermedi-ate demand prices, or the costcharged for goods and servicessold to businesses as inputs inproduction. This is an indicator ofcost pressures building in thepipeline for many businesses,which can be a precursor tobroader inflation.

On a monthly basis, prices

for processed goods for interme-diate demand were unchanged.That gauge is up nearly 7% froma year earlier, well outpacingprices for final demand, butmatching the June rate.

“Since we’ve seen them easeback a little bit over the pastcouple of months, I think it’s go-ing to be a pretty gradual pickupin the underlying pace of infla-tion,” said Sarah House, senioreconomist at Wells Fargo.

Still, pipeline price pressuresare elevated and could translateinto a further pickup in consumerprices if businesses choose topass along cost increases.

—Sarah Chaney

Redstone’s movecould complicatemerger deals as theindustry consolidates.

ROBYNBECK/AGENCE

FRANCE-PRESSE/GETTYIMAGES

WASHINGTON, D.C.

Judge Halts RemovalOf Asylum Seekers

A federal judge stopped thedeportations of an asylum-seek-ing woman and her youngdaughter who were alreadyaboard a plane to El Salvador,criticizing the Trump administra-tion for trying to remove themwhile they were in the midst ofchallenging their cases in court.

U.S. District Judge Emmet G.Sullivan threatened to hold Attor-ney General Jeff Sessions in con-tempt of court if U.S. officialsdidn’t immediately return the pairto the U.S. The Department ofHomeland Security said it wascomplying with the order. “Uponarrival in El Salvador, the plaintiffsdid not disembark and are cur-rently en route back to the UnitedStates,” the official said. Thewoman and her daughter wereback in the U.S. Thursday night.

—Sadie Gurman

WHITE HOUSE

Ex-Aide RecordedTrump Conversations

A former West Wing aide re-corded conversations with Presi-dent Trump, creating a fresh is-sue for a White House alreadydispleased over leaks of internaldeliberations, according to twopeople familiar with the matter.

Omarosa Manigault-Newman,a former contestant on Mr.Trump’s reality-TV program,taped high-level administrationofficials and Mr. Trump duringher tenure as an assistant tothe president, these people said.

Ms. Manigault-Newman didn'trespond to a request for comment.

Ms. Manigault-Newman madeappearances on the president’s oldTV show, “The Apprentice.” Shejoined the White House last yearas director of communications forthe Office of Public Liaison.

—Peter Nicholas

Small clerical errors discov-ered Thursday reduced the sizeof Kansas Secretary of StateKris Kobach’s lead over Gov.Jeff Colyer in the state’s Re-publican gubernatorial primary,which remains too close to call.

Two vote-count discrepan-cies, one in Thomas Countyand one in Haskell County, re-duced the size of Mr. Kobach’srazor-thin lead over Mr. Co-lyer to 121 votes, down from191 votes, the Associated Pressreported. Provisional ballotshave yet to be counted. Assecretary of state, Mr. Kobachoversees the election process.

Election officials in ThomasCounty discovered that Mr. Co-lyer had won 522 votes there,rather than the 422 originallyreported. In Haskell County,election officials reported thatMr. Colyer in fact received 220votes, not 103, and Mr. Kobachwon 257 votes, not 110.

Mr. Kobach, with the supportof an endorsement from Presi-dent Trump, is seeking to unseatan incumbent of his own party.

BY ANDREW DUEHREN

Kansas GOPRace Tightens

THEWALL STREET JOURNAL. Friday, August 10, 2018 | A3

U.S. NEWS

BY ARIAN CAMPO-FLORES

PuertoRico NodsTo HigherDeath Toll

said resident Chase Luker, whoworks at outdoor-adventurecompany Dare to Hyde.

Mr. Luker, who didn’t applyfor a permit, said the companyleads hunting trips for water-fowl, turkey and the occa-sional black bear—but it isn’tequipped to lead alligator-hunting excursions.

Hyde County, which lies tothe south of Alligator River, isone of only 10 in North Caro-lina that can, with permission

from the Wildlife ResourcesCommission, reduce its alliga-tor population via hunting.Hyde County was the onlycounty to apply to the com-mission this year, Ms. Davissaid.

The U.S. Department of theInterior has classified theAmerican alligator as a threat-ened species since 1987 tohelp protect the similar-look-ing American crocodile, whichis endangered.

buted to development and hu-man population growth,” saidMs. Davis, adding that no peo-ple have reported injuriesfrom alligators this summer.

Some said the hunt, fre-quently conducted from aboat, could be challenging.

Alligators have found theirway into the county’s drainagepumps, an important part offlood prevention. They also re-side in canals, many of whichare as narrow as 6 or 8 feet,

Fish Get Tangled Up in TariffsIf seafood importsfrom China get hitwith duties, U.S.fishermen could suffer

An employee works at Boston-based fish company Slade Gorton. Proposed tariffs on Chinese imports include dozens of varieties of fish.

SIMONSIMARDFO

RTH

EWALL

STR

EETJOURNAL

Stephen Dinkelacker, left, and Rob Verzone restrain an alligator to take its measurements in HydeCounty, N.C. Mr. Dinkelacker, below, has been tracking alligators in the state for almost 20 years.

The Puerto Rican govern-ment acknowledged in a docu-ment filed to Congress onWednesday that the death tollfrom Hurricane Maria lastyear may have exceeded 1,400,though the official countstands at 64.

The administration of Gov.Ricardo Rosselló has faced crit-icism that it severely under-counted the number of fatali-ties stemming from the storm.Numerous studies by academicresearchers and media organi-zations have concluded thedeath toll likely approached orsurpassed 1,000 and could havebeen far higher.

The administration’s ac-knowledgment, reported ear-lier by the New York Times,appears in a lengthy documentposted online Thursday detail-ing its recovery and recon-struction plan to Congress,with a wish list of projectscosting $139 billion.

“Although the initial deathcount released by the PuertoRico Department of PublicSafety was 64, the toll appearsto be higher,” the documentstates. Based on death regis-tries data released in June,“there were 1,427 more deathsin the four months after thehurricanes than normal (basedon the previous four years).”

The document notes thedeaths “may or may not be at-tributable” to Hurricanes Ma-ria and Irma, which struck theisland weeks earlier.

Democrats in Congress re-sponded to the latest reporton the hurricane death toll bycalling for more aid for the is-lands, though lawmakersdidn’t say if they would pushfor Mr. Rosselló’s request.

Since Oct. 1, 2017, the Fed-eral Emergency ManagementAgency has designated morethan $13.7 billion for PuertoRico.

—Natalie Andrewscontributed to this article.

A handful of hunters willsoon be permitted to bag anAmerican alligator, an animalrarely hunted in North Caro-lina.

The state’s Wildlife Re-sources Commission will al-low alligator hunting in HydeCounty beginning Sept. 1,marking the first sanctionedhunt in the state in more than40 years. So far, demand ishigh, with more than 400people applying for 20 per-mits, said Alicia Davis, a con-servation biologist at thecommission.

The monthlong controlledhunt is intended to decreasethe population by up to 20 al-ligators and will target threeregions in the county wherethere have been “frequent alli-gator conflicts,” according tothe county.

Assistant County ManagerKris Noble said the area’s alli-gator problem has gotten sobad in the past five years thatresidents no longer swim inlocal ponds. Ms. Noble stoppedtaking her Labrador retrieversalong on fishing trips to theInner Banks.

Hyde County, in North Car-olina’s coastal plain, is thestate’s second-largest by totalarea but the second-least pop-ulous. With zero municipali-ties and fewer than 6,000 resi-dents as of the last nationalcensus in 2010, it has fallen tothe county to manage the alli-gator population.

“A lot of municipalities mustdeal with downtown traffic andparking, but we deal with re-source management and ani-mal control,” Ms. Noble said.“It is pretty obvious to anyonethat lives and works here thatthe alligator...interactions areon the rise.”

The state hasn’t undertakena large-scale study of its alli-gator population since the1970s, so it can’t prove moregator-related complaints actu-ally means there are more alli-gators, Ms. Davis said.

“We’ve been seeing an in-crease in the number of callswe get from the public. Atleast some of that is attri-

BY MAYA SWEEDLER

State Sets Rare Hunt for Alligators

switching to a district-basedsystem would harm Latinos,because they live throughoutthe city—and not just one partof town. The city’s populationis about 65% non-Hispanicwhite, 16% Hispanic, 10%Asian, 5% mixed race and 4%black, according to U.S. Censusdata.

“It is a very diverse cityand people of different racialbackgrounds live throughoutthe city,” said Theodore J.Boutrous Jr., an attorney rep-resenting the city. “It is im-possible to create a districtthat would enhance the votingpower of Latinos.”

Ms. Loya’s lawsuit chargesthat Santa Monica violatedCalifornia’s Voting Rights Act,a 2002 state law pushed byLatino advocates that ex-panded provisions of the land-mark federal Voting Rights Actof 1965.

In 1986, the U.S. SupremeCourt laid out conditions thatmust be met for minorities toprove they have been disen-franchised under the federallaw. One of those conditionswas that minorities must dem-onstrate they can draw a dis-trict where they are the ma-jority. The California law doesaway with that requirement,making it easier to sue citiessuch as Santa Monica, but alsomaking the California law atarget of conservative critics,who argue it goes too far.

The Santa Monica trial isunfolding as a separate casebacked by the Project on FairRepresentation, a nonprofitconservative legal foundationin Arlington, Va., is challeng-ing the constitutionality of theCalifornia law in federal court,arguing it makes race toomuch of a factor in elections.

Edward Blum, the founda-tion’s president, said suchlaws “diminish competitiveelections and contribute to ra-cial and ethnic political polar-ization.”

Santa Monica, Calif., with a“well-being index” to gaugethe happiness of its residentsand a fleet of city buses pow-ered by natural gas, often livesup to its reputation as awealthy, liberal enclave onCalifornia’s coast

But this month, a trial in aLos Angeles courtroom hasput the seaside city on thesame side as a conservative le-gal activist who is challengingthe state’s voting-rights law.

The fight revolves aroundthe city’s at-large election sys-tem for its seven City Councilseats. Instead of winning of-fice by capturing the majorityin any particular district,council members are electedcitywide.

The city is being sued instate court by Maria Loya,who argues she lost electionsfor City Council and the SantaMonica College Board ofTrustees, which also elects itsmembers citywide, because ofthe at-large system. Ms. Loya,who is Latina and lives in thecity’s Pico neighborhood,which is historically Latino,ran for the council in 2004and the college board in 2014.

“After losing two elections Idid a lot of thinking about itand was convinced that theelection system in Santa Mon-ica was rigged,” said Ms. Loya,whose suit asks the court toorder the city to change to adistrict-election system.

The city’s attorneys say Ms.Loya has failed to prove ra-cially polarized voting driveselections in Santa Monica orthat Latino votes are dilutedby the current system. Theynote the city has elected Latinocandidates including a formermayor, Tony Vazquez, who isone of two Hispanics who nowsit on the City Council.

Attorneys representing thecity, which has a population ofabout 92,000, argue that

BY ALEJANDRO LAZO

Lawsuit ChallengesElection SystemIn Santa Monica

The next round of U.S. tariffsaimed at Chinese imports couldwind up hurting a major tradeproduct that initially comesfrom America: fish.

A 10% duty proposed by theTrump administration lastmonth on $200 billion worth ofimports from China includeddozens of varieties of fish, fromtilapia to tuna. The proposedtariffs, which could increase to25%, are set to be decided inSeptember by trade representa-tives.

An estimated $900 million infish and seafood on that list isfirst caught in the U.S., sent toChina for processing into itemslike fish sticks and fillets, andthen imported by U.S. compa-nies to sell to American con-sumers.

“The value added is in an-other country, but essentiallyit’s an American-raised prod-uct,” Joseph Glauber, formerchief economist at the U.S. De-partment of Agriculture, said ofgoods like fish sourced in theU.S. but processed overseas andre-imported. He said the pro-posed tariffs could cut profitsor boost prices throughout sea-food supply chains.

The practice of sending fishto China to be breaded, sea-soned, portioned or packagedhas grown in the past two de-cades, according to U.S. fishinggroups. Domestic seafood-pro-cessing plants have faced highcosts and labor shortages, whilecheaper facilities have sprungup in China to support its ex-tensive domestic fish-farmingindustry.

That has helped make Chinathe top source of seafood forthe U.S., with the 1.3 billionpounds sent to the U.S. lastyear double that of second-ranked India, according to mar-ket-research firm Urner Barry.

The exposure of U.S. seafoodto tariffs aimed at anothercountry highlights how inter-

twined global supply chainshave become. Many pinksalmon, for example, are caughtby commercial fishermen insoutheast Alaska. The fish aretransported to processingplants in the region to beheaded, gutted and frozen, be-fore being loaded into shippingcontainers bound for China.Once there, they are thawed,deboned, smoked, filleted orturned into salmon burgers forsale world-wide, including inthe U.S.

More than half of Alaskanseafood sent to China is pro-cessed and then re-exported,said Garrett Evridge, an econo-mist with McDowell Group, anAlaskan research and consult-ing firm. The percentage can beas high as 95% for fish like sole,he said. The fishing industry,one of the largest private-sec-tor employers in Alaska, pro-vides about 60,000 jobs, hesaid, and Alaskan seafoodmakes up 60% of the nation’scatch.

Some Gulf Coast seafoodproducers had lobbied for the

latest round of tariffs to includefish. In a letter to the Trumpadministration in May, theSouthern Shrimp Alliance tradegroup said Chinese-farmed fishtend to be raised with antibiot-ics, and imports unfairly com-pete with the group’s members.

A spokeswoman for the U.S.Trade Representative said theagency was soliciting publiccomments on the proposed tar-iffs, and the duties “were se-lected to increase pressure onChina to change its harmful be-havior.”

With supplies of wild-caughtU.S. fish unable to meet domes-tic demand, more than 80% ofthe seafood Americans eat isimported, according to the Na-tional Oceanic and AtmosphericAdministration. And the U.S.seafood companies that importfish products back from Chinaare bracing for lost business.Tariffs could translate intolower seafood sales, hittingsmall, family-run boats, largeseafood processors and myriadsuppliers.

Because fish sellers are in alow-margin business, theywould need to pass on higherprices to restaurant and gro-cery customers, which in turnwould likely raise prices forconsumers, companies said.

Seafood already averageshigher than other forms of pro-tein. Fish and seafood averaged$7.22 per package for the 12months through June, up from$6.77 a year earlier, accordingto Nielsen Total View data.Meat averaged $3.54 a packagein the year through June, Niel-sen found.

BY HEATHER HADDONAND JESSE NEWMAN

Big HaulChina is the top exporter of seafood to the U.S., with a significantportion of the shipments is composed of fish caught in Americanwaters and then processed in China to save costs.

Top seafood imports to the U.S. for 2017, by country

THEWALL STREET JOURNAL.Source: Urner Barry

0 0.2 0.4 0.6billion pounds

0.8 1.0 1.2

China

India

Vietnam

Indonesia

Thailand

Ecuador

Chile

Taiwan

Peru

Philippines

COASTA

LNCALLIGATO

RRESEARCH

(2)

Where the WildThings Are

Stephen Dinkelacker, a biol-ogy professor at FraminghamState University in Massachu-setts, created the Coastal NCAlligator Research project tostudy and track alligators in thestate.

In almost two decades, Mr.Dinkelacker has found alligatorsin some unusual places.

THE OUTER BANKSKitty Hawk, a town in the

Outer Banks located about 3miles off the mainland, madeheadlines when residents re-ported an alligator in May.

The research team hap-pened to be nearby, so they

managed to tag the 9-footspecimen and release it.

It was the first record of analligator on the island side ofthe Outer Banks.

“The idea that saltwater isa barrier or impediment isn’trealistic. Alligators can swim,”Mr. Dinkelacker said.

DARE COUNTYBOMBING RANGE

The range serves as a prac-tice facility for U.S. Navy andAir Force flight crews. Thenoisy airplanes didn’t seem todeter the alligator, Mr. Din-kelacker said, as it showed upnear a pond in the bombingrange just over a week ago.Tags indicated that the alligatorwas also seen in 2013 and2014 in a wildlife refuge andtraveled up to 16 miles to thebombing range, according tothe research group.

STAND-ALONE PONDAny waterway can hold an

alligator. But sometimes, Mr.Dinkelacker said, he finds gatorsin ponds that aren’t connectedto a canal or ditch: “You’re like,how did you walk here?”

A4 | Friday, August 10, 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

ing our assets in space,” hesaid this week. Mr. Shanahansaid when Mr. Mattis first op-posed the idea, it was at atime of budget uncertainty.Today, Mr. Shanahan implied,there is more certainty.

Beyond Congress, the estab-lishment of the first new mili-tary branch since the Air Forcewas created in 1947 faces anumber of obstacles. TheSpace Force would likely re-quire its own headquarters,contractors, recruiters, and ci-vilian support, amounting tothousands of new employees.It would demand its own stan-dards for its troops, housing,basing, and potentially a newranking system.

A yet-to-be-named assistantsecretary of defense for spacewould report to Mr. Mattisabout the development of thebranch, Mr. Pence said.

Within the halls of the Pen-tagon, the announcement was

met with a mix of curiosityand amusement. Some saidthat a new branch would allowthe U.S. military to focus on anoften neglected part of na-tional security. Others mockedthe prospect of space-inspireduniforms and the creation ofranks like senior spaceman, amodification of the Air Force’ssenior airman. Above all,many saw the potential for anew layer of bureaucracy.

Several parts of the militarydeal with the defense of space,led by the Air Force’s AirForce Space Command. It re-mains unclear what wouldhappen to that unit should theSpace Force be launched.

The Pentagon report calledRussia and China “strategiccompetitors” in space. In addi-tion to threats to GPS satel-lites such as jamming of theirsignals, U.S. space expertsworry about potential attackson fleets of commercial com-

EVANVUCCI/ASSOCIATEDPRESS

Vice President Pence, center, met Thursday with Deputy DefenseSecretary Pat Shanahan, left, and Defense Secretary Jim Mattis.

cluded in the Democratic Con-gressional CampaignCommittee’s “Red to Blue”program that lends resourcesand support to candidateswith a serious chance to win.

The public-affairs data andanalytics firm Quorum hasidentified a handful of the 535sitting members of Congresswho have served intelligenceagencies or in top national se-curity jobs. Those include Mr.Hurd and Sen. Dan Sullivan(R., Alaska), who served onthe White House National Se-curity Council staff under for-mer President George W. Bush.

A small number of othershave shared similar profiles:Former GOP Rep. Porter Gosswas in the CIA in the 1960sbefore running for Congress in

1988. He later became CIA di-rector. Former PresidentGeorge H.W. Bush served asCIA director before his time inthe White House.

Former members of the mil-itary at all ranks have longsought political careers. Butpolitics hasn’t been the typicalcareer path for veterans of thespy services or former top na-tional security staff members.

Nicholas Dujmovic, a for-mer CIA analyst who is now aprofessor of Intelligence Stud-ies at Catholic University, saida public post-agency career,especially in politics, was onceconsidered unthinkable formidlevel officers in the intelli-gence or national security ap-paratus. “CIA was reallyclosed-mouthed,” he said.“People would not do thingsthat were public-oriented afterretirement.”

SPOTSYLVANIA, Va.—Abi-gail Spanberger spent yearsundercover as a CIA case offi-cer managing and recruitingspies. Now she is doing one ofthe most public things possi-ble: running for Congress.

A Democrat, Ms. Span-berger is challenging Republi-can Rep. Dave Brat in a GOP-friendly district that stretchesfrom the outskirts of Rich-mond to the exurbs of Wash-ington. Mr. Brat was an upstartcandidate himself not longago, a Tea Party-backed insur-gent who in 2014 defeated for-mer House Majority LeaderEric Cantor in the GOP primary.

“I wasn’t enthralled with,interested in or even comfort-able with the idea of being ina public place with peoplepublicly knowing who I amand knowing a lot about mybackground,” said Ms. Span-berger, who is making her firstrun for public office. “It’s atremendous shift.”

This year, Ms. Spanberger isone of a crop of House candi-dates, most of them Demo-crats, with deep experience innational security who haveemerged as a force on thecampaign trail, touting back-grounds in espionage, counter-terrorism and foreign policy.

Nancy Soderberg, a formertop national security official inthe Clinton administration, isrunning in the Aug. 28 Demo-cratic primary for a DaytonaBeach, Fla.-area House seat.

In Michigan’s Eighth Con-gressional District, former Cen-tral Intelligence Agency analystElissa Slotkin won the Demo-cratic nomination this weekand will face Republican Rep.Mike Bishop in November.

In Texas, former military in-telligence officer Gina OrtizJones is running against GOPRep. Will Hurd. Mr. Hurd,elected to Congress in 2014, isa former CIA operations officer.

“Since I was undercover andI was undercover my entiretime in the agency, I never saidthe three initials out loud. Itwas so strange basically sayingit all the time,” Mr. Hurd re-called recently on a CBS Newspodcast about his first run foroffice and his transition fromspy to congressman.

The national DemocraticParty considers Ms. Span-berger, Ms. Ortiz Jones, Ms.Slotkin, Ms. Soderberg andAndy Kim, who is running fora House seat in New Jersey,top-tier candidates in competi-tive races. All have been in-

BY BYRON TAU

CandidatesTout CareersIn Espionage

Abigail Spanberger,formerly in the CIA,is now running for aseat in Congress.

munications satellites used totransmit video, voice and data.

Even more worrisome, theysay, are potential attacks byhostile powers on the Penta-gon’s missile-warning and se-cure communications systems.

Current U.S. space defensesinclude nuclear-hardenedhardware and reflectors toward off jamming attempts.But part of the motivation be-hind the Space Force, accord-ing to government and indus-try officials, is the emergingthreats of Beijing and Moscowdeveloping superfast andhighly maneuverable missilesand warheads able to evadethose safeguards.

Whether the idea of SpaceCommand takes off or not, in-dustry officials see billions ofdollars in new weapons devel-opment and production con-tracts flowing from shorter-term acquisition changes thatare designed to address someof the same issues.

Shortly after the announce-ment, Mr. Trump tweeted:“Space Force all the way!”

The Trump campaign im-mediately touted the prospectof the new force. In an email,Trump campaign managerBrad Parscale asked support-ers to pick one of six potentiallogos for Space Force.

Some House GOP leadershad advocated such a force foryears. In March, Mr. Trumpsuggested that Space Force be-gan as an off-the-cuff idea, butit has proved to be a hit at hisrallies.

—Gordon Luboldand Andy Pasztor

contributed to this article.

will take at least a year if notmore, military officials said, asthe Pentagon seeks congres-sional approval.

Among the proposed com-ponents of the Space Forcewould be an elite Space Opera-tions unit of operators akin tothe Army’s Green Berets andthe Navy SEALs, Mr. Pencesaid. Space Operations forceswould begin deploying to Eu-rope and the Asia Pacific by2019, the report said.

In addition, a Space Com-mand would developing“Space warfighting operationsto protect U.S. national inter-ests,” according to the Penta-gon report.

Defense Secretary Jim Mat-tis, in an October 2017 letterto the leaders of the Houseand Senate Armed ServicesCommittee, said he opposed anew military service dedicatedto space. He wrote that hedidn’t want the “additional or-ganizational layers at a timewhen we are focused on re-ducing overhead and integrat-ing joint warfighting func-tions.” Other top Air Forceleaders have also said theydidn’t support it.

Mr. Mattis has since refinedhis position. “We are in com-plete alignment with the presi-dent’s concern about protect-

ContinuedfromPageOne

Pence SetsPlans forSpace Force

Mr. Manafort has pleadednot guilty to all the charges ofbank and tax fraud. His law-yers have attacked the credi-bility of Mr. Manafort’s ex-business partner RichardGates, a central witnessagainst him, and blamed himfor the wrongdoing, saying itwas part of his effort to em-bezzle money from Mr.Manafort.

Defense attorneys will have achance to make that case morefully when the defense beginsits case as early as Friday.

Prosecutors say Mr.Manafort’s consulting businesshad lost its main clients by2014, prompting him in 2015and 2016 to turn to severalU.S. banks for loans based onhomes he owned in Manhattanand Brooklyn.

One of those institutions,Citizens Bank, approved Mr.Manafort in March 2016 for a$3.4 million loan against anapartment in the Manhattanneighborhood of SoHo.

Melinda James, a mort-gage-loan assistant at thebank, testified Thursday thatMr. Manafort had repeatedlysigned loan-application docu-ments saying the SoHo apart-ment was a secondary resi-dence for Mr. Manafort ratherthan a rental unit, and thatanother Brooklyn townhomethat Mr. Manafort owneddidn’t have a mortgage.

Prosecutors have presentedevidence, including through awitness from home-sharingservice Airbnb Inc. on Thurs-day morning, that the apart-ment was available through

Airbnb and was occupied bypaying guests in 2015 and2016.

They have also showed thatMr. Manafort was applying atthe same time for a mortgageon the Brooklyn townhomeand had obtained that mort-gage before closing on theSoHo apartment loan.

On cross-examination, Mr.Manafort’s attorney high-lighted an email in which Mr.Manafort told Ms. James thatthe other loan on the Brooklynproperty had been “approved.”He said it was Mr. Gates wholater sent Ms. James docu-ments inaccurately indicatingthe property had no mortgage.

In testimony earlier thisweek, Mr. Gates said he haddone so at Mr. Manafort’s di-rection.

The government’s caseagainst Paul Manafort, the for-mer Trump campaign chair-man, neared its end Thursdaywith testimony from employ-ees of several banks whohelped process loan applica-tions in which Mr. Manafortallegedly supplied false infor-mation.

Over the past two weeks,special counsel Robert Muel-ler’s prosecutors have pre-sented evidence that they sayshows Mr. Manafort madesome $60 million from con-sulting work in Ukraine, andused millions of dollars of thatincome to pay for luxury cloth-ing and real estate without re-porting it on tax returns.

BY ARUNA VISWANATHAAND DEL QUENTIN WILBER

Manafort Jury Hears of Bank Loans

Federal prosecutors in NewYork have sought documentsfrom Franklin L. Haney, a topdonor to President Trump,about his business dealings withMichael Cohen, according topeople familiar with the matter.

Mr. Haney in early Aprilhired Mr. Cohen, who at thetime served as personal lawyerto the president, to help obtainfunding for a nuclear-powerproject from the Department ofEnergy, including a $5 billionloan from the U.S. government,the Journal reported last week,citing people familiar with thematter.

Mr. Cohen would have beenpaid $10 million if he success-fully helped obtain the funding,the people said. The contract isno longer in effect.

The Energy Department de-clined to comment.

Prosecutors are examiningwhether Mr. Cohen engaged inunregistered lobbying in con-nection with his consultingwork after Mr. Trump went tothe White House, according topeople familiar with the probe.Mr. Cohen has never registeredas a federal lobbyist, public re-cords show.

Several of Mr. Cohen’s cor-porate clients, including No-vartis AG and AT&T Inc., havebeen contacted by federalprosecutors in New York, theJournal also reported.

On Thursday, a Democraticsenator sent a letter to EnergySecretary Rick Perry request-ing more information aboutthe agency’s loan-approval pro-cess, saying the Journal’s re-port “raises disturbing ques-tions about the integrity of theDepartment of Energy’s loanapproval process for fundingnuclear power plant construc-tion.”

Sen. Ed Markey (D., Mass.),a member of the Senate Com-mittee on Environment andPublic Works, in the letter toMr. Perry asked for documentsrelating to the loan applicationfrom Mr. Haney and any evalu-ations of that application byagency staffers, as well as anycommunications between Mr.Cohen and agency officials re-

garding the project.Shortly after Mr. Haney

hired Mr. Cohen in April, fed-eral prosecutors raided Mr. Co-hen’s home, hotel room and of-fice as part of a broaderinvestigation by the ManhattanU.S. attorney’s office, accord-ing to people familiar with thematter. Mr. Cohen has deniedwrongdoing and hasn’t beencharged with any crimes.

Mr. Haney and his company,Nuclear Development LLC,have been seeking to completea pair of unfinished nuclear re-actors in Alabama known asthe Bellefonte Nuclear PowerPlant. A lawyer for Mr. Haneyhas denied that his client orthe company entered into acontract with Mr. Cohen forlobbying services.

U.S. Probes Trump Donor’s Cohen TiesSTEVEHELBER/ASSOCIATEDPRESS

By Rebecca Ballhaus,Michael Rothfeldand Joe Palazzolo

ANDREW

HARRER/BLOOMBERGNEWS

Paul Manafort in Alexandria, Va., in May. In his trial, prosecutors are close to finishing and the defense will begin as early as Friday.

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THEWALL STREET JOURNAL. * * * * Friday, August 10, 2018 | A5

Saudi Arabia’s diplomaticrow with Canada has upendedthe lives of thousands of Saudistudents at Canadian universi-ties, forcing them to leave thecountry less than a month be-fore the fall semester starts.

When the kingdom expelledCanada’s ambassador thisweek, it also ordered theroughly 7,000 Saudi studentsand their accompanying familymembers to leave Canada, oneof a series of punitive mea-sures Riyadh unveiled in retal-iation for Ottawa’s criticism ofits human-rights record.

Many of them are in shock,some having lived here foryears, amassing student debtand building up credits thatmight not be recognized else-where. They now fear theirstudies or careers will inevita-bly be affected—an anxietythat speaks to the human

By KimMackrael andPaul Vieira in Ottawaand Donna Abdulaziz

in Beirut

WORLDWATCH

INDONESIA

Powerful AftershockJolts Stricken Lombok

A powerful aftershock sentthousands of residents of the In-donesian island of Lombok run-ning into the streets, and top-pled buildings already weakenedby Sunday’s even stronger quake.

The 6.2-magnitude quake onThursday hit the northwestcoast, where Sunday’s 7.0-mag-nitude temblor had damagedtens of thousands of homes anddisplaced as many as 270,000people. Since Sunday, more than350 aftershocks have kept survi-vors in a state of anxiety.

Sutopo Purwo Nugroho,spokesman for the national di-saster-mitigation agency, put theofficial death toll Thursday at259, but other authorities gavefigures as high as 381.

Ida Bagus Buwana, a policeofficer, said he fled his office onthe second floor of a station inthe provincial capital of Mat-aram when the aftershock hit.

“The glass panels at the frontof the building shattered com-pletely,” he said. “People wererunning everywhere, screaming.”

He was told by an officer far-ther north in the hard-hit townof Tanjung that a bridge therehad collapsed in the quake, headded.

The area is home to popularbeaches and resorts and next tothe low-lying Gili islets, which of-ficials evacuated earlier this week,moving almost 9,000 people,many of them foreign tourists.

—Ben Ottoand I Made Sentana

IRAQ

Recount of VotesYields Little Change

Iraq’s top election body said amanual recount of votes fromthe May parliamentary electionshowed almost no differencewith the initial tally, clearing theway for political parties to forma government.

Six of 329 legislators losttheir seats in the recount, theelectoral commission said.

The ballots were recountedafter allegations of fraud in anelection in which populist anti-U.S. cleric Moqtada al-Sadr waselected in a surprise victory.Those allegations paralyzedIraq’s politics and increased pop-ular anger, and the recount re-sult is unlikely to restore confi-dence in the democratic process.

At least 55% of Iraqis hadboycotted the May vote, reflect-ing disillusionment with a politi-cal class that has reaped billionsof dollars from oil revenues butfailed to deliver even basic ser-vices to large parts of the popu-lation since the U.S. toppledSaddam Hussein in 2003.

The results must now be rati-fied by the court, after which asession of parliament should beheld within 15 days. It could beseveral months before a govern-ment is formed.

—Isabel Colesand Ghassan Adnan

WORLD NEWS

mostly held, allowing for talkson a longer-term truce medi-ated by the United Nations andEgypt to continue in Cairo.

A series of clashes that be-gan Tuesday has dimmed theprospects of those talks.

“If the current escalation isnot contained immediately, thesituation can rapidly deterio-rate with devastating conse-quences for all people,” Nicko-lay Mladenov, the U.N.’s specialcoordinator for the Middle Eastpeace process, said in a state-ment Thursday.

Mr. Mladenov said the U.N.would continue to press effortswith Egypt to reach a long-term calm, improve the human-itarian situation and reconcilewarring Palestinian factions.

Both Israel and Hamas haveindicated they want peace butsay they are also ready to go towar with each other.

Israel’s security cabinet metThursday evening to discussthe flare-up and directed Is-rael’s military “to continue tak-ing strong action against theterrorist elements.”

Yoav Galant, a senior Israelicabinet member and ministerof construction and housing,said Israel is prepared to go towar with Hamas if the rocketfire doesn’t stop, but is stillwilling to continue to negotiatean Egyptian-backed cease-fire.

“We are ready to cooperate

with the Egyptians with any is-sue that is on the table, includ-ing what is necessary toachieve a cease-fire, but onlyafter the firing will be stopped.We are ready for peace,” saidMr. Galant.

Hamas officials have said thegroup is also open to discussinginternational and Egyptian pro-posals for reconciliation andimproving humanitarian condi-tions. But a Hamas spokesmansaid the group is prepared for

war if necessary.The Israeli military and mili-

tants in Gaza have repeatedlyexchanged fire in recentmonths, raising concerns of an-other war. These clashes comeas Gazans since March haveheld weekly demonstrations atthe border fence with Israelcalling for the right to return totheir ancestors’ villages andtowns in what is now Israel.

Those protests have oftenturned deadly. Some Palestin-

ians have clashed with Israel’smilitary, with some throwingMolotov cocktails and flyingflaming kites to cause fires asthey came down in Israeli terri-tory. More than 140 people havebeen killed at the fence by Is-raeli live fire, which Israel main-tains is necessary to protect itsborder. Palestinian officials saythe protesters were unarmed.

The humanitarian situationin Gaza has also deteriorated,with residents getting only sev-

eral hours of electricity a dayand facing severe water short-ages.

Israel’s military on Thursdaysaid militants from Gaza firedrockets and mortars into Israelthrough the night and into theday, triggering sirens in townsnear the Gaza border. Most ofthe rockets landed in open ar-eas but Israel’s Iron Dome sys-tem intercepted 30 launches,the military added.

In response, Israel said ittargeted more than 150 Hamasmilitary sites, including aweapons-manufacturing andstorage facility, a complex usedfor Hamas’s navy, a militarycompound used for rocket-launching experiments, and fivetraining camps.

Lt. Col. Jonathan Conricus,an Israeli military spokesman,said the flare-up affects Israel’sability to reach a truce withHamas.

“When we have rockets firedat our civilians and when wehave civilian casualties and thedisruption of civilian life inSderot, in Ashkelon and the ar-eas that surround the GazaStrip…it will make it very diffi-cult for Hamas to make anygains, any positive gains whilethey fire at Israeli civilians,” hesaid.

—Abu Bakr Bashirand Dov Lieber

contributed to this article.

An intense exchange of firebetween the Israeli military andPalestinian militants in Gazathreatens to disrupt efforts tostrike a long-term peace dealbetween the two and renewsconcerns of a wider conflict.

Israel extended a wave ofovernight airstrikes against tar-gets in Gaza into the earlyhours of Thursday in responseto militants there firing at least180 rockets and mortars sincethe previous evening.

Gaza’s Health Ministry saidthat three people were killed inthe Israeli strikes, including apregnant 23-year-old womanand her 18-month-old child, aswell as a 30-year-old memberof Hamas’s military wing. Atleast seven Israelis were in-jured by the Palestinian rocketfire, including three in the bor-der town of Sderot, accordingto Israel’s military.

The flare-up comes after Is-rael and Gaza ruler Hamasreached a fragile calm late lastmonth, halting the most in-tense bout of fighting sincetheir 2014 war. The pause had

BY FELICIA SCHWARTZ

Israel-Hamas Clashes Dim Truce ChancesRocket fire from Gaza,airstrikes from Israelcomplicate Egyptian-led negotiations

A fireball exploded during Israeli airstrikes on Hamas targets in Gaza City late Wednesday.

MAHMUDHAMS/AGENCEFRANCE-PRESSE/GETTYIMAGES

costs of the kingdom’s rapidlyescalating feud with Canada.

“We don’t have a homeback home,” lamented a Saudistudent in the Vancouver areawho has been living in Canadafor more than five years. “Ihave a two-bedroom apart-ment here, fully furnished,” hesaid. “I was planning to stayfor a long time.”

The Saudi student said he isjust one credit away fromgraduating from a four-yearprogram and hopes he can re-main in Canada long enoughto complete it before eventu-ally returning home.

That may not be possible:The Saudi government said allstudents must leave Canadawithin a month.

The diplomatic crisisstarted Aug. 6, when SaudiArabia’s government down-graded ties after Canada’s for-eign ministry in a tweet calledon the kingdom to immedi-ately release human-rights ac-tivists detained in recentmonths. The Saudi govern-ment dismissed the criticism

as unacceptable interferencein its internal affairs.

The Saudi governmentfunds a generous scholarshipprogram that covers fees andliving expenses for youngSaudi men and women tostudy abroad, mostly in West-ern universities. The govern-ment often also covers the liv-ing costs for accompanyingfamily members or depen-

dents.The Saudi Ministry of Edu-

cation this week announced itwould stop funding scholar-ships and training programs inCanada. Saudi’s ambassador toCanada on Thursday clarifiedthat students without scholar-ships were free to stay.

The ministry said it wouldhelp students transfer else-where, either to Saudi Arabia

or abroad. “I want to assureour students in Canada thatyour government is attentiveto your academic future,”Saudi Arabia’s minister of edu-cation, Ahmed al-Eissa, saidearlier this week.

Many Saudis worry theywill have to redo all of thetraining and exams in anothercountry to obtain a residencyor fellowship. One Saudi med-ical student at a Canadianuniversity, who wasn’t cov-ered by the scholarship pro-gram, said he and most of hispeers remain in a state of dis-belief.

“[There is] nothing but adark future and a debt I stillhaven’t paid,” the studentsaid. “It is a terrible feeling.”

Canada has been a populardestination for Saudi medicalstudents, with many of thekingdom’s top doctors havinggraduated from Canadian uni-versities. At Montreal’s McGillUniversity, over 10% of itsroughly 1,200 post-MD stu-dents are from Saudi Arabia, aschool spokeswoman said.

Saudi Order Uproots Students’ Lives in Canada

StudentsStudents’ families

Study AbroadTop destinations for Saudi students on government scholarships, 2017

THEWALL STREET JOURNAL.Source: Saudi Arabia's Education Ministry

0 100,00020,000 40,000 60,000 80,000

U.S.

U.K.

Canada

Australia

Ireland

Germany

Airstrikes on a market innorthern Yemen on Thursdaykilled dozens of people, includ-ing at least 29 children in aschool bus, drawing interna-tional condemnation and put-ting a spotlight on a U.S.-backed Saudi military coalitionaccused of carrying out the at-tack.

The International Commit-tee of the Red Cross said med-ics in the Yemeni city of Saada,where the attack took place,had received the bodies of thechildren, all of them under 15years of age. It also received 48wounded, including 30 chil-dren.

The health ministry con-trolled by Yemen’s Houthi reb-els put the death toll higherThursday evening, at 50 killedand 77 wounded. The Iran-al-lied rebels blamed the Saudicoalition for the attack.

A spokesman for the coali-tion said the group had carriedout airstrikes in Saada prov-ince on Thursday in a “legiti-mate military action,” targetingmilitants responsible for a mis-sile attack the day before onsouthern Saudi Arabia, accord-ing to the official Saudi PressAgency.

The spokesman didn’t drawan explicit link between the co-alition strikes and the schoolbus death toll, but he accusedthe Houthis of recruiting childsoldiers, putting them on bat-tlefields and using them tocover up terrorist acts.

The Saudi-led military coali-tion is fighting to remove theHouthis from power in the cap-ital, San’a, and often carriesout airstrikes against the rebel

group. The strikes’ civilian toll,however, has brought growingrebukes from aid groups andpoliticians abroad.

The United Nations esti-mates that Saudi coalitionstrikes have killed more than4,000 civilians since the warbegan more than three yearsago. In the U.S., the toll has ledto congressional opposition toAmerican support for the coali-tion, which includes aerial refu-eling and targeting assistance.

“The U.S. must stop sup-porting these barbaric attacks,”Rep. Ro Khanna (D., Calif.) saidThursday. “Now more than

ever we must end our complic-ity in this slaughter.”

State Department spokes-woman Heather Nauert saidthe U.S. was concerned aboutthe reports and called on theSaudi-led coalition to carry outa thorough and fair investiga-tion, but called Saudi Arabia“an important strategic part-ner.”

The Houthis’ political officecondemned the killing of chil-dren, while their defense min-istry vowed an unspecified re-sponse.

“The massacres against chil-dren in Yemen by the collation

forces proved that children’srights are a big lie,” said Mo-hammed Abdulsalam, a Houthispokesman.

The Houthis launched a“Badr 1” missile at an indus-trial complex near Jizan, SaudiArabia, on Wednesday evening,according to the rebels’ officialnews agency. Saudi forces in-tercepted it, but shrapnel fromthe interception killed one per-son and injured 11 more, thecoalition spokesman saidWednesday.

Jan Egeland, the head of theNorwegian Refugee Council,which provided aid to about

762,000 people in Yemen lastyear, decried Thursday’s attackas “grotesque, shameful” in atweet.

“Blatant disregard for rulesof war when [a] bus carryinginnocent school children is fairgame for attack,” he wrote.

The attack comes as diplo-matic efforts to resolve Ye-men’s protracted war heat up.Martin Griffiths, the U.N. envoyto Yemen, said a week ago hewould invite the sides to talksin Geneva on Sept. 6, the firstround of talks in two years.

—Dion Nissenbaumcontributed to this article.

BY ASA FITCHAND MOHAMMED AL-KIBSI

Airstrikes in Northern Yemen Kill Dozens

Wednesday’s airstrikes on a market in Saada, Yemen, wounded at least 30 children including the boy above, and left dozens dead.

NAIFRAHMA/REUTERS

A6 | Friday, August 10, 2018 * * * * * THEWALL STREET JOURNAL.

WORLD NEWS

mentators lamented Mr.Trump’s inability to pushthrough a hostile Congress areset in relations with Russiafollowing a summit with Mr.Putin in Helsinki in July.

The head of the foreign-re-lations committee of Russia’sSenate, Konstantin Kosachev,compared the new sanctions toa “lynching.”

“The U.S. is once again be-having like a police state, beat-ing out evidence from suspectsby threats and torture,” he toldInterfax.

The Kremlin, meanwhile, re-peated its previous denial ofany involvement in the attackon Sergei Skripal and hisdaughter Yulia in southernEngland this year, while play-ing down the importance ofthe sanctions.

As a volatile day unfolded inMoscow, response from Wash-ington was muted. Mr. Trumpmade no public comments onthe matter, and communica-tions aides referred all ques-tions to the State Department,which said the U.S. still soughtimproved ties with Moscow.

Department spokeswoman

Heather Nauert said the ad-ministration had “compliedwith the law” and would con-tinue to do so, but added:“We’d like to have a better re-lationship with the Russiangovernment, recognizing thatwe have a lot of areas of mu-tual concern.”

The measures announcedWednesday constitute the firsttranche of sanctions dictatedby U.S. law. A second trancheof sanctions would take effectwithin three months unless thepresident certifies to Congressthat Russia has met three con-ditions: ceasing the use ofchemical and biological weap-ons; credibly assuring the U.S.that it won’t use such weaponsin the future; and submittingto inspections by internationalobservers to ensure compli-ance.

Should Russia fail to meetthese criteria, the presidenthas discretion over the sever-ity of the next measures, re-quiring Mr. Trump to imposeat least three of six types ofadditional sanctions. These in-clude opposing any loans orother assistance to Russia by

international-developmentbanks; barring U.S. banks fromissuing loans or extendingcredit to the Russian govern-ment; prohibiting exports ofgoods and technology to Rus-sia; restricting imports of Rus-sian goods; downgrading orsuspending diplomatic rela-tions with Russia; and sus-pending the authorization ofRussian-owned or controlledair carriers to fly into and outof the U.S.

A spate of Western sanc-tions against Russia since Mr.Putin’s decision to annex Cri-mea in 2014 have wiped outhalf of the ruble’s value, re-duced investment in the en-ergy sector and crippled alu-minum giant United Co. RusalPLC.

The State Department de-clined on Thursday to providefurther details on how the ad-ministration planned to tailorthe potential second round ofsanctions.

The sanctions drew praisefrom House Foreign AffairsCommittee Chairman Ed Royce(R., Calif.), who has urged theadministration to respond tothe poisoning.

“The administration isrightly acting to uphold inter-national bans on the use ofchemical weapons,” Mr. Roycesaid on Wednesday. “The man-datory sanctions that followthis determination are key toincreasing pressure on Russia.”

But some still questionedthe administration’s overallpolicy toward Russia aftermonths of sometimes conflict-ing statements and actions.

Heather Conley, a formerdeputy assistant secretary ofstate in the Bureau for Euro-pean and Eurasian Affairs inRepublican George W. Bush’sadministration, characterizedthe latest move as emblematicof a “broader incoherence” inthe U.S. approach to Russia.

Ms. Conley, who serves assenior vice president for Eu-rope, Eurasia, and the Arctic atthe Center for Strategic andInternational Studies, notedthe two countries “don’t havethat much bilateral trade, andwhat we do have is protectedtrade.” In light of those limita-tions, she said, the objective ofthe sanctions is uncertain.

“The interagency process isalways tortured, on a goodday,” she said. “But it’s start-ing to break down to a pointwhere I’m actually very con-cerned we don’t have a coher-ent process anymore. And ifwe’re confusing ourselves, thesignals that we’re sending tothe Kremlin are very confused,may be misinterpreted, andcan also lead to an escalationthat we didn’t anticipate, ei-ther.”

maintains significant discre-tionary power over the degreeof that punishment.

A spokesman for PresidentVladimir Putin of Russia strucka cautious tone and said Mos-cow remained committed tobuilding “constructive rela-tions with the U.S.” andwouldn’t draft countermea-sures before learning the fulldetails.

Others in the country ex-pressed alarm and dismay overthe U.S. move, which threat-ened to diminish hopes of im-proved bilateral ties.

Lawmakers from Russia’sruling party accused U.S. poli-ticians of treating the countrylike a punching bag in theirpartisan infighting and in mid-term campaigning. On statetelevision, analysts and com-

ContinuedfromPageOne

SanctionsHit RubleAnd Stocks

SpookedThe ruble fell this week after theU.S. announced sanctions againstRussia. Rubles per dollar:

THEWALL STREET JOURNAL.Source: Tullett Prebon Information

62

68

66

64

AugustJuly

SCALE INVERTED

KANDAHAR AIR FIELD,Afghanistan—Salsa Night onthe Kandahar Air FieldBoardwalk is dead. TheTGI Friday’s on southern Af-ghanistan’s biggest militarybase is long gone, too. Theyhave been replaced by alonely coffee shop that sellsdoughnuts and samosas anda Kebab House selling pizzaand Philly cheesesteaks.

But American soldiers arestill here, running laps pastthe small Sept. 11 memorial,playing soccer in the 90-de-gree summer-evening heat,and checking out the hip-hopdance night at the USO IceHouse.

The Boardwalk has alwaysserved as a metaphor for thestate of the 17-year war inAfghanistan, and in impor-tant ways still does.

At the height of PresidentObama’s military surge in2011, it was a surreal oasisfor 30,000 people working tobeat back Taliban advances.

Now, it is pretty quiet.About 3,500 American forceswork on the sprawling des-ert base, where they flyReaper drones and Warthogwarplanes, train Afghan heli-copter pilots, and keep try-ing to execute an exit strat-egy that sticks.

In Kandahar and aroundthe country, the U.S. is stillbattling corruption, still try-ing to build a reliable Afghanmilitary, still trying to pre-vent ethnic divisions fromtriggering another civil war,still worrying about Afghansoldiers turning their gunson their American partners,still badgering Pakistan to

crack down on Taliban ha-vens across the border, stilltrying to turn poppy farmersinto pomegranate growers.

The U.S. has been tryingto promote pomegranates asa path to peace for morethan a decade. In 2008, theEconomist labeled the fruit“Afghanistan’s great purplehope.” In 2010, the U.S.pumped millions of dollarsinto programs meant to en-courage farmers growingopium poppies to growthings like pomegranates. In

2012, a Taliban suicidebomber destroyed one ofKandahar’s fledgling pome-granate-juice factories.

In July, Jamie Knapp, a re-tired Marine Corps colonel

who has spent the past sixyears working as a speciallytrained “Afghan Hand”—mili-tary men and women spe-cially trained on the lan-guage, culture and politics ofthe region—hailed a newbrand of Kandahar-producedpomegranate juice as a signthat things have changed.

“I can tell you what thesolution is—it’s not a mys-tery,” Mr. Knapp said afterhanding out small bottles ofjuice to visitors. “It’s a four-letter-word: J-O-B-S. Offer

these people a form of in-come and they will rejectwhatever message the Tali-ban can offer.”

Mr. Knapp knows Afghani-stan better than most. Since2012, he has helped teachAfghan soldiers English,worked in the presidentialpalace as an adviser to Presi-dent Ashraf Ghani, and nowadvises Afghan officials inKandahar.

“I think many people maybe growing tired, thinking,‘When will this thing in Af-

ghanistan end?’ ” hesaid. “We are so close withwhat we are doing. If we canwalk with them into the fu-ture, then I think we willhave a friend in every Af-ghan that we ever thoughtwe could, and we will havesomething to look back tothe American people andsay: ‘I know it was hard, anda lot of blood and treasurewas invested, but we didit.’ ”

The most important per-son who needs convincing isthe one in the Oval Office.President Trump reluctantlyembraced his national secu-rity team’s advice on Af-ghanistan. He sent about6,000 more U.S. forces to Af-ghanistan with an open-ended pledge to train Afghansecurity forces until they canprotect their country andforce the Taliban into peacetalks.

But Mr. Trump has littleappetite for spending bil-lions of dollars in Afghani-stan, and America’s militaryleaders know they couldwake up one day to a presi-dential tweet that upendstheir plans.

While American airmentake another shot at tryingto create an air force for Af-ghanistan, U.S. pilots basedin Kandahar are doing thejob.

“We joke that we’re tryingto put the wings on in theair as we’re flying down therunway, and there’s probablysome truth to that,” said Lt.Col. Marcus Jackson, an AirForce officer working tobuild and train Afghan pilotsto fly a small fleet of BlackHawk helicopters.

BY DION NISSENBAUM

The Kandahar Air Field Boardwalk has served as a metaphor for the state of the 17-year war in Afghanistan, and the U.S.’s role in it.

DIONNISSENBA

UM/THEWALL

STRE

ETJOURN

AL

About 3,500Americans work atKandahar Air Field,down from 30,000.

As China made good on itsthreat to impose 25% tariffs on$16 billion worth of U.S. im-ports, one big-ticket item orig-inally on its hit list was con-spicuously missing: crude oil.

Oil had been one of a num-ber of targets China listed inJune for tariffs to counterthose the Trump administra-tion threatened on Chinese im-ports. The gambit jeopardizeda budding relationship: Overthe past two years China hasbecome the biggest buyer ofU.S. crude-oil exports, last yeartaking a fifth of the total.

China’s Ministry of Com-merce didn’t explain the omis-sion. Its statement accompany-ing the list called the U.S.measures “unreasonable” andsaid China had to counterthem “to safeguard its legiti-mate rights and interests andthe multilateral trading sys-tem.” The dollar-for-dollar re-taliation against the U.S. tariffsis set to take effect Aug. 23.

Analysts and industry insid-ers said the change could sig-nal that China is reassessingits bluster, given its slowingeconomy, the ease with whichcrude sellers can find new buy-ers—and, most of all, its climb-ing reliance on foreign oil.China depends on imports for

70% of its energy needs, andthe International EnergyAgency forecasts that willclimb to 80% by 2040.

“China would be shootingitself in the foot if they tax[crude oil] imports,” saidShane Oliver, an analyst atAMP Capital Markets.

Though the volume Chinabuys from the U.S. has risensome 200-fold in the past twoyears, American crude still ac-counts for only 3% of Chineseimports. China’s biggest sup-pliers are Russia and SaudiArabia.

Playing against China’s in-terests: The light sweet crudethat has become a mainstayU.S. product has sold at a dis-count to medium sourgrades—which China’s tradi-tional suppliers tend to pro-duce—for most of the past twoyears.

In recent years refiners inAsia, including China, have be-gun to retool their plants tohandle the strain of petroleumthe U.S. produces; if Chinadrives U.S. crude from its mar-kets, other Asian buyers couldeasily step in.

“The U.S.’s light crudesaren’t going to go away,” saidErik Norland, senior economistat CME Group. “If it’s not ex-ported to China, it will be ex-ported someplace else.”

BY CHUIN-WEI YAP

China Takes U.S.Oil Off Tariff List

Surge—and Salsa—AreMereMemories at Afghan BaseSparser American presence reflects the ebbs and flows of 17-year war; promoting pomegranates for peace

TOKYO—Japan returned tosolid growth in the April-Junequarter, and economists saidgrowth was likely to continueon the back of higher wages andconsumer spending unless tradeconflicts with the U.S. worsen.

The world’s third-largesteconomy expanded at an an-nualized pace of 1.9% in thesecond quarter after a 0.9%contraction in the first quar-ter, which ended the longeststretch of growth in 28 years.

The new figures confirmthat the contraction “wasnothing more than a tempo-rary soft patch rather than thesign of a turning point in thebusiness cycle,” said Barclaysanalyst Tetsufumi Yamakawa.

Prime Minister Shinzo Abehas cited the rise in gross do-mestic product since he tookoffice in December 2012 asone of his top accomplish-ments. He is expected to winre-election next month asleader of the ruling LiberalDemocratic Party, allowinghim to remain prime minister.

Analysts said domestic de-mand was likely to keep theeconomy on track if there isn’tbad news from overseas.

Private consumption, whichaccounts for nearly 60% ofGDP, increased 0.7% in the sec-ond quarter as temporarypressures that weighed on

spending earlier this year, in-cluding higher fresh-foodprices and heavy snow, faded.

“A firm uptrend in wages—as summer bonuses increasesignificantly on the back ofsolid corporate earnings—isexpected to support consumerspending,” said Société Gé-nérale economist Takuji Aida.

Nominal compensation ofemployees hit a record in thesecond quarter, rising 4.3%from a year earlier, and capitalspending rose 1.3%.

However, Friday’s data

showed increasing labor costshaven’t created any price pres-sures so far. The GDP deflator, ameasure of inflation, slowed to0.1% from 0.5% in the previousthree months. That suggeststhe Bank of Japan remains farfrom its 2% inflation target.

Mizuho Securities econo-mist Toru Suehiro said con-sumers seem hesitant to spenda lot despite higher wages ow-ing to fears about the future.

Exports rose 0.2% in theApril-June period. That isslower than the growth of

around 2% in the last half of2017, and economists saidsluggish exports might keep alid on growth.

A greater threat comes fromthe Trump administration,which is studying tariffs of upto 25% on autos and auto parts.Yoshimasa Maruyama, an econ-omist at SMBC Nikko Securi-ties, said a recent trade trucereached by President Trumpwith the European Union sug-gests the U.S. may refrain fromtariffs, but “it remains the big-gest risk factor” for Japan.

BY MEGUMI FUJIKAWA

Japan’s Growth Looks Solid

Girls in summer kimonos in a shopping district in Tokyo last month.

KIM

KYUNGHOON/REU

TERS

Back on TrackJapan's economy returned togrowth after a mild contraction.

Quarterly change in GDP*

THEWALL STREET JOURNAL.Source: Japan's Cabinet Office*Annualized and seasonally adjusted

6

–8

–6

–4

–2

0

2

4

%

’15 ’182013

THEWALL STREET JOURNAL. Friday, August 10, 2018 | A7

IN DEPTH

about 63% of mentions of gunsor the NRA have come fromDemocrats, according to ad-tracking firm Kantar Media/CMAG. In 2014, during the lastmidterm campaign, Democraticcandidates accounted for 38% ofsuch references. Many Demo-cratic House candidates whoused to brag about their NRAbona fides no longer do, even asRepublicans continue to opposenew regulations. The NRAhasn’t backed a Democratic Sen-ate candidate since 2012.

The gun-control lobby todayhas enough money to counterthe NRA’s war chest, thanks inbig part to former New YorkMayor Michael Bloomberg. Theresult is an American politicallandscape even more polarizedthan before. Candidates are withthe NRA or with gun-control ad-vocates, and the major parties’bases don’t allow for much mid-dle ground.

Moms Demand Action,launched following the 2012 kill-ing of 20 first-grade studentsand six officials at Sandy HookElementary School in Newtown,Conn., is now largely funded byMr. Bloomberg. The gun-con-trol-advocacy group hasawarded its Gun Sense Candi-date distinction to 571 Demo-crats who have run for Congressthis year, and to 19 Republicans.

Six House Democrats votedlast year to allow reciprocity forstate concealed-carry licenses,an NRA-backed proposal thatwould allow someone with sucha license from one state to carrya weapon nationwide. In 2011,43 House Democrats backedsimilar legislation. The Senatehasn’t acted on either.

NRA spokeswoman JenniferBaker says the group’s support-ers are energized by what shecalled “attacks on law-abidingcitizens’ constitutional rights,”whereas when it comes to gun-control voters, “no one knows ifthose people are going to vote—they’re not proven voters.”

“It’s not that we’re not sup-porting Democrats,” she adds.“Democrats aren’t supporting

the Second Amendment.”In June, the NRA took its

candidate-grade archive off theinternet after past “A” scoresshowed up in political attacksagainst those holding the rat-ings. Everytown for Gun Safety,the Bloomberg-backed umbrellaorganization that includesMoms Demand Action, re-sponded by posting its own ar-chive of NRA grades. The NRA’sMs. Baker says its grades changeeach election cycle and aren’trelevant following the cycle.

‘F’ lapel pinsSome Democratic candidates

and Congress members nowwear “F” lapel pins to advertisetheir NRA grades.

The Wall Street Journal/NBCNews June poll found Demo-cratic voters rated gun controlthe second-most-important po-litical issue after health care.Among Republicans, guns ratedfifth, trailing the economy,taxes, immigration and supportfor Mr. Trump. The lower GOP

ranking may be driven by confi-dence in Mr. Trump, on whomthe NRA spent $30 million tohelp elect and who is the gun-rights movement’s closest WhiteHouse ally ever.

“2018 could be the first yearin which intensity on our side ofthe issue exceeds intensity onthe other side,” says DemocraticSen. Chris Murphy of Connecti-cut, the leading gun-control ad-vocate in Congress.

Democratic candidates arefollowing a path forged byPennsylvania Rep. Conor Lamb,who won a March special elec-tion—in a district Mr. Trumpcarried by 20 percentagepoints—after highlighting in aTV ad his support for back-ground checks for gun buyers.

In July, Democrats in the At-lanta suburbs nominated forCongress Lucy McBath, a gun-control activist who works forthe Everytown group. Every-town spent $1.2 million in theprimary backing Ms. McBath, aformer Delta Air Lines flight at-tendant who became an activist

Rep. Mike Thompson (D., Calif.), above after the Parkland shootings, got NRA funding in the 2000s, thensaw his NRA grade drop to ‘F’ in 2016. Below, with a shotgun during the 2005 Congressional Shootout.

fords was shot. Still, she didn’tadvertise her new position dur-ing 2012 campaigning, when herwebsite noted her “A” NRA rat-ing. “Somebody must have leftthat up there by accident,” shesays. In 2014, the NRA gave hera “B.”

Ms. Kirkpatrick says her newstance is informed by the inten-sity of Democratic voters push-ing the issue. “I heard a lotmore from them than I did fromanybody supporting the NRA.”

Mr. Ryan of Ohio establisheda pro-gun-rights record in thestate senate and his first sixterms in Congress. The NRA,with which the Democrat votedat least 80% of the time, do-nated to his campaigns everytwo years and gave him an “A”in 2010 and “A-” in 2012.

By 2016, Mr. Ryan and Ms.Kirkpatrick were appearing at aHouse-floor sit-in for gun-con-trol measures following theshooting that killed 49 at thePulse nightclub in Orlando, Fla.Both received “D” grades fromthe NRA that year.

After last October’s Las Ve-gas shooting, Mr. Ryan donatedmore than $20,000—equivalentto his past contributions fromthe NRA—to Mr. Bloomberg’sgun-control groups.

Mr. Ryan, who is running forre-election and is weighing botha challenge to House DemocraticLeader Nancy Pelosi of Califor-nia and a 2020 presidential run,says until recently there was lit-tle political benefit in backinggun-control proposals. Thisyear, he says, he has seen MomsDemand Action and Giffordsvolunteers campaigning for can-didates across Ohio.

In the hours following theParkland shooting in February,Mr. Bloomberg’s group activatedits Everytown Survivor Net-work, which connects 1,500 gun-violence survivors to comfortvictims and assist them throughthe media crush. The networkhelped turn high-school stu-dents into activists with nation-wide profiles.

Parkland’s impactParkland students Emma

González and David Hogg nowhave more Twitter followerseach than the NRA. The two,with funding from Mr.Bloomberg and celebrities in-cluding George Clooney, sparkedstudent-led demonstrations call-ing for gun control. That mo-mentum has led 20 states to en-act measures such as expandingbackground checks and limitinghigh-capacity magazines, ac-cording to Third Way, a centristDemocratic think tank.

In Florida, GOP Gov. RickScott, who had an NRA “A+” in2014, signed legislation increas-ing the minimum age to buy ahandgun to 21 from 18 and im-posed a three-day waiting pe-riod for a buyer to acquire agun, among other measures. Mr.Scott told families of the Park-land victims that the new statelaw “will forever honor the in-credible impact their loved oneshave had on our state.” The NRAhasn’t issued Mr. Scott a 2018grade yet.

If Democrats regain theHouse majority in November,they are certain to launch thefirst substantive gun-control de-bate since the 1994 assault-weapons ban. That law, whichlapsed in 2004, helped spark theRepublican House takeover.

California Rep. Mike Thomp-son, who received NRA contri-butions in three campaigns inthe 2000s, is now chairman ofthe House Democrats’ gun-vio-lence-prevention task force. HisNRA grade fell from “B+” in2010 to “F” in 2016.

“When we take the majorityin November,” he says, “you willsee a background-checks billright away.”

after her teenage son was shotand killed by a man who saidthe boy was playing music tooloud in a Florida parking lot.The shooter was convicted offirst-degree murder in 2014.

The Democratic shift on gunshas been spurred by a politicalinfrastructure built after SandyHook. Since then, Mr.Bloomberg’s groups have spentmore than $200 million buildingan army of five million support-ers and a crew of lobbyists instate capitols. Giffords, a gun-control organization named forformer Arizona Rep. GabrielleGiffords, who survived a 2011shooting, has about 1.4 millionsupporters.

“The truth is there was reallyno grass roots on the gun-safetyside,” Everytown President JohnFeinblatt says. “The NRA putout an emergency alert, and theswitchboards on Capitol Hill andstate capitols lit up like theFourth of July. We didn’t havethat kind of power.”

Mr. Feinblatt borrowed astrategy from the same-sex-marriage movement, which fo-cused on winning state and localvictories before moving onWashington. In 2014, Everytownspent $400,000 on Democrats inOregon state senate races. Ore-gon was the only state in whichDemocrats gained statehouseseats during the 2014 GOP wave.The next year, Oregon enacted alaw requiring backgroundchecks for all gun purchases.

Ms. Kirkpatrick was onceamong the NRA’s strongestDemocratic defenders. “My val-ues are the same values that youbelieve in,” she said in a 2010 TVsegment. “Hard work, playing bythe rules, doing more with lessand protecting our rights, likethe rights to bear and keeparms, and that’s why I have an‘A’ rating with the NRA.”

A July 2018 TV ad for Ms.Kirkpatrick says she would “banassault weapons” and enact uni-versal background checks. TheNRA this year gave her an “F.”

She says her position on guncontrol changed after Ms. Gif-

The NRA has sharplylowered its ratings forDemocratic Housecandidates in the generalelections.

Number of candidatesendorsed

Number of gradesfor candidates

Democrats

Republicans

68

6

158

238

210

0 6

225

2010 ’12 ’14 ’16

2010 ’12 ’14 ’16A

F

A

F

250

0

50

100

150

200

250

0

50

100

150

200

Democrats Republicans

61

215

16

251

6

245

2

245250

0

50

100

150

200

2010 ’12 ’14 ’16

Downgraded

THEWALL STREET JOURNAL.Source: NRA

seats. Of them, 62 support ex-panded background checks forgun purchases. Only RichardOjeda, who is running for aWest Virginia seat DonaldTrump carried by 50 percent-age points, opposes them. Noneof the 63 has NRA support.

The shift has been propelledby newmoney and organization,as well as an energy amongDemocratic activists and votersthat has pushed candidates intoaltering their positions, lestthey appear out of step with theparty’s base. “There’s a counter-energy now because for a longtime, it was pretty one-sided,”says Democratic Rep. Tim Ryanof Ohio, whom the NRA oncerated at “A” and downgraded toa “D” in 2016; it hasn’t gradedhim yet for 2018. A string of gunmassacres, he says, means ifyou’re “not doing anything, youhold that position to your ownperil, political peril.”

The realignment is part ofDemocrats’ broader shift to theleft on a range of issues, accel-erated by insurgent energy acti-vated following Mr. Trump’selection. Many leading Demo-crats are campaigning on plat-forms calling for a single-payerhealth-care system and reiningin the Immigration and CustomsEnforcement agency.

That may play well in Demo-cratic strongholds. And theparty’s transformation on gunscould also appeal in the kinds ofsuburban districts it needs towin to gain control of the Housethis fall, based on polls and re-cent elections.

It’s less likely to win enoughvotes to carry rural, Republican-dominated swaths of the coun-try that have a stronger gun cul-ture. The few remaining pro-NRA Democrats warn that theparty’s full embrace of the gun-control legislative wish listcould backfire in their districts.

“As a party, we cannot alien-ate voters by falling to the ex-tremes,” says Texas Rep. HenryCuellar, one of three Democratsto receive NRA contributionsthis year, “especially as we lookahead towards the upcomingNovember elections.”

Mr. Cuellar says an anti-NRAstance won’t help Democraticlawmakers in districts like his,which covers a stretch of Texasfrom San Antonio to the ruralareas along the Mexican border.

In Tuesday’s high-profileHouse special election in Ohio,Republicans didn’t make an is-sue of Democrat Danny O’Con-nor’s support for universalbackground checks. Congressio-nal Leadership Fund, the HouseGOP’s super PAC, spent $3 mil-lion attacking Mr. O’Connor butnot one of its TV ads invokedhis position on gun control. InWashington state, DemocratKim Schrier appears to have ad-vanced to the general electionfollowing a campaign that tookaim at the NRA. Mr. O’Connortrails in the vote count. The As-sociated Press hasn’t declared awinner in either contest.

For a generation after the1994 assault-weapons ban costscores of Democrats their jobs,party members avoided pushinggun restrictions. This year, vot-ers favoring gun control havebecome more vocal over con-gressional inaction following re-cent high-profile mass shootingsin Las Vegas, Parkland, Fla., andSutherland Springs, Texas.

Democratic candidates areeager to talk about gun controlnow. In TV ads U.S. House can-didates have aired this year,

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DemocratsEmbraceGun Limits

In Boston, Dan Berlin wasenduring his daily commute tohis job as a vice president of acustomer-experience researchfirm in July when he stumbledacross an obscure drive-timecomedian: the MassachusettsDepartment of Transportation.

The agency had posted elec-tronic highway messages aboutconstruction, telling drivers toexpect “Wicked tough travels”and warning, “It’s coming. It’sbad.” A previous DOT sign said,“Use yah blinkah.”

“The person writing theMassDOT electronic signs….de-serves a raise,” Mr. Berlin, 41,wrote in a Twitter post in July.“The messages are short, eye-catching but not distracting,and pretty funny.” An agencyspokesman said the signs are“collaborative efforts.”

The Iowa Department ofTransportation helped pioneerhighway hilarity five years ago.

At the time, transportationagencies typically used digital

billboards to convey real-timetraffic information or to partic-ipate in national safety initia-tives like the “Click It orTicket” campaign.

An Iowa official wanted toput out regular public-safetymessages when the electronicbillboards might otherwise bedark, and assigned veteran traf-fic and safety engineer WillySorenson to the project. “It ac-tually hit me in the shower,”

Mr. Sorenson says. “Let’s do‘Message Mondays.’ ”

Early messages were on thegentle side—“Santa’s coming.Have you been a good driver?”

Then Mr. Sorenson and hiscolleague Tracey Bramble, aninformation specialist, gotcheeky with messages like“Have some class. Stay off mybumper” and “Did you run outof blinker fluid?”

Their ideas are pitched toand approved by a subcommit-tee of engineers and otherswho make sure the slogan isn’ttoo aggressive—“Deck the halls,not the guy who cut you off”got a lot of debate before ap-proval—or so subtle that noone gets it.

Iowa state traffic engineerTim Crouch says he’s often thecommittee member who isn’tlaughing. “I don’t always getthe ones tied to a Taylor Swiftsong or other pop culture,” hesays. “I get lost on those.”

Iowa, which doesn’t repeat

messages, gives away its slo-gans to other states. Artistcredit gets murky. One well-cir-culated message is the “Getyour head out of your apps”one. “Everybody thinks theycame up with it,” Mr. Sorensonsays. “It was from a 14-year-oldin Cedar Rapids. He told hisdad. His dad contacted me.”

It helps that transportationofficials tasked with writing theelectronic billboard messageshave recently started a dedi-cated “share site” on Facebookto trade ideas, says Sam Cole,the traffic safety communica-tions manager for the ColoradoDepartment of Transportation.

“I’m not really a funny per-son,” Mr. Cole says. He recentlyborrowed “Who ya gonna call?Nobody—You’re driving” fromother states.

Highway officials say it’s un-clear exactly how the memora-ble missives, part of largersafety efforts, affect distracteddriving, speeding and other

problems. In a survey spon-sored by the Federal HighwayAdministration, respondentssaid roadside safety mes-sages—the study looked atmore straightforward messagesin four urban areas—would bemore likely to change their be-havior than messages fromother media.

In Virginia, Mr. Taylor, thetraffic-operations specialist,says he has received so manygood ideas that he now has anonline “sign library.”

One came from RemingtonStein, who is 30, lives outsideFredericksburg, Va., and sayshe can spend three hours dailycommuting. In July, Mr. Steinvisited the Virginia Departmentof Transportation’s Facebookpage and wrote: “Here’s a quotefor VDOT to post on 95. ‘You’renot a tree, don’t stay rooted tothe left lane.’ ”

“I thought, you know, justmaybe they’ll use it and put itup there,” he says.

Transportation featured “Hitthe road, Jack... Don’t text backno more” on digital billboardsthis summer. Maine went with“Spend money on lobstahs, notspeeding tickets.”

Drivers find it “out of the or-dinary for a department oftransportation to have a per-sonality,” says Lisa Miller, theUtah DOT traveler informationmanager. That agency “causedquite a stir,” she says, with oneof its highway messages, “Getyour head out of your apps.”

Utah now steers towardtamer, locally relevant messageslike one this month: “Gamblingis illegal in Utah. Buckle up.”

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foam. Businesses with annualrevenue of less than $500,000can apply for exemptions, cityofficials said.

Foam containers generallyare cheaper than alternativessuch as aluminum or plastic.One foam clamshell containercosts about 10 cents, while al-ternatives can run double that.

A spokeswoman who repre-sents the Alliance and Dart saidthe group “was created to ad-vocate for small and ethnic res-taurants that didn’t necessarily

have a voice or representation.”Dart has argued that foam is re-cyclable and shouldn’t banned.

The fight about foam beganin 2013 with a proposal bythen-Mayor MichaelBloomberg. In 2015, the Alli-ance and other plaintiffs—11restaurant owners, foam man-ufacturers and recyclers—suedthe city, saying they would “beirreparably harmed if this bangoes into effect.” This June,state Supreme Court JusticeMargaret Chan cleared the

way for the ban to go forward.If restaurants and conve-

nience stores once were wor-ried about eliminating foam, to-day the ban has been met witha collective shrug.

An employee at a Brooklynrestaurant, whose owner is oneof the lawsuit’s plaintiffs, saidthe establishment stopped usingfoam a couple of years ago. “Ourmembers haven’t expressed thatmuch concern,” said Kevin Du-gan, government affairs directorfor the New York State Restau-

rant Association.Arguments on appeal re-

volve around whether foamcan be recycled. Industry play-ers say foam is recyclable, andhave offered to pay for a NewYork City foam recycling pro-gram. Experts unconnected tothe industry disagree.

Deepak Rajagopal, an assis-tant professor at the Universityof California, Los Angeles, saidrecycling foam would be diffi-cult and expensive. “[Foam]doesn’t degrade,” he said.

An industry-backed groupcalled the Restaurant ActionAlliance is continuing to fightNew York City’s impending banon foam containers, despiterestaurant owners saying theyare largely unconcerned or nolonger use such packaging.

On its website the groupsays it represents “thousandsof small-business ownersthroughout the five boroughsof New York.” The Alliance hasclose ties to a major foammanufacturer, Dart ContainerCorp., according to people for-merly involved with the group.

The latest salvo in the Alli-ance’s multiyear attempt tofight the ban is an appeal,filed last month, of a judge’sruling that cleared the way forcity officials to prohibit foamtakeout containers, cups andpacking peanuts. Expandedpolystyrene foam—commonly,although incorrectly, calledStyrofoam—has been the sub-ject of a protracted battle be-tween New York City officialsand large industry players,particularly Dart.

Under the ban, which takeseffect in January, restaurants,stores and manufacturersaren’t allowed to have or use

BY GERALD PORTER JR.AND CORINNE RAMEY

Industry-Backed Group Fights Foam Ban

A food-cart owner says switching won’t significantly affect costs.

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Supporters SpendBig to Lobby City

The Restaurant Action Alli-ance, the first plaintiff listed onlegal documents in a lawsuitagainst a New York City banon foam containers, first ap-pears in city records in 2013.

The group was managed byMercury Public Affairs LLC, alobbying and communicationsfirm, according to two peoplefamiliar with the group. From2013 through 2016, Dart paidMercury $267,500 to lobbyNew York City officials aboutthe ban, records show.

From 2013 through this year,

Dart spent a total of $1.8 millionlobbying in the city, recordsshow. The American ChemistryCouncil, an industry group, hasspent $2.6 million lobbying localofficials about foam, and, in2013, contributed $824,500 tothe Alliance. That year the res-taurant group’s contact on cityrecords was an AmericanChemistry Council lobbyist.

Frank Liesman, Dart’s gen-eral counsel, said in a state-ment that the company “is le-gally participating in thelegislative process, trying toprotect our business and thebusinesses of our customers.”

The American ChemistryCouncil and Mercury declinedto comment.

Twenty-two suspects con-nected to an alleged drug op-eration at the Queensbridgehousing development were ar-rested Wednesday, police said.

The Queens narcotics unitrecovered crack cocaine, her-oin, marijuana and four fire-arms after executing ninesearch warrants, said NewYork Police Department Dep-uty Inspector Donald Boller.

The arrests were part of an11-month investigation theNYPD called “Operation theBridge Is Over,” he said duringa Thursday news conference.

The suspects were selling a“large quantity” of drugs out ofapartments in the public-hous-ing development located in theLong Island City neighborhoodof Queens, Mr. Boller said.

He didn’t specify the amountof drugs recovered or theirstreet value. But he noted thatthere was “high traffic” goingin and out of the apartmentswhere officers made the arrests.

NYPD Chief of DetectivesWilliam Aubry called the busta “crucial takedown.”

“While crime is at its low-est levels, we are still usingprecision policing to focus onviolence,” Chief Aubry said.

The suspects were chargedwith criminal sale of a con-trolled substance and criminalpossession of a firearm, policesaid. Four of the suspects areaffiliated with the Bloods gangor its subsets, Mr. Boller said.

The investigation began af-ter a spike in violence that be-gan in January, he said. Therehave been five shootings atQueensbridge this year, one ofwhich was fatal.

“We focused specifically onthe Queensbridge housing de-velopment due to the violencein and around the develop-ment,” Mr. Boller said.

Pursuing the arrests be-came a priority after violenceintensified at the housingcomplex during the past twomonths, police said.

NYPDArrests 22In QueensDrug Bust

GREATER NEW YORK“Angel Barbosa first

cheated New Yorkers out oftens of thousands of dollars inthe form of his falsely inflatedsalary, and then stole nearly$60,000 from taxpayers in asmartphone procurement-and-resale scheme,” ManhattanDistrict Attorney Cyrus VanceJr. said in a statement.

On Thursday, Mr. Barbosapleaded not guilty. Jeremy Sa-land, a lawyer for Mr. Barbosa,said his client voluntarily ar-ranged to appear in court andface the accusations.

“A valued employee of theMTA during his tenure, my cli-ent looks forward to reviewingthe evidence as we move for-ward through his case,” Mr.Saland said.

In 2016, prosecutors said,Mr. Barbosa ordered an MTA

employee to buy more than 60iPhones from an agency ven-dor. The purchase wasn’t ap-proved by the MTA and didn’tfollow proper procurementprocedures, prosecutors said.

The 63 iPhones, which cost$58,153.57, were shipped di-rectly to Mr. Barbosa, accord-ing to prosecutors, and weren’tused by MTA employees. Then,they said, Mr. Barbosa gave thephones to an associate to sell.

Prosecutors separatelycharged Mr. Barbosa with lyingto inflate his MTA salary. Theysaid Mr. Barbosa claimed hemade $30,000 more than heactually did when working as aprocurement manager at NewYork University. To supportthis, prosecutors said, heforged two earnings state-ments from NYU and altered

paycheck amounts. Because ofthis, the MTA gave him ahigher starting salary than hewould have otherwise received.

While working at the MTA,Mr. Barbosa also recruited afriend to work in the MTA’sprocurement department. Hecoached her to lie about herprior salary and alter pay stubsfrom her previous employer,according to the Manhattandistrict attorney’s office.

In 2017, Mr. Barbosa’s lastyear with the MTA, his annualsalary was $194,201, recordsshow. An MTA spokesman saidthe agency fired Mr. Barbosa“as soon as we became awareof allegations of impropriety.”

Mr. Barbosa, of Manalapan,N.J., served as the MTA’s chiefprocurement officer from 2013through 2017.

A former MetropolitanTransportation Authority offi-cial was indicted Thursday onaccusations he bought nearly$60,000 worth of iPhones withtaxpayer funds then resoldthem and kept the money.

The Manhattan district at-torney’s office charged AngelBarbosa, the MTA’s former chiefprocurement officer, with grandlarceny. He was separately ac-cused of filing fake documentsfrom a previous job to get ahigher salary at the MTA.

BY CORINNE RAMEY

FormerMTAOfficial Accused of LarcencyProsecutors say chiefprocurement officerresold iPhones boughtwith taxpayer money

The ex-official used nearly $60,000 in public funds to purchase63 iPhones, the Manhattan district attorney’s office said.

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The suspects wereselling drugs out ofpublic housingapartments, police say.

BY GERALD PORTER JR.

First Lady Melania Trump’s Parents Become U.S. Citizens in New York CeremonyFirst lady Melania Trump’s

parents were sworn in as U.S.citizens on Thursday, completinga legal path to citizenship thattheir son-in-law has suggestedeliminating.

Viktor and Amalija Knavs, bothin their 70s, took the citizenshipoath at a private ceremony inNew York City. The Slovenian im-migrants, had been living in theU.S. as permanent residents.

The Knavses slipped in andout of a side entrance at a Man-hattan federal building flankedby Department of Homeland Se-curity police. The couple said lit-tle, other than Mr. Knavs tellinga reporter “thank you” whenasked how they felt about be-coming Americans.

The Knavses’ lawyer, MichaelWildes, right, said the Knavsesapplied for citizenship on theirown and didn’t get special treat-ment. He confirmed that Mrs.Trump sponsored their greencards. Her husband, PresidentTrump, has proposed endingmost family-based immigration,which he refers to as “chain mi-gration.” Mr. Trump hasn’t com-mented on his in-laws’ new-found citizenship.

—Associated Press SETH

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town of Somers since 1953, itwas very much about thecone. The soft-serve optionshere are more traditional, soI opted for the basic twistwith chocolate and vanilla.But the real twist was thesize—a kid’s cone was a tow-ering affair that easily pro-vided an afternoon’s diver-sion of licking away.

Then, I saw a guy walkingoff with the namesake “king”cone and wondered if itwould take him through theevening, if not the nextmorning.

One final stop: the DairyHaus in Saratoga Springswhere I ready to enjoy mydip cone—black raspberrysoft-serve taken to the next

level with a crackly, coconut-flavored shell.

It wasn’t the fancy fare Icould find in the city. But asthe ice cream dribbled pastthe cone and onto my handand I looked in vain for an-other napkin, I found myselfsated and sticky all at once.What more could you wanton a summer’s day?

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Like most New Yorkers, Ienjoy a good burger. And if Ican follow it with a good icecream cone, I am doubly sat-isfied.

But in gourmet-crazedNew York, circa 2018, thesimple pleasures in lifeare…not so simple. Thesedays, I am confronted with

burgers inwhich the meatblend must bediscussed ad in-finitum. And

my beloved frozen dessert?The latest “it” version in thecity is vegan ice “cream.”

All of which has left meseeking the kind of diningspot that serves these treatsin no-frills fashion. And thatmeant only one thing: It wastime to head upstate.

Specifically, it was time tohead to the Hudson Valleyand the Albany/SaratogaSprings area, where old-school, seasonal burger-and-ice cream stands continue tothrive—the real ShakeShacks, if you will.

Their existence defies in-dustry trends: Independentrestaurants—aka mom-and-pops—have been on the de-cline nationally, with theiroverall count dropping 6%during the last four years to352,815, according to the NPDGroup/ReCount restaurantcensus, an industry survey.Meanwhile, chain restaurantshave grown by 5% duringthat same period to 307,940.

These upstate stands are avery particular type of mom-and-pop, however: Thinkplaces going back at least 30years that are typically de-fined by what they lack—noindoor seating, no waiterservice and no trying to beall things to all customers.

In other words, don’tcome if you’re watching yourwaistline and have a long listof dietary demands. Do comeif you appreciate a sunny

Simple Summer IndulgencesA road trip leads to dining gems that offer old-school burgers and ice cream served in a no-frills fashion

FOOD &CULTURE

GREATERNEWYORKWATCH

NEW YORK CITY

Police Say Coach HitMan Who Later Died

A rising star in college bas-ketball’s coaching ranks threw apunch that led to the death of aNew York City tourist who ap-parently mistook him for anUber driver, police said Thursday.

Wake Forest assistant coachJamill Jones attacked SandorSzabo around 1:15 a.m. Sundayin Queens, causing him to falland hit his head on the sidewalk,police said. Mr. Szabo, visitingfrom Boca Raton, Fla., made con-tact with the window of Mr.Jones’s SUV while looking for hisride after a wedding, police said.

The coach got out, followedMr. Szabo to the sidewalk, hithim and sped off, police said. Mr.Szabo, 35 years old, never re-gained consciousness and wastaken off life support Tuesday.

Mr. Jones, also 35, turnedhimself in to police Thursday. Heis awaiting arraignment on amisdemeanor assault charge. Hislawyer couldn’t immediately bereached. Wake Forest said itwould comment further once itgathers more information.

—Associated Press

CONNECTICUT

Native American FortRemains Discovered

The remnants of a centuries-old Native American fort andseveral thousand artifacts havebeen found at a railroad bridgeconstruction site in Connecticut.

State Department of Trans-portation officials on Thursdayannounced the fort and artifacts,some believed to be more than3,000 years old, were discoveredin Norwalk around the 122-year-old Walk Bridge, a commuter railspan scheduled to be replaced.

Experts believe the fort wasused for trade between NativeAmericans and Dutch settlerssometime between 1615 and1640. They say the fort is ontop of a 3,000-year-old NativeAmerican site.

—Associated Press

summer’s day indulgence.When I set out on my ca-

loric journey, it was a rainyWednesday in July. No mat-ter: At Joe’s Dairy Bar &Grill in the Dutchess Countyhamlet of Hopewell Junction,I felt everything was rightwith the world. The humblespot, adorned with a car-toonish fabricated cone onthe roof, seems to draw asteady stream of customers.

I quickly discovered whywhen I took a bite of mycheeseburger, a generouslyproportioned affair that wasa cut above fast food. Evenbetter were the crinkle-cutfries—crispy and salted tojust the right degree. Andbetter yet may have been theice cream: I went with thebubble-gum soft serve, a fla-vor of the day that tasted ex-actly like the beloved BubbleYum of my childhood.

At King Kone, a fixture inthe Westchester County

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King Kone, a fixture in the Westchester County town of Somers for more than 60 years, offers more traditional soft-serve options.Below, at Joe's Dairy Bar & Grill in Dutchess County, the Unicorn Freak Shake brightens the menu, and Peter Bolettieri picks up his order.

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A10 | Friday, August 10, 2018 THEWALL STREET JOURNAL.

characters go—than Arthur Calgary(Luke Treadaway), a shabby figurewho arrives at Sunny Point with theurgent news that Jack could nothave been guilty of killing Rachel.He has proof—he had given Jack alift in his car and was riding withhim at the time the murder wascommitted.

Calgary’s information elicits nogratitude from family members,more than one of whom exhibit asuspicious eagerness to get rid ofhim and his alibi for Jack, which

TELEVISION REVIEW | By Dorothy Rabinowitz

Adam Driver as Flip Zimmerman andJohn David Washington as RonStallworth, left; Topher Grace asDavid Duke, below

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FILM REVIEW | By Joe Morgenstern

‘BlacKkKlansman’:Running on Fury

SPIKE LEE doesn’t mince wordsin “BlacKkKlansman.” He ignitesthem, revels in their combustibil-ity and illustrates them with in-flammatory images. This free-wheeling account of an African-American cop who infiltrated theKu Klux Klan in the early 1970s isproblematic as narrative drama,but stunning as provocation. It’s afurious, in-your-white-face outcryagainst racial hatred in America’spast and turbu-lent present,with repeatedreferences toPresidentTrump.

That’s howthe film will beremembered,and I’ll get to itsmost controver-sial content shortly. First, though,a sense of the story, which is apretext for spectacular polemics aswell as a fascinating, largely fac-tual piece of cultural history.

Ron Stallworth (John DavidWashington), the first black detec-tive on the Colorado Springs policeforce, finds a classified ad in a lo-cal newspaper offering informa-tion on the Klan—screwy buttrue—and decides to answer it,

representing himself as white anda committed hater of blacks andJews. This impulsive approach isall well and good until someonecalls and suggests a meeting.That’s when Ron, being indeliblyblack, needs an actual strategy. Hissolution is partnering with a whitecop, Flip Zimmerman (AdamDriver), who is, not insignificantly,Jewish. Ron remains Ron on thephone—in another true-life twist

he uses his realname by mistakeduring his firstconversationwith a Klans-man—while Flippretends to beRon in person,seeking out andingratiating him-self with a gro-

tesque assortment of bigots. (Thescreenplay was adapted from Mr.Stallworth’s memoir by CharlieWachtel, David Rabinowitz, KevinWillmott and Mr. Lee.)

The grotesqueness would beover the top if the director caredabout a top. Most of the localKlansmen, plus one Klanswoman—the group’s dim-bulb bomb carrieris the wife of its most obviouslypsychotic member—are played for

laughs. And forshock; the N-wordand other racialepithets are re-peated so often,both by the copsand their quarries,that they becomean anodyne man-tra. Some of theresults are hilari-ous: A terrific gaginvolves a Polar-oid camera andRon at the centerof a group shot.But the downsideof the mockery isglibness; if onlythe racists andterrorists of theworld came asclearly labeled asthis flagrantlywacko crew.

The conven-tional part of the film—relativelyconventional, given the exuberantzigs and sermonizing zags withinthe narrative—varies sharply intone. Mr. Washington grounds Ronin emotional reality; it’s a fine per-formance, by turns earnest, ruefuland rapier-smart. (At certainpoints in his telephone persona,

Ron sounds eerily like RichardPryor doing one of his riffs on awhite man’s voice.) Mr. Driver ismuch less successful in makingFlip convincing to his would-becolleagues in the Klan, let alone tous. Like others in the cast—mostnotably Laura Harrier as PatriceDumas, a black activist with whom

Ron strikes up a friendship verg-ing on romance—he seems to haveneeded more help than he couldget from Mr. Lee’s permissive di-rection and the slapdash script,whose plot inventions are clumsy,whether or not they were meantto be absurd.

Topher Grace’s David Duke, theKlan’s Grand Wizard, is anotherstory—because the actor has cho-sen to dispense with the real Mr.Duke’s sincere affect, portrayinghim as a malignity both reedy andhollow; and because the Duke onscreen serves as a bridge to an-other story element. He is integralto the saga of Ron, who gets totalk to him on the phone, and wholater serves, in an official policecapacity, as his bodyguard. ButDuke is also an instrument of Mr.Lee’s larger scheme. “Americafirst!” he cries, just as the real-lifeDavid Duke has often done in hispublic diatribes; the onscreenDuke talks about what’s needed“for America to achieve its great-ness again.”

This is, of course, an indirectevocation of Donald Trump in amovie that doesn’t have muchtruck with indirection. “BlacKk-Klansman” means to make us an-gry with its incendiary take onAmerican history, sometimes usingimages that Mr. Lee has used be-fore, though not as effectively. Thefirst scene is an excerpt from“Gone With the Wind” in whichVivien Leigh’s Scarlett O’Hara, vis-ibly stirred, walks through hun-dreds of injured Confederatetroops lying on the streets of theAtlanta. That’s succeeded by ablack-and-white sequence withAlec Baldwin as a fictional midcen-tury hatemonger, Dr. KennebrewBeauregard, undone by the cameraand continually flubbing his vilelines—a witty actor playing a badactor who is also a bad actor.While Beauregard struggles, a pro-jector covers his face with frag-ments of D.W. Griffith’s “Birth of aNation,” the wildly racist 1915 epicin which southern whites organizethe Ku Klux Klan to defend civili-zation against marauding blacks.

We may have seen these imagesbefore, but they have never beenso horrific as in this context, andcontext is everything here. In ascattershot style that’s short oncohesion but long on passion, Mr.Lee and his colleagues—Chayse Ir-vin was the cinematographer andTerence Blanchard did the score—insist on connecting what hashappened in this nation withwhat’s happening now. Thatmeans cutting loose from the1970s and fitting “BlacKkKlans-man” with a coda calculated to in-furiate every member of its audi-ence, albeit for differing reasons—video footage of the whitenationalist rally that took placeone year ago in Charlottesville,Va., and President Trump’s re-marks about it. Never has a con-temporary film shattered the dra-matic unities with such force.

The story of a black copwho infiltrated the KuKlux Klan is filled withincendiary imagery

LIFE&ARTS

AS THIS VERSION of AgathaChristie’s “Ordeal by Innocence”begins, the members of the Argyllhousehold are making grim prepa-rations for a wedding. It has been18 months since the flamboyantand manipulative Rachel (AnnaChancellor))—adoptive mother offive—was found bludgeoned todeath. Her widowed husband, Leo(Bill Nighy), the only Argyll whosees anything to celebrate in theoccasion, is about to marry his re-pellently smug sex kitten of a sec-retary, Gwenda (Alice Eve). Thefamily has been further reduced bythe death of one son, the spiritedand rebellious Jack (AnthonyBoyle), hauled off to prison as theinstant suspect in his mother’smurder, and killed there by an-other inmate.

Or so the police claim. The airis thick with suspicion and resent-ments of the most envenomed kindat Sunny Point—the wonderfullynamed estate that’s home to theArgylls and that serves as the set-ting for this relentlessly dark, oc-casionally exhausting and alto-gether gripping adaptation ofChristie’s 1958 novel.

The exhaustion—the inevitableeffect of an avalanche of flashbacksincomprehensible in their mys-tery—disappears soon enough as

the characters stand revealed. Ofthese none is more magnetic thanthe murdered and unknowable Ra-chel, an heiress celebrated as a phi-lanthropist who had chosen toadopt five orphans and raise themin her own special way—a kind thatbred fear in them and, finally, hate.By the time Rachel is killed every-one in the family can be said tohave had a good reason for wantingto see her dead.

And no presence is more movingor complex—a rarity as Christie’s

they dismiss as afraud. True, theirvisitor looks un-hinged as well asshabby, but no re-buff, howeverthreatening, no or-ders to stay away,will deter Calgary—a haunting portrayalby Mr. Treadaway.He’s more than justa man determinedto do justice—he’s aman obsessed bythe need to do goodto expiate the hor-ror of past deeds.

This version ofChristie’s tale, set inthe mid-1950s, has,to put it mildly, un-

dergone serious alteration at thehands of adapter Sarah Phelpswhose sights were clearly set onevoking the postwar atmosphere,the terrors of nuclear war. Here,then is the anguished Dr. Calgary,who—unlike the Calgary in thenovel—is deranged by grief over hiswartime role working on the atomicbomb.

At the center of the action, pre-siding over all with unfailing calm,is Leo, head of the family, a charac-ter oozing a fine blend of grace and

diffidence, seasoned with hints ofcorruption—an exquisite perfor-mance by Bill Nighy, all of whosescenes are the show’s most reliablepleasures. Visiting his son in prison,Leo is at his silken ease deliveringthe barest murmur of regret overJack’s arrest for his mother’s mur-der, and noting that his crime was,of course, not surprising, given hisdelinquent nature.

This adaptation of “Ordeal byInnocence” has, thanks to its manydepartures from the original, dis-tressed many Christie devotees,but no change has caused moreoutrage than the one most vital toa mystery—the answer to thequestion, who is the murderer? Inthe adapted version, the real killerturns out to be someone otherthan the one Christie named. Con-fronted with criticism over suchan alteration in a writer’s work,adapter Ms. Phelps has offered as-surances of her indifference. “Ohpurists,” she told an interviewer.“Anything that’s purist is deeplyproblematic to me.”

Even so the series is richly re-warding, unfailingly suspensefuldrama, the new identity of thereal murderer notwithstanding.

Ordeal by InnocenceFriday, Amazon Prime

‘ORDEAL BY INNOCENCE’: A SUSPECT IN THE FAMILY

Ella Purnell (bottom),Eleanor Tomlinson(center), Crystal Clarke(top right) and AnthonyBoyle (top left)

AMAZO

NPR

IMEVIDEO

THEWALL STREET JOURNAL. Friday, August 10, 2018 | A11

sence of this documentary isthat there is always progress,always hope, in this case forthe status of women.

Mr. Erdbrink uncovers un-expected Western influencesthat have taken hold—from12 step programs to Zumba—that have reached Iran largelythanks to the invincible pow-ers of the internet, which hasbrought changes hitherto un-dreamed of in modern Iran.

He takes his camera crew toa mosque and to demonstra-tions where crowds shout im-precations at their enemies inthe West. We’re instructed inthe importance of the Death toAmerica, Death to Israel,Death to England chants,which—we learn from a devo-tee of this exercise—have adefinite positive effect on thebody. This information comesfrom an Iranian Mr. Erdbrinkcalls Mr. Big Mouth, whoseems, between his deathwishes for the West, a conviv-ial sort. The chanting, it ap-pears, always raises his spirits.

The film touches on morecrucial matters, like sanctionsagainst Iran and the toll ittakes on its citizens, andthere’s at least one wrench-ing saga of an innocent aca-demic fingered by the gov-ernment as a spy, thenthrown into prison where hedies—a tale told by his em-bittered family.

These are, in the end, fourcompelling hours, in whichthere is no missing the film’sdetermination to portray anIran whose people are mis-judged by the world.

Our Man in TehranMonday, 9 p.m. and Tuesday,9 p.m,, PBS

FOUND INTRANSLATION | By Peter Gordon

TheWSJ Daily Crossword | Edited by Mike Shenk

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The answer tothis week’s contestcrossword is alanguage.

Across1 Sound of thunder5 Wear away

10 Early homicidevictim

14 Fawn over, with“on”

15 I, for one16 Neighbor of

Burkina Faso17 Literally, “novel

with a key”19 Best Picture

winnerannounced byMichelle Obama

Previous Puzzle’s Solution

20 Execute, in slang21 Executes, in

slang22 Subject to

suffering23 Whitman of TV’s

“Parenthood”24 K-pop superstar25 Literally, “red

bush”27 Mutton source29 Sweater type31 It’s found in veins32 According to34 Rubdown sound35 Barack’s first

secretary ofeducation

36 Literally,“restructuring”

39 Eight furlongs41 Fly swatter42 Shapiro of “All

ThingsConsidered”

43 Busy worker inApr.

44 Good name for amineralogist

46 When “SNL”wraps

50 Literally, “disk”52 Really long time54 Strong heart55 Put down stakes56 Fairy of myth57 Grip’s workplace58 Get well59 Literally, “baked

earth”

62 Leave out63 Perfect64 Niqab, e.g.65 Ma’s ma66 Has the hots

(for)67 Hyperbolic tracesDown1 PC spinners2 Bath sponge3 Withdrawal

charge4 Royal pain?5 Chris of

“Avengers:Infinity War”

6 1990 sequel withthe tagline “Gofor it”

7 TempleUniversity team

8 Scottish river9 Keebler cookie

maker10 Maker of the

Flashback gameconsole

11 One of theLeeward Islands

12 Phrase like “allintensivepurposes” or“free reign,”resulting frommishearing

13 Visual inspection18 Mascot of RCA22 Concave pan

25 Tush26 Golf Hall of

Famer Lorena28 Pentathlon event30 Smart33 Fight the power35 Related36 Banana relative37 Singer-

songwriterBareilles

38 Amusinglytwisted

39 Carson’s sidekick40 Rio neighborhood44 Spoiled45 Survey

salaciously47 Holy Week

follower48 Like vinegar49 They can be

precious51 Triangle in math

textbooks53 Paperless tests56 A.G. appointer59 “___ It Happens

to You” (Oscar-nominated LadyGaga song)

60 U. URL ender61 Fallopian tube

travelers

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Email your answer—in the subject line—to crosswordcontest@wsj.comby 11:59 p.m. Eastern Time Sunday, August 12. A solver selected atrandomwill win aWSJmug. Last week’s winner: Jud Cairns, Chantilly, VA.Complete contest rules atWSJ.com/Puzzles. (No purchase necessary.Void where prohibited. U.S. residents 18 and over only.)

M A Y O O W L E T C A L LA R O D P I E T A A B E ES T U D Y I N G A B R O A DS Y R I A N S L O P I N G

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A S T R A L P L A N EC A R R I E N E A T OA D O P T E E R A W B A RM O D E R N M A T U R I T YE R I N E V I T A E D I EL E N S D Y L A N S E T S

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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

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THIS TWO-PART “FRONT-LINE” documentary is basedon the Iran travels ofThomas Erdbrink, longtimeTehran bureau chief for theNew York Times, who mar-ried an Iranian woman andnow considers himself, as hesuggests in his narrative, un-likely to want to live any-where else any time soon.We are quickly persuaded.This determinedly upbeatdocumentary is filled withcheer—especially the openingsection, which appears de-voted to family relations. Thefilm’s producers are evidentlyunder the impression thatprotracted exchanges of archdrivel between the journalistand his wife about who theboss is in the marriage, remi-niscences of their courtship,lunch with the in-laws (com-plete with more sprightlyjoshing about the couple’s re-lationship) are just what’sneeded to ease the mind of aviewer settling down to watcha film about Iran.

Or more precisely, the Irannobody knows—which is theactual theme of these fourhours and one, when it finallysettles in, that can feel seri-ously seductive. Mr. Erdbrinkhears the story of an Iranianwoman who is divorced andtrying to find an apartment torent. Just as she is about toclose a deal, another olderIranian woman warns theagent that he must not rent tothis single woman—she willbring men, she will be a kindof contaminant to the build-ing. The would-be renter re-calls at no point did thewoman even look at her. Still,she does in the end find anice apartment—for the es-

CAROLROSEG

G

LIFE & ARTS

Ian Lassiter and Lexi Lapp in‘Pushkin: A Life Played Out’

New YorkGEORGE BALANCHINE called Tchai-kovsky “Pushkin in music: supremecraftsmanship, exact proportions, maj-esty.” That says a lot about Tchaikov-sky, and even more about AleksandrPushkin. But though he was and isRussia’s greatest poet, Pushkin’s workis comparatively little known in theWest save in the form of Tchaikov-sky’s “Yevgeny Onegin” and Mussorg-sky’s “Boris Godunov.” Outside ofthose operas, whose libretti wereadapted by their composers from histwo best remembered works, he hasnever made much of an impressionoutside his native land. As a result,few Westerners know anything aboutPushkin’s spectacularly eventful lifeand violent death—he was a compul-sive gambler who was killed in a duelin 1837—both of which were as theat-rical as his poetry.

That’s where Jonathan Leaf comesin. Mr. Leaf is the author of, amongother things, “The Germans in Paris,”a smart, elegantly wrought 2007comedy of manners about an imag-ined but plausible encounter betweenHeinrich Heine, Karl Marx and Rich-ard Wagner. While he has a Stop-pard-like knack for spinning thought-provoking drama out of suchspeculative scenarios, “Pushkin: ALife Played Out,” a history play inverse about the circumstances lead-ing up to Pushkin’s murder, is not awitty game of what-if. It is, rather, aromantic tragedy, the true story ofan idealist who refuses to compro-mise with the lethal realities ofpower and so finds himself staringdown the wrong end of a gun barrel.Tautly told and staged with hurtlingmomentum by Christopher McElroen,“Pushkin” is one of the best newplays to open in New York in recentmemory, and this fabulously well-acted production, performed in an80-seat black-box theater, puts you aheartbeat away from the action.

Mr. Leaf’s Pushkin (Ian Lassiter) isthe kind of poet who, knowing thathe is a genius, assumes that theworld will treat him with respect. Be-cause he has the ear of Czar NicholasI (Gene Gillette), he further supposesthat royal favor puts him out of reachof the consequences of his irresponsi-ble behavior. Most misguidedly of all,he believes his poetry to be so pow-erful that it will persuade the czar tofree Russia’s serfs “when his maj-esty’s ready for it.” In fact, Nicholassees Pushkin not as the truth-tellingFool to his truth-hungry Lear but asan expensive toy, a talented courtier

whose unwillingness to play thecourt’s obsequious game is testing hispatron’s patience. Pushkin is no morewilling to listen to his terrified wife,Natalya (Jenny Leona), who begs himto walk away from the edge of disas-ter and behave with the prudence be-fitting a husband and father. Instead,he utters the ominous words that willseal his fate: “Alive or dead, a duelistis respected.”

Greatly aided by his masterly 11-person cast, Mr. Leaf has brought offthe considerable feat of writing aplay in blank iambic pentameter (heeven supplies his own believable-sounding Pushkinesque verses forthe poet’s own poems) that has theclean, transparent sound of everydayspeech, eloquent but not high-flown.If you didn’t know that the charac-ters in “Pushkin” were speaking inverse, you could easily fail to realizeit until well into the evening, so in-

volving is the high-stakes plot andso good the acting. Mr. Lassiter ismagnetically convincing as theprideful Pushkin—he is the verymodel of a Byronic hero—and Mr.Gillette is equally persuasive as hisroyal nemesis.

“Pushkin” doesn’t look or feel like asmall-scale show, much less a low-budget downtown production. TroyHourie, the scenic designer, has cre-ated a simply decorated set that none-theless suggests the resplendent air ofCzarist Russia, and Elivia Bovenzi’speriod costumes perfect the illusion:You know at all times where you areand when it is. Nor can I possibly sayenough good things about Mr. McEl-roen’s staging, which builds to the cli-mactic duel so inexorably that you’llresent the intermission. It would cer-tainly be possible to mount “Pushkin”in a full-size theater—indeed, this pro-duction, like the play itself, deservesto transfer to a much bigger house—but Mr. McElroen and his designershave used the downstairs performancespace of Manhattan’s Sheen Center forThought and Culture with a resource-fulness that borders on the magical.

Be all this as it may, “Pushkin” isMr. Leaf’s triumph first and foremost.Though I knew that he was a play-wright of formidable gifts, I confess tonot having expected “Pushkin” tocome across so forcefully. Nor is it amere egghead’s entertainment: I sawit in the company of a friend who’dbarely heard of Pushkin, and she’s stilltalking about it a week later. So amI—and so will you.

Pushkin: A Life Played OutThe American Vicarious, Sheen Centerfor Thought and Culture, 18 Bleecker St.($57), 866-811-4111, closes Aug. 5

Mr. Teachout, the Journal’s dramacritic, is the author, most recently, of“Billy and Me.” Write to him attteachout@wsj.com.

THEATER REVIEW | By Terry Teachout

The Poet and the Pistol

A history play aboutRussia’s greatest poet

comes off as a romantictragedy

TELEVISION REVIEW | By Dorothy Rabinowitz

A JOURNEYTHROUGH IRAN

JACKÓVAN‘THOF

Thomas Erdbrink with his wife, Newsha Tavakolian

A12 | Friday, August 10, 2018 THEWALL STREET JOURNAL.

LondonDuring last season’s historic run

to the title, Manchester City set anew standard for the English Pre-mier League. Over the course of 10grueling months, the club provedthat uncompromisingly beautifulpossession soccer could conquerthe most physical league in theworld.

City made that point so emphat-ically that it finished the yearholding the trophy, with a slew ofnew records to its name, becomingthe first team to reach 100 pointsand scoring a record 106 goals inthe process. Week after week, Citymade for irresistible viewingwherever the Premier League wasbroadcast across the globe.

But what should have stood asundeniable evidence of the Pre-mier League’s strength is begin-ning to look more sinister. WithCity fully rearmed to defend its ti-tle as the season starts Friday,English soccer’s competitive bal-ance is in danger and the club’sdominance is a major problem forthe most popular league on theplanet.

“Every single club I’ve ever metwould like to win the league, by astreet, every season,” PremierLeague Chief Executive RichardScudamore said. “That’s whatthey’re strategically trying toachieve. We run a league. Theworst thing that could ever hap-pen to a league is that the sameteam wins it by a street, every

season.”The Premier League has suf-

fered dominant teams before. Butthe gulf between the alpha dogsand the pack seemingly has neverbeen this wide. In a season of su-per-managers running free-spend-ing clubs, City managed to postthe largest winning margin sincethe Premier League was foundedin 1992, blowing away ManchesterUnited by 19 points.

That’s because in the decadesince Manchester’s second mostfamous club was taken over by amember of the royal family of AbuDhabi, City has paired ambitionwith means like no other club inthe league’s history. When itneeded to spend money, it spent it

BY JOSHUA ROBINSONAND JONATHAN CLEGG

by the barrel, until it fielded themost expensive team in soccer his-tory. When it needed style, it wentfor the top of the line, hiring themost decorated manager in Europein Pep Guardiola.

And even after running rough-shod over the competition lastseason, City strengthened its al-ready record-breaking forward lineby adding one of the most danger-ous attackers in English soccer, the$77 million winger Riyad Mahrezfrom Leicester City.

City’s challengers, meanwhile,are at loss on how to give chase.Chelsea has been unusually re-strained in the transfer market af-ter taking most of the summer tosort out its managerial situation.

New boss Maurizio Sarri arrivedbarely three weeks before the cam-paign kicks off.

Manchester United is consumedby internal turmoil over transfers,while Tottenham has yet to spenda dime this summer.

The only team that seems to begearing up for a fight is Liverpool,which has shelled out $210 millionon new players. But the Reds havea large gap to bridge in the stand-ings—they were 25 points worseoff than City last season.

“We have not bought a teamwhilst the others have sold theirs,it is not like this,” Liverpool man-ager Jürgen Klopp told the BBC.

It’s not only City’s rivals whoappear to have been shaken by theclub’s strength. The league itselfmight not be prepared for its bur-geoning dynasty.

Though it had just five differenttitle-winners in its first 20 yearsof existence, the Premier Leaguehas marketed itself as the mostcompetitive championship in soc-cer. Leicester City’s underdog tri-umph in 2016 against 5,000-to-1odds served to reinforce that illu-sion of parity amid a decade ofchampions failing to retain theirtitles. So did the rise of five genu-ine contenders since then—Man-chester City, Chelsea, Liverpool,Tottenham and Manchester United.

But before a ball has beenkicked, those contenders alreadylook to be in a fight for secondplace. Which has left people insidethe game pondering an alarmingquestion: What if the next few Pre-mier League seasons all turn intopreludes to Manchester City open-

top bus parades?“From my point of view, the

players don’t have to be worried,”Guardiola said. “I am ready tofight again.”

For the Premier League, thespecter of City’s dominance comesat a delicate moment. Only lastspring, the league brokered an un-easy peace between the so-calledBig Six teams and the other 14over the sharing of its foreign tele-vision revenue, worth roughly $1billion a year. But people familiarwith the matter say that the BigSix have had preliminary talks—which are no longer active—tobreak away from the current struc-ture, potentially to ally with otherEuropean clubs in a super league.They wouldn’t be guaranteed titlesthere either, but they believe theTV rights payments and global at-tention would be somehow greaterthan what they receive today.

There has also been talk thisyear of expanding the ChampionsLeague, the prestigious pan-Euro-pean tournament, into the sport’smain event with matches playedon weekends and domestic gamesshunted into midweek. For now,the Premier League has refused toentertain that possibility even re-motely. But if a Manchester Citydynasty watered down the prod-uct, it would be harder and harderto keep the powerful clubs inCity’s wake from pushing for ashake-up.

“There is the natural tension,”Scudamore said. “Even the biggestclubs realize that what they’restriving to achieve might be badfor them.”

ASHLYN ZHANG is a 14-year-oldrising ninth-grader from Californiawho is awesome at basketball.

As the star of her team at theJr. NBA World Championship thisweek, Zhang is one of those play-ers with the skills required tobring her imagination to life. Let’ssay she’s dribbling on the left sideof a 2-on-1 fast break, for example,and her defender sticks to themiddle without committing to ei-ther player. Zhang knows exactlywhat she would do.

“Eurostep to the middle,” shesaid. “Fake them out, step theother way, finish with my righthand.”

Excusez-moi?That would have been a per-

fectly appropriate reaction to anAmerican teenager discussing theintricacies of Eurosteps not toolong ago. But not anymore. TheEurostep is as European as frenchfries are French.

This crafty move was consid-ered exotic when it came to theNBA two decades ago. It lookeddownright foreign to see a playerdo what Zhang described: plantone way, take one long step at fullspeed the other way, avoid contactand sneak around the defender foran easy layup.

Now it’s simply part of thegame for today’s generation ofyouth players. Manu Ginobili hasbeen in the league as long asthey’ve been alive. It’s as naturalto kids as shooting unfathomablylong 3-pointers.

The slow normalization of theEurostep is obvious anytime youwatch an NBA game. The last twoleague MVPs, James Harden andRussell Westbrook, are masters ofthe Eurostep. LeBron James flash-ing his Eurostep on the fast breakturns defenders into foie gras. Butthe most revealing sign of the Eu-rostep invasion once appeared onhis Instagram from someone whohappens to share his name: LeBronJames Jr., better known as Bronny,had the basketball world admiringhis own beautiful Eurostep. He wasin fifth grade.

It was only the latest reminderthat this deceptive maneuver hastrickled from the NBA, where verytall human beings exploit theirlong strides and explosive lowerbody strength to make this moveunstoppable, all the way down tohigh school, middle school and ele-mentary school.

“Every single trainer teachesthe Eurostep,” said Josh Burr, thefounder of The Skill Factory in At-lanta, where a variety of playersfrom Harden to boys on the South-east team have trained. “Every oneof those kids can do it.”

BY BEN COHEN

Ginobili loseshis defender witha quick first stepor screen from histeammate andmakes a hard driveto the basket.

1

He wasn't the first NBA player to use the ‘Eurostep,’ but SanAntonio Spurs guard Manu Ginobili was the one who helpedusher the exotic move into the mainstream.

Here's a breakdown ofhow the Eurostep works:

But he doesn't. After planting his left foot,he quickly changes direction, taking a long stepto the right. That creates the space for Ginobilito get around his defender for an open layup.

Defender

Mike Sudal/THEWALL STREET JOURNAL.

He picks up his dribble and freezes hisdefender with a hard step to the left. The ideais that he'll finish with his dominant left hand.

23

Defender

The players and coaches at thefirst Jr. NBA World Championshipthis week say it’s almost a prereq-uisite for playing these days.Something that didn’t exist not solong ago has stitched itself intothe fabric of the game to the pointthat it’s becoming impossible toenvision basketball without it.

“In a year or two, it’ll be aspopular as the triple threat,” saidWalt Webb, the coach of the Mid-Atlantic boys team. “This is some-

thing that you have to do in orderto play the game of basketballmoving forward.”

It wasn’t that way when theLithuanian guard Sarunas Marciu-lionis helped import the Eurostepto the NBA in 1989. His nifty wayof avoiding contact around thebasket was partially inspired bythe legendary Croatian player Dra-zen Petrovic, he said, but it didn’tstick right away in part becauseMarciulionis was an unlikelysource of innovation. At his ownHall of Fame induction, Marciulio-

nis called himself a “strange duck.”NBA players weren’t in the busi-

ness of copying strange ducks, andthe Eurostep could have easily dis-appeared when he retired in 1997.But it didn’t. And that’s becausetwo years later the San AntonioSpurs drafted a second-tier Italianclub’s top prospect named ManuGinobili. Marciulionis, a lefty likeGinobili, Harden and AshlynZhang, soon got a call from some-one telling him that a player fromArgentina was bringing the Euro-step back.

It seeped into the public con-sciousness as it spread throughoutthe NBA, but the widespread adop-tion of the Eurostep is such a re-cent development that young eliteplayers today are being trained bycoaches in their 30s and 40s whosay they went their entire careerswithout attempting a single one.But one unexpected benefit of NBAplayers oversharing on Instagramis that it’s easy for anyone in theworld to copy what they’re doing.A boy like Phoenix Johnson cansteal Kyrie Irving’s moves, includ-ing his Eurostep, by studying himon YouTube and Instagram.

“He’s 10! We’re talking about a10-year-old!” said his father, SamJohnson, the coach of the Centralregion girls team this week. “Ididn’t teach my son any of this. Heteaches himself.”

The odd thing about the Euro-

step is that it’s more Americanthan European at this point. NihadMusovic, the founder of a NewYork basketball academy repre-senting the Northeast this week,played for both Fordham Univer-sity and Montenegro’s junior na-tional team, where he became per-sonally familiar with the power ofthe Eurostep.

Montenegro played Greece atthe under-20 European champion-ships in 2013, and Musovic faced apromising young Greek player witha name that was hard to pro-nounce and a Eurostep that washarder to defend. He left that tour-nament with the sense that Gian-nis Antetokounmpo might have afuture in the NBA.

Marciulionis understands fromhis own experience how tricky itcan be to pass along the Eurostepto the next generation. He’s teach-ing his 16-year-old son Augustashow to pull off the move that hecreated. It’s still a work in prog-ress.

“We’ll see,” Marciulionis said.“One thing is to teach. Other thingis to implement in the game. Let’stalk in two years.”

Ashlyn Zhang is already confi-dent in her own Eurostep. Themove feels so intuitive to this Cali-fornia teen she’s not even surewhy it’s called a Eurostep.

“Actually,” she said, “I’ve neverreally thought about that.”

BASKETBALL

HowAmerica’s KidsHoned the Eurostep

‘Every single trainerteaches the Eurostep,’Burr said. ‘Every one ofthose kids can do it.’

SPORTS

SOCCER

PREMIER LEAGUE HAS AMANCHESTER CITY PROBLEM

Manchester City won the Premier League title by a record margin last season.

PAULELLIS/AGENCEFRANCE-PRESSE/GETTYIMAGES

THEWALL STREET JOURNAL. Friday, August 10, 2018 | A13

Station WagonMemoriesDon’t Make Me Pull Over!By Richard Ratay(Scribner, 272 pages, $27)

BOOKSHELF | By Daniel Akst

OPINION

NASA’s New Probe Sails Into the Solar Wind

T he astrophysicist EugeneParker found only doubt-ers 60 years ago when

he proposed that a type of“wind” flows from the sun.Now NASA is sending up aspacecraft named in his honor.The Parker Solar Probe, set tolaunch Saturday, will fly closerto the sun than any previousmission. It will investigate whythe sun’s atmosphere is hotterthan the sun itself, how to pro-tect earthly electric grids fromspace weather, and more.

I came to know EugeneParker in the 1990s as a fellowastrophysicist at the Univer-sity of Chicago. By that timehe was a legend who had builta completely new field. No onehad expected that when hefirst proposed the concept ofsolar wind in 1958.

Back then, scientiststended to believe that thespace between our sun and

the planets was empty. Mr.Parker suggested instead thatit contained a wind of thesun’s particles and magneticfields. When he submitted hispaper to the AstrophysicalJournal, it was rejected. Thepaper saw the light of day

only because the journal’s edi-tor, future Nobel laureate Sub-rahmanyan Chandrasekhar,agreed to publish it over thereviewers’ objections.

But Mr. Parker never wa-vered, and no one could find aproblem with his physics ormath. He was vindicated fouryears later, when NASA’s Mari-ner 2 probe confirmed the ex-istence of solar wind.

For this breakthrough and

his work since, Mr. Parker isregarded as the father of mod-ern heliophysics. As NASA sci-entists tell it, the decision toname the new probe afterhim—the first time that honorhas been bestowed on a livingperson—was easy.

Great advances in scienceoften stem from a willingnessto challenge convention. Gali-leo was convicted of heresy in1633 after he insisted that thesun was the center of the solarsystem. Everyone scoffed atthe 19th-century physician Ig-naz Semmelweis when he ar-gued that doctors ought towash their hands between pa-tients. The science of platetectonics, proposed by AlfredWegener in 1912, didn’t be-come widely accepted until the1970s.

Scientists can be narrow-minded like anyone else. Butthe scientific method over-comes this failing, as new the-ories and ideas are constantly

tested against data. Sciencedemands a willingness to chal-lenge and be challenged.

At 91, Mr. Parker still lovesthe unexpected. Discussing thesolar probe recently, he saidthat “we have to be preparedfor some surprises—thingsthat we never thought of, orthings that we thought of butwere not correct.”

The launch of the ParkerSolar Probe vindicates notonly Eugene Parker’s ideas butalso his vision of science as anarena for both uncommon dar-ing and humility. It’s neverclear where the next great ad-vance will come from, or howit may challenge today’s as-sumptions. To forge newpaths, scientists must be braveenough to try new ideas—andconfident enough to risk beingproven wrong.

Ms. Olinto is dean of the Di-vision of the Physical Sciencesat the University of Chicago.

By Angela V. Olinto

Its namesake, EugeneParker, is a livinglegend of astrophysics.

C ontemplating a family road trip, it behooves us all toask, in the spirit of those wartime posters: “Is thisjourney really necessary?” Have we forgotten Pascal’s

observation that “all of humanity’s problems stem fromman’s inability to sit quietly in a room alone”?

For many sensible people, the idea of packing the familyinto a car and driving halfway across creation has all theappeal of a root canal without anesthetic. But for RichardRatay, a Wisconsin advertising man, the family road trip is asource of nostalgia rather than trauma. His long-distancechildhood adventures in his family’s giant land cruisers are atthe center of “Don’t Make Me Pull Over!,” a breezy andwarm-hearted “informal history” of the great American

family road trip.Baby boomers and Gen

Xers will thrill to recalldriving without seat belts(young Richard was fond ofstargazing through the rearwindow from the shelf atop theback seats), listening to musicfrom an eight-track player,eating at Howard Johnson’s,drawing with Magic Slate padsand navigating with paper maps.Although the Ratays eventuallygot a CB radio—anybodyremember those?—readers will be

astonished to learn that the familymade it every year from the Upper Mid-

west to the Gulf Coast without benefit of smart-phones or GPS, no doubt in much the same mysterious way asancient Polynesian seafarers traversed the South Pacific.

Despite energy shortages and stagflation, road trips were amainstay of family vacations in Mr. Ratay’s youth, spurred bythe Interstate Highway System and the blossoming of amotoring middle class. “During the 1970s alone, Americanslogged 14.4 trillion highway miles—enough to travel fromEarth to Pluto and back 2,500 times,” he reports, adding: “Myfamily alone was responsible for approximately 1 trillion.”

Why all the driving? Most people simply couldn’t affordcommercial air travel, which was artificially expensive as aresult of federal regulation. “As late as 1975,” Mr. Ratay notes,“four in five Americans had never traveled by plane.” The costwas especially prohibitive for the larger families moreprevalent back then, and you’d probably need a car when youlanded anyway.

OK, so family road trips. But how do you get a whole bookout of the subject? Mr. Ratay is not the type to subject us toedgy interrogations of “Lolita” or the “National Lampoon’sVacation” movies, and, unlike so many other accounts offamily life, this one is blissfully free of addiction, abuse orcruelty. For better or worse, the patriarchy sails theinterstates unindicted in these pages, down highwaysseemingly paved with the iconic candies, videogames andpaneled station wagons of the 1970s.

And therein lies the answer. Mr. Ratay simply fills out hisaccount of the many hours his family spent on the road withthumbnail histories of practically everything they saw, ate,rode in or rolled along: “Turnpike” evidently comes fromcolonial toll roads that required a keeper to rotate a spikedgate, or pike, to grant entry.

Take those internal-combustion dinosaurs with the faux-wood panels running along the sides. “The first station wagonswere standard automobiles retrofitted with wagon bodies” foruse around train stations, the author tells us, and in the 1930sand 1940s Detroit produced classy-looking wood-bodiedvehicles for affluent customers who aspired to the landedgentry. After the war, steel-bodied station wagons caught onwith the masses, but in a nod to the vehicle’s aristocraticorigins, many still sported “wood-grain panel decals.”

Since Mr. Ratay’s family enjoyed staying in Ramada Inns,we learn that the company was named for the ramas—Spanish for “branches”—with which southwestern farmworkers used to build little shelters for shade. They called theshelters themselves “ramadas,” the author reports. You’ll alsolearn the origins of the Fuzzbuster (the first radar detector),and the history of cruise control.

Not to worry; it all goes down like a cold lemonade on a hotsummer’s day. Mr. Ratay is a charming raconteur who alwaysseems to know just when it’s time to get us all back into thecar with his big, quintessentially middle-class family, whichseems to be riding off into the sunset even as you read aboutit. Of the two adults and four kids, Mr. Ratay’s colorful father,a golf-obsessed salesman, is the book’s unrivaled star. Hispenny-pinching, his nerve-racking insistence that there’s stillgas in the tank when the gauge shows “E,” and perhaps mostof all his portable executive cocktail kit from Sears make hima memorable figure—and never mind the time he fell asleep atthe wheel trying to save on a motel.

Sadly, if you miss this sort of Americana, the family roadtrip is no longer what it was. Seat belts prevent the kidsfrom roaming freely or stretching out, and each passengercan now lose himself in a world of private entertainmentinstead of playing license-plate games with everyone else.Meanwhile, the federal price fixing that kept the cost of airtravel sky high was abolished, at last, in the Carteradministration, undone by the rise of bigger, faster jetliners,the need of airlines to stake out new routes, and the belief ofliberals like Ralph Nader that competition rather thanregulation was the best thing for consumers.

Flying became so cheap that eventually even the elder Mr.Ratay springs for a vacation by air. And while the familyenjoys the extra time that flying gains them in Washington,D.C., the author is sensitive to what has been lost. “We’dtaken a trip but we’d made no journey,” he laments. “Andsomehow it felt as though we hadn’t earned the right toenjoy our final destination.”

Mr. Akst writes the Journal’s weekly news quiz.

Road trips were once amainstay of familyvacations: navigating with paper maps, eatingat Howard Johnson’s, driving without seat belts.

Coming in BOOKS this weekendThe tangled tree of life • Breaking the sky’s glass ceiling• John Tyndall’s science at the summit •Wayne Kramer’shard-rock confessional • An insider’s view of art andmoney • Sam Sacks on the best new fiction •& much more

The phrase“re-educa-tion camp”invokesMao’sCultural Rev-olution or

Vietnam after the communisttakeover. But this form of re-pression is alive and well inXi Jinping’s China. His gov-ernment is imposing a “politi-cal re-education” campaign inthe Xinjiang Uyghur Autono-mous Region, targeting theUyghur Muslim population,Kazakhs and other ethnicMuslim minorities.

Xinjiang today is “a policestate to rival North Korea, witha formalized racism on the or-der of South African apart-heid,” wrote one expert. Its res-idents make up only 1.5% ofChina’s population—but ac-counted for 21% of arrests in2017. This massive increaseover the previous year doesn’tinclude detainees in re-educa-tion centers.

China has detained as manyas one million people in camps.While Chinese authorities denythat such camps exist, satelliteimages show the recent con-struction of massive structuresin Xinjiang. Research fromChina scholar Adrian Zenz de-tails Chinese government pro-curement and construction bidsfor new re-education facilitiesand “upgrades and enlarge-ments” to existing ones.

Security personnel subjectcamp detainees in Xinjiang totorture, medical neglect, soli-tary confinement, sleep depri-vation and other deadly formsof abuse. They also force de-tainees to submit to dailybrainwashing sessions and

China’s Campaign Against Muslim Minoritieshours of exposure to Commu-nist Party propaganda. Theprisoners’ overseers requirerecitation of party slogans be-fore eating.

Outside the camps, Chineseauthorities aggressively sup-press expressions of religiousidentity. Xinjiang residents facedaily intrusions in their homelife, including “home stays”where Communist Party offi-cials live with local families.Chinese authorities prohibit“abnormal” beards and veils inpublic, as well as some Islamicnames. Standard religious prac-tices—abstaining from alcohol,tobacco and pork, or fastingduring Ramadan—provoke theauthorities’ suspicions.

The government has em-braced tools Mao only couldhave dreamed of: big data, irisand body scanners, voice-pat-tern analyzers, DNA sequencers(including some sold by anAmerican company) and facial-recognition cameras. Authori-ties use hand-held devices tosearch smartphones for en-crypted messaging apps andrequire residents to installmonitoring software in theirsmartphones.

Radio Free Asia leads in re-porting on this crisis. In retalia-tion, Chinese authorities havedetained dozens of family mem-bers related to Uyghur journal-ists working for RFA in the U.S.In recent testimony before theCongressional-Executive Com-mission on China, RFA journal-ist Gulchehra Hoja lamented,“It’s a cruel irony that we asjournalists can find out so muchabout what’s happening insideChina’s Northwest, yet so littleabout our own families and

loved ones. We are afraid to askour friends and others there,because any contact and com-munication could endangerthem as well.” China also hasused Uyghurs living in thecountry as leverage to gatherinformation about exiled Uy-ghurs’ activities—or to compelsome to return to China.

China largely has avoidedconsequences for this repre-hensible behavior. It no longershould.

The U.S. should apply GlobalMagnitsky Act sanctions againstXinjiang Communist Party Sec-retary Chen Quanguo. A Polit-buro member, he first gainedexperience with repression inTibet. His tenure as party chiefin Xinjiang has coincided withthe proliferation of re-educationcamps, and he is seen as an in-novator in his dark craft.

All government officials andbusiness entities assisting themass detentions and surveil-lance in Xinjiang should facesanctions too. The Commerceand State departments shouldadd Chinese state securityagencies to a restricted end-user list to ensure that Ameri-can companies don’t aid Chi-nese human-rights abuses.

Consistent with the admin-istration’s commitment to“reciprocity” in relations withChina, the U.S. should denyvisas to executives and ad-ministrative staff of Chinese

state-run media companies op-erating on American soil untilall family members of RFAjournalists are released.

Secretary of State MikePompeo raised the plight ofRFA reporters and their fami-lies in July. Vice President MikePence has discussed the crisispublicly too. But words must befollowed by action. State shouldwork with like-minded govern-ments to increase public pres-sure against China at the UnitedNations and other multilateralinstitutions. The Organizationof Islamic Cooperation andmany Muslim-majority nationshave remained virtually silent,perhaps for fear of upsettingChina. If the U.S. takes a bolderstance, other nations shouldn’tbe afraid to follow.

Stability in Xinjiang is cru-cial to Mr. Xi’s Belt and RoadInitiative. Public condemna-tion of China’s human-rightsrecord, including its treatmentof religious and ethnic minori-ties in Xinjiang, would be mostunwelcome.

Despite its efforts to proj-ect a benevolent image aroundthe globe, the Chinese Com-munist Party remains repres-sive, brutal and utterly intol-erant. Consider what oneofficial reportedly said aboutthe “political re-education”campaign in Xinjiang: “Youcan’t uproot all the weeds hid-den among the crops in thefield one by one—you need tospray chemicals to kill themall.” American leaders mustfind the political will to con-front this evil.

Mr. Rubio, a Republican, is aU.S. senator from Florida.

The suppression ofthe Uyghurs deservesthe world’s attention.

HOUSES OFWORSHIPBy MarcoRubio

To serve inthe Trump ad-ministrationis to deservehazard pay,and latelythat’s espe-cially true ofInterior Sec-retary RyanZinke.

The green-industrial complex claimedScott Pruitt’s scalp lastmonth, ginning up a storm ofethics allegations that forcedhis resignation as adminis-trator of the EnvironmentalProtection Agency. Now ithas shifted focus to Mr.Zinke. But it’s hitting walls.Mr. Zinke isn’t giving his de-tractors easy opportunities.He has aides who know andfollow the rules, and backingin the White House and inCongress.

Not that the incoming ispleasant. Few movements arebetter funded and coordinatedor more messianic than theenvironmental left. They de-spise a Trump team that iscorrecting decades of back-ward energy and environmen-tal schemes and are workingfuriously to bring down the re-formers. Unlike green groupsof 20 years ago, which focusedon policy, today’s effort is fo-cused almost entirely on per-sonal destruction.

Mr. Zinke’s antagonists in-clude the usual big-dollar or-ganizations, like the NaturalResources Defense Council,many of which are now staffedor run by former Obama offi-cials; self-described watchdog

They Won’t Sink Zinkegroups like the Western Val-ues Project, that are closelytied to major environmentaland labor groups; and con-gressional allies such as Dem-ocratic Rep. Raul Grijalva ofArizona, who call daily for in-vestigations. The coalitionproduces an assembly line ofallegations, which the main-stream media dutifully passalong.

Their problem is that theycan’t find any real stink withMr. Zinke. Mr. Pruitt was hitwith an array of allegations,many nonsensical, but whattipped the scale against himwere those in which heseemed to be using his posi-tion for gain or wasting tax-payer dollars. The critics havetried desperately to do thesame to Mr. Zinke, with noluck.

One claim was that he se-cretly arranged a Puerto Ricocontract for an energy firmfrom Whitefish, Mont., hishometown. The Interior De-partment’s Office of InspectorGeneral tells me it neveropened an investigation, andeven Democrats have droppedit in embarrassment.

Mr. Zinke’s foes more re-cently claimed he has mis-used his office to promote aland development in White-fish. But the story involves afoundation from which Mr.Zinke resigned upon becom-ing secretary, and a projectthat has been on the table forages.

The groups have also triedto go after him on spending,including three charteredflights. But the inspector

general found Mr. Zinke hadfollowed “relevant law, policy,rules and regulations.” It alsofound all the trips were “rea-sonable,” save one—and Mr.Zinke’s staff wasn’t to blamesince it received prior ap-proval from ethics officials forevery flight. Then there hasbeen the attempt to claim heviolated the Hatch Act by at-tending political events whileout on official duties. The U.S.

Office of Special Counsel (apermanent government bodythat monitors federal person-nel issues) in May said Mr.Zinke had done everything le-gally. Every “scandal” is ofthis type; lots of smoke, butnever any fire.

Mr. Zinke has an added as-set in Deputy Secretary DavidBernhardt, who worked at In-terior during the George W.Bush administration, wherehe went through the ethicsrodeo. Mr. Bernhardt is hiringan unprecedented number ofnew ethics officials, includingin April two ethics gurus,Scott de la Vega and HeatherGottry, who each bring de-cades of expertise. The goalis not only to give the politi-cal team the best guidance,but to ensure better compli-ance across Interior’s 70,000employees.

One final point in Mr.Zinke’s favor: He has supportwithin the administration.One recently departed WhiteHouse official tells me this isin large part because the inte-rior secretary (unlike Mr.Pruitt) is the “consummateteam player,” constantly en-gaged in dialogue with WhiteHouse staff, and in particularwilling to take direction onhow to handle questions andsituations.

And there is respect—inter-nally, in Congress, and at thestate level—for his reform pro-gram, which has been sweep-ing. The department has beenleading the way on swifter,smarter timelines for environ-mental analyses and permit-ting. It is tackling the failedEndangered Species Act, jump-starting oil and gas develop-ment on federal lands, makingsure public lands are onceagain for “public use” by all,and working to cut an enor-mous maintenance backlog inthe national parks.

All of this is why he willcontinue as the environmentalleft’s top target—they despiseany plan that envisions ourpublic lands for “the benefitand enjoyment of the people”(Teddy Roosevelt’s words atYellowstone). Expect to seemore headlines suggestingMr. Zinke is corrupt. Butknow that those headlinesdon’t come via fact or reasonor policy debate. They comeout of a known take-downstrategy from the left—andone to which Mr. Zinke andhis team are on guard.

Write to kim@wsj.com.

Environmentalistswill find the interiorsecretary a hardertarget than Pruitt.

POTOMACWATCHBy KimberleyA. Strassel

A14 | Friday, August 10, 2018 THEWALL STREET JOURNAL.

Health Care: A Good Return for 18% of GDP?Charles Blahous’s new study claims

that Sen. Bernie Sanders’s “Medicarefor All” plan would cost $32.6 trillionover 10 years (“Even Doubling TaxesWouldn’t Pay for ‘Medicare for All,’”op-ed, Aug. 2). Even accepting thatthis estimate is correct (and Sen.Sanders has disputed it), that is not animpossible burden for an economy likeours. Len Burman and his colleagueshave estimated that a 1% federalvalue-added tax would raise $100 bil-lion a year. A 25% federal VAT plus a3% increase in the top federal income-tax rate (from 37% to 40%) would beadequate to fund Medicare for Alleven under Mr. Blahous’s assumptions.This is similar to the tax rates in manyEuropean and OECD countries. More-over, the resulting reduction in theburden on U.S. businesses would givea significant boost to the U.S. econ-omy. We should not let Mr. Blahous’sbig numbers scare us away from pur-suing this opportunity to join the restof the developed world in providingadequate health care for all our citi-zens.

PROF. REUVEN S. AVI-YONAHThe University of Michigan

Ann Arbor, Mich.

To me, Medicare for All means anefficient, competent and ethical medi-cal system run by the government,that is highly regulated, somewhat likethe U.S. military: a nonprofit systemwith discipline. Administrativecharges and unnecessary procedureswould be minimized and incomes ad-justed to reflect the training andworkload. Everyone would be covered,as our military protects us all. Ofcourse, lots of doctors, hospitals, sur-gicenters and drug companies wouldmake less money, as in the world’sother developed countries.

MEL VIGMAN, M.D.Summit, N.J.

One problem with an expanded$32.6 trillion Medicare obligation isthat paying for the current Medicareprogram is already straining the fed-eral budget, with Medicare trusteeswarning that projected outlays will ex-ceed funding sources by nearly 50%within seven years. The Medicaretrust fund that pays for hospital careis projected to run out of moneywithin eight years. What could possi-bly go wrong if another quarter-billionAmericans crowd into the Medicaremansion?

Medicare for All would eliminatethe higher private-insurance paymentsthat health-care providers receive andthat subsidize low-margin or below-cost services to Medicare and Medic-aid patients. When subsidies disap-pear, health-service providers willadjust to less income, retire from thepractice of medicine or switch to con-cierge services for more affluent

Americans. Even if Washington comesup with the tax revenue needed tokeep the new health-care system go-ing, the supply of providers willshrink. The rich will have doctors oncall, and one guesses that politicianswill have special access to better care.

GARY ROBERTSONTampa Bay, Fla.

Medicare currently works not onlybecause of coverage limitations butbecause its business model requirespayments for 40 years before any ben-efits.

BRIAN R. MERRICKWest Barnstable, Mass.

Even if the political wherewithal ex-isted to come up with the money, it’shighly unlikely that America’s cur-rently existing health-care infrastruc-ture could accommodate such an ex-pansion, let alone prevailing consumerexpectations.

The new and sophisticated facilitiesbeing built largely reflect the continu-ing march toward specialization in theU.S., not the provision of basic medicalservices which underlie universalhealth-care systems elsewhere. Thereis a much closer to even split of gener-alists to specialists in universal health-care countries than in America. U.S.efforts to increase the number of gen-eralists or primary-care providers, atleast since the late 1980s, have failedmiserably.

Reformers should focus on provid-ing basic health-care services to thosewho have none.

CARL F. AMERINGER, PH.D.Nellysford, Va.

Even with assumptions that mostlikely underestimate administrativeand pharmaceutical savings, CharlesBlahous’s paper indicates a decrease intotal health-care spending under a sin-gle-payer model. While it’s true thatgovernment spending would be sub-stantially increased, the total amountwe as a nation pay for health carewould be less, even while coveringmore people with expanded benefits.

The U.S. pays more for health care,whether measured on a per capita ba-sis or as a portion of GDP, than everyother nation on Earth. It is clear weare not using resources wisely. Mr.Blahous is correct in stating that thereneeds to be a “serious national discus-sion about [Medicare for All’s] vastcost.” What he fails to mention is thatvast costs are already happening andare worsened by the structure of ourhealth-care system. Single-payer is aneconomically viable alternative thatwill save more lives, end more physi-cal suffering, ease financial hardshipand help our businesses be more com-petitive.

JOHN PERRYMAN, M.D.St. Charles, Ill.

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.

“Please stop sayingit’s all about the journey.”

THEWALL STREET JOURNAL

Pepper ...And Salt

Protect the Grid Now or Face Disaster LaterRegarding “U.S. Steps Up Grid De-

fense” (page one, Aug. 6): Strongerpenalties sound good superficially,but how many Russian, Chinese orNorth Korean hackers do you thinkwill be extradited and brought tojustice?

Our nation’s economy is inextrica-bly tied to the internet. Retail, bank-ing and securities markets are allweb-based to one degree or another.The internet has fueled unprece-dented growth and competition.

But it also exposes our country tonew and potentially devastating vul-nerabilities. As you note, hostileforces are knocking at the door of ourelectrical grids. Just two weeks with-out electricity in major populationcenters could lead to dangerous in-stability and civil unrest.

Our courts and local governmentsare being asked to pay ransoms to re-trieve hijacked data systems. Our in-tellectual property is stolen. Mostpeople live in fear of identity theft.And I don’t think I need to describeelection interference that threatensthe core of our democratic values. Itis reasonable to assume that the nextgreat international conflict will likely

be fought, at least in large measure,on the cyberspace battlefield.

When our nation faced the scourgeof terrorism after 9/11, we created theDepartment of Homeland Security. Itlet our citizens know that organizedand concerted efforts were beingmade to keep them safe. It also sent aclear message of our resolve to ourenemies. The time has come to againconsider a stand-alone national de-partment of cybersecurity. We havethe greatest IT minds in the world.We can establish an agency with theworld’s best IT talent (hopefully withthe funding this would require).

CRAIG MAYTONColumbus, Ohio

Punishment after the fact is likeclosing the door after the horses gotout. We need to be proactive andharden not only cyberspace but alsoour entire infrastructure. An electro-magnetic pulse can take out every-thing all at once. Russia, China andNorth Korea all have the ability to dothis. The cost is about $3 billion toharden our infrastructure nationwide.Yet Congress fiddles. One day Romewill burn.

SUSAN BRENNANTequesta, Fla.

New Wage Will Raise CostsJason Riley’s “Does the Constitu-

tion Mandate Minimum Wage Hikes?”(Upward Mobility, Aug. 1) overlooksone consequence that is often ig-nored: higher prices. The majority ofpoor people won’t see any rise intheir incomes, but will see higherprices in the fast-food places, grocerystores and discount outlets that theyfrequent. This is certainly not theonly example of policies that claim tohelp the poor ending up doing mostof them more harm than good.

GREGORY BUSHAnnapolis, Md.

Corruption and Double Standards

D emocrats and their media friends havefound what they think will be a killerpolitical theme this fall: Corruption in

Washington. Yet this suddenpassion for political virtuecould use some context, notleast amention of Bob Hugin’scampaign against disgracedDemocratic Senator Bob Me-nendez in New Jersey.

“The Chris Collins indictment ensures eth-ics will be a major issue in the midterms,” de-clared a headline in the Washington Post onTuesday. Mr. Collins, a GOP Congressman fromupstate New York, was indicted Thursday forinsider trading. The Congressman is accusedof leaking news to his son Cameron about afailed clinical trial for a drug made by InnateImmunotherapeutics Ltd. The indictment saysCameron Collins then sold shares to avoidsubstantial losses.

Mr. Collins promptly declared his innocenceand isn’t resigning his seat, though HouseSpeaker Paul Ryan removed him from the En-ergy and Commerce Committee. The indictmentis compelling, but insider-trading cases broughtby the U.S. Attorney for the Southern Districthave a mixed trial record.

Democrats aren’t waiting for trial. “Thecharges against Congressman Collins show therampant culture of corruption and self-enrich-ment among Republicans inWashington today,”declared House Democratic leader Nancy Pelosi.Look for columns in the Post and other mediaamplifying the theme.

Yet political corruption is hardly partisan,and in recent years as many Democrats havebeen rung up as Republicans. There’s Floridaethicist Corrine Brown, who served in Congressfrom 1993 to January 2017 but is now servingfive years in federal prison for defrauding acharity. She’s appealing her conviction and stillgetting her congressional pension.

Or recall Chaka Fattah, an 11-term Memberfrom Pennsylvania, who was convicted in 2016for racketeering, money laundering and fraud.He’s serving a 10-year sentence.

And if candidates running for re-election thisyear are the issue, the poster politician for cor-ruption is surely RobertMenendez. Prosecutorsdropped corruption charges against the Senatorthis year only after a jury couldn’t reach a unan-imous verdict.

The charges included favors Mr. Menendezdid for a campaign contributor and friend, Salo-monMelgen, who has been convicted of Medi-

care fraud, in return for perkslike three nights at a five-starParis hotel. The Senator lob-bied regulators to changeMedicare rules to help Mel-gen’s company and he helpedthe doctor’s girlfriends get vi-

sas to stay in the U.S.Mr. Menendez barely escaped conviction

thanks to the higher quid-pro-quo corruptionstandard established by the Supreme Court inMcDonnell v. U.S. in 2016. He might be in jailnow if the Obama Administration had agreedto changeMedicare for his buddy. And in Aprilthe Senate Ethics Committeemore or lessmadethat point when it examined the charges and“severely admonished”Mr.Menendez for abus-ing his office.

“The Committee has found that over a six-year period you knowingly and repeatedly ac-cepted gifts of significant value fromDr.Melgenwithout obtaining required Committee ap-proval, and that you failed to publicly disclosecertain gifts as required by Senate Rule and fed-eral law,” the committee said in a letter to Mr.Menendez, adding:

“Additionally, while accepting these gifts,you used your position as aMember of the Sen-ate to advance Dr. Melgen’s personal and busi-ness interests. The Committee has determinedthat this conduct violated Senate Rules, federallaw, and applicable standards of conduct.”

Is this also part of the “rampant culture ofcorruption,” Mrs. Pelosi?

Republican BobHugin, a former biotech CEO,is running against Mr. Menendez this year. Mr.Hugin is largely self-financing his campaign,which Democrats claim to like for reducing therisks of corruption. Mr. Hugin has moderateviews on taxes, health care and social issuesthat fit the New Jersey electorate.

If their ethics and corruption campaign hada scintilla of sincerity, liberal columnists wouldbewriting in favor ofMr. Hugin theway conser-vatives supported Democrat Doug Jones againstRoyMoore’s Senate campaign in Alabama lastyear. But Democrats and their media echoesaren’t really worried about corruption. Theirpose is a tactic to regain power. Meet the newswamp creatures, same as the old.

Funny, the left’s anti-corruption campaignignores Bob Menendez.

A Looming Trade Lesson

A merica lost more than three-fourths ofits textile-mill jobs between 1991 and2016. “One of my main objectives was

to bring those opportunitiesback,” says Gary Heiman,president and CEO of Cincin-nati-based Standard Textile.Mr. Heiman has succeeded,creating around 400 jobs intwo Southern towns, but nowthe Trump tariffs are threatening to drivethose jobs back overseas. That’s the oppositeof what Mr. Trump claims is happening dueto his tariffs.

Standard Textile specializes in makingsheets, towels and other reusable fabric prod-ucts for hospitals and hotels. Since 2002 thecompany has invested some $66 million inAmerican manufacturing facilities and equip-ment in Union, S.C., and Thomaston, Ga.

Workers don’t need a college degree, andStandard Textile provides on-the-job trainingfor anyonewho shows the right attitude and ap-titude to work. Employees earn an average of$44,000 a year in salary and benefits—wellabove themedian household income of $35,000in Union and $27,500 in Thomaston.

A raw fabric known as greige is StandardTextile’s main input, and the company buysabout $30million worth from China each year.Workers at the Union facility scour, bleach, dyeand finish the cottonmaterial, sending rolls ofthe fabric to Thomaston for cutting, sewing andpackaging. But in July the Trump Administra-tion proposed raising tariffs by 10% on $200 bil-lion of Chinese goods—greige included. On Aug.1 President Trump directed the U.S. Trade Rep-resentative to lift the tariff to 25%.

That increase would put Standard Textile ata major disadvantage against foreign competi-tion. The company paid $2.9 million in duties

for greige last year, and thiswould add up to $7.5 millionmore to its manufacturingcosts. Finished textiles madeby Chinese workers wouldcontinue to face the old tariffof 6.7%.

Mr. Heiman says the increased tariffs ongreige would be such a burden that it couldforce him to shut down some of his Americanmanufacturing plants, lay off hundreds of work-ers, and move operations overseas.

Mr. Trumpwon amajority of votes in Unionand Thomaston in 2016. Russ Ogle, a plantman-ager at Standard Textile’s Union facility, says thePresident’s proposed tariffs have left his work-ers feeling bewildered. “The mantra for theTrump election, the promises, were bring backjobs to the United States, and particularly, man-ufacturing jobs,” Mr. Ogle says, adding:

“We’re here trying to fight the battle, to becompetitive against lower-wage-paying coun-tries around the world. And this tariff and itspossible consequences would be devastating—absolutely devastating. Not only the loss of in-come, but the senselessness of it. This policycreates an unfair advantage for companies thatare sourcing finished products from overseasat the expense of Americanmanufacturers andjobs. We aren’t asking for any handouts, just alevel playing field.”

Hundreds of companies are asking similarquestions as they cope with the harmful conse-quences of his tariffs that Donald Trumpdoesn’t like to talk about.

Tariffs threaten the jobsthat Standard Textilebrought back to the U.S.

Maduro Rounds Up More Non-Suspects

V enezuelan dictator Nicolás Maduro isat least predictable. After a drone car-rying explosives blew up over a mili-

tary parade where he wasspeaking on Saturday, his crit-ics said he would use the inci-dent to unleash a crackdownon opposition politicians. Cuethe security police.

According to press reports,a group calling itself Soldiers in T-shirts hasclaimed responsibility for the drone attack.That’s an apt name because the soldiers wereinept if they planned Saturday’s fiasco. But onTuesday Mr. Maduro gave a two-hour speechin which he alleged that some of the first sixdetained suspects had laid the blame for thedumb drone on two democratically electedmembers of the National Assembly.

Mr. Maduro shuttered that legislative bodylast year because it was controlled by the op-position. He replaced it with a pro-governmentlegislature. But some oppositionmembers havestubbornly continued to practice politics in thepublic square, and they have a following dueto the dire circumstances of everyday Venezue-lan life. This irritates Mr. Maduro, his fellow

rulers in the one-party state and his Cuban in-telligence handlers.

Mr. Maduro claims that one of the culpritswho backed Saturday’s droneexplosion is Julio Borges, amember of the oppositionJustice First party. An arrestorder for Mr. Borges hasbeen issued but not executedbecause he lives in exile in

Colombia.But the other accused man, 29-year-old

Juan Requesens also of Justice First, was de-tained along with his sister Rafaela, a studentleader, on Tuesday. Justice First tweeted that“fourteenmen of the SEBIN [state intelligence]forcefully kidnapped” the two. Ms. Requesenswas later released unharmed but the congress-man remains detained. His family says they donot know his whereabouts.

As evidence of Mr. Requesens’s supposedculpability, Mr. Maduro showed a video duringhis Tuesday speech, featuring what he allegedwas a National Guard official, face blurred,naming Mr. Requesens as a suspect. Venezue-lans knowwell that his real crime is oppositionto the Maduro-Cuba regime.

Venezuela’s dictatoruses the drone explosionto jail opponents.

REVIEW & OUTLOOK

OPINION

THEWALL STREET JOURNAL. * * * * Friday, August 10, 2018 | A15

America is the world’s mostprosperous large country,but critics often attempt totarnish that title by claim-ing income is distributed

less equally in the U.S. than in otherdeveloped countries. These criticspoint to data from the Organizationfor Economic Cooperation and Devel-opment, which ranks the U.S. as theleast equal of the seven largest devel-oped countries. American progres-sives often weaponize statistics likethese to urge greater redistribution.

But the OECD income-distributioncomparison is biased because the U.S.underreports its income transfers incomparison to other nations. Whenthe data are adjusted to account forall government programs that trans-fer income, the U.S. is shown to havean income distribution that alignsclosely with its peers.

The OECD measures inequality bydetermining a country’s “Gini coeffi-cient,” or the proportion of all in-come that would have to be redistrib-uted to achieve perfect equality. Anation’s Gini coefficient would be 0 ifevery household had the same

The Myth of American Inequalityamount of disposableincome, and it wouldapproach 1 if a singlehousehold had all ofthe disposable income.The current OECDcomparison, portrayedby the blue bars in thenearby chart, showsGini coefficients forthe world’s most-de-veloped large coun-tries, ranging from0.29 in Germany to0.39 in the U.S.

But there are varia-tions in how each na-tion reports income.The U.S. deviates sig-nificantly from thenorm by excludingseveral large govern-ment transfers to low-income households.Inexplicably, the Census Bureau ex-cludes Medicare and Medicaid, whichredistribute more than $760 billion ayear to the bottom 40% of Americanhouseholds. The data also exclude 93other federal redistribution programsthat annually transfer some $520 bil-lion to low-income households. Theseinclude the Children’s Health Insur-ance Program, Temporary Assistancefor Needy Families and the SpecialSupplemental Nutrition Program forWomen, Infants and Children. Statesand localities directly fund another$310 billion in redistribution pro-grams also excluded from the CensusBureau’s submission.

This means current OECD com-parisons omit about $1.6 trillion in

annual redistributions to low-in-come Americans—close to 80% oftheir total redistribution receipts.This significantly skews the U.S.Gini coefficient. The correct Ginishould be 0.32—not 0.39. That putsthe U.S. income distribution in themiddle of the seven largest devel-oped nations—the red bar on thechart.

Gini scores for other countries inthe OECD ranking also might shiftwith better data: The OECD doesn’tpublish transfers by income level forother countries. But the change in in-come distribution for other countrieswould likely be less drastic. The poor-est fifth of U.S. households receive84.2% of their disposable income

from taxpayer-fundedtransfers, and the sec-ond quintile gets57.8%. U.S. transferpayments constitute28.5% of Americans’disposable income—almost double the 15%reported by the Cen-sus Bureau. That’s abigger share than inall large developedcountries other thanFrance, which redis-tributes 33.1% of itsdisposable income.

The U.S. also hasthe most progressiveincome taxes of itspeer group. The top10% of U.S. house-holds earn about33.5% of all income,but they pay 45.1% of

income taxes, including Social Secu-rity and Medicare taxes. Their shareof all income-related taxes is 1.35times as large as their share of in-come. In Germany, the top 10% pay1.07 times their share of earnings.The top 10% of French pay 1.1 timestheir share.

If the top earners pay smallershares of income taxes in othercountries, everybody else pays more.The bottom 90% of German earnerspay a share of their nation’s taxes onincome 77% larger than that paid bythe bottom 90% of Americans. Thebottom 90% in France pay nearlydouble the share their Americancounterparts pay. Even in Sweden—the supposed progressive utopia—

the top 10% of earners pay only 5.9%of gross domestic product in in-come-related taxes, 22% less thantheir American peers. The bottom90% of Swedes pay 16.3% of GDP intaxes on income, 77% more than inthe U.S.

Even these numbers understatehow progressive the total tax burdenis in America. The U.S. has no value-added tax and collects only 35.8% ofall tax revenues from non-income-taxsources, the smallest share of anyOECD country. Most developed coun-tries have large VATs and collect afar larger share of their state reve-nue through regressive levies.

When all transfer payments andtaxes are counted, the U.S. redistrib-utes a larger share of its disposableincome than any country other thanFrance. Relative to the share of in-come they earn, the share of incometaxes paid by America’s high earnersis greater than the share of incometaxes paid by their peers in anyother OECD country. The progressivedream of an America with massiveincome redistribution and a highlyprogressive tax system has alreadycome true. To make America evenmore like Europe, these dreamerswill have to redefine middle-incomeAmericans as “rich” and then doubletheir taxes.

Mr. Gramm, a former chairman ofthe Senate Banking Committee, is avisiting scholar at the American En-terprise Institute. Mr. Early servedtwice as assistant commissioner atthe Bureau of Labor Statistics and ispresident of Vital Few LLC.

By Phil GrammAnd John F. Early

Taxes and transfers inthe U.S. put its incomedistribution in line withits large developed peers.

OPINION

WhatsApp Gets a Bum Rap for an Indian Murder EpidemicIs WhatsApp respon-sible for dozens ofmurders in India thisyear? Critics of thepopular Facebook-owned messagingservice blame it for aspate of lynchings,often sparked by lu-rid rumors of child-abduction gangs.

Stung by bad pub-licity and a public rebuke by the Indiangovernment, WhatsApp has rushed toput the brakes on viral content, edu-cate the Indian public about rumors,and understand the country’s fake-news problem. All good, but it ob-scures a larger point. This is a complexproblem that spans education, law en-forcement and public order. The prob-lem is not WhatsApp. It’s India.

The rumors leading up to a lynchingcan take several forms. It could be avideo of grainy security-camera foot-age that purportedly shows two kid-nappers on amotorbike whisking awaya small boy. Or it could be a photo of

two unidentified women labeled aschild traffickers. In a charged environ-ment, word that strangers offered chil-dren chocolates can be enough to ginup a murderous crowd. Since April,mobs have bludgeoned to death atleast 28 people in 11 Indian states.

In July villagers killed five itineranttribal men they mistakenly suspectedof child abduction in the western stateof Maharashtra. The Indian govern-ment took notice—of WhatsApp. In astatement, the Ministry of Electronicsand Information Technology expressed“deep disapproval” of “irresponsiblemessages” circulated on the serviceand “conveyed in no uncertain termsthat WhatsApp must take immediateaction to end this menace.”

With at least 200 million users, In-dia is WhatsApp’s biggest market.Since the end of June the companyhas rolled out measures to put aclamp on viral rumors and tampdown criticism that it’s insensitive tothe deaths.

In India, users will no longer see abutton designed to make it easy to

forward photos or videos. An Indianuser can now forward a message toonly five groups or individuals, downfrom more than 100. Forwarded mes-sages now carry a label to signal thatthey may not be reliable. And Whats-App has armed group administratorswith the power to stop some mem-bers from posting.

The company is running full-pageads in 10 Indian languages warningpeople to “check information thatseems unbelievable” and “be thought-ful about what you share.” A radioand video campaign covers similarterrain. WhatsApp has earmarked $1million for academic grants of up to$50,000 to study misinformation onthe platform. It says it plans to workwith Indian law enforcement officials

and fact-checking sites to curb theproblem.

“We want to help,” says WhatsAppspokesman Carl Woog. “But it’ssomething for government and civilsociety to do as well.”

The desire to help is understand-able. The $19 billion purchase ofWhatsApp in 2014 is Facebook’s larg-est acquisition. With 270 million us-ers, India is also Facebook’s largestmarket. Critics blame Facebook forfailing to curb inflammatory materialthey say has led to violence againstMuslims in neighboring Myanmarand Sri Lanka.

Yet while India’s blaming a foreigntechnology company for a complex do-mestic problem plays well to the gal-lery at home, it makes no sense. Some1.5 billion people in 180 countries useWhatsApp—tens of millions in coun-tries such as Brazil, Indonesia andMexico. But only in India doWhatsAppmessages seem to gin up murderousmobs with regularity.

The government’s focus on technol-ogy reflects a peculiar Indian tendency

to seek silver-bullet solutions for com-plex problems. In 2010 the federal gov-ernment sought to boost education-through a quixotic bid to mass-produce inexpensive tablets forstudents. Never mind that teachers ingovernment schools often do not showup to teach. Police departments haveexperimented unsuccessfully with spe-cial apps for women as a quick fix tothe deeper problem of violence againstthem.

Company executives may be toopolitic to say this, but there’s a rea-son WhatsApp must worry aboutlynch mobs in India and not in Brazil,Mexico and Spain. It has to do withliteracy rates, respect for law en-forcement and familiarity with theInternet, among other things. There’slittle reason to believe things wouldbe very different if 200 million Indi-ans—many of whom are getting on-line for the first time—used Viber orFacebook Messenger instead ofWhatsApp. Blaming WhatsApp for vi-olence is simply a case of shootingthe messenger.

Blaming a tech companyfor a complex domesticproblem makes no sense.

EAST ISEASTBy SadanandDhume

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Cold, Windy Bliss on a Salmon Fishing Trip

E very August I post a “GoneFishin’ ” note in my email’sautoreply and head out to Haida

Gwaii for four glorious days of salmonfishing. Literally “the islands of theHaida people,” Haida Gwaii is the na-tive name Canada assigned in 2010 tothe archipelago formerly known asthe Queen Charlotte Islands. TheCharlottes, as they still are commonlycalled, are about 50 miles west ofmainland British Columbia and 500miles north of Vancouver. We fish offLangara, the northernmost island inthe chain.

Spending the hours between dawnand dusk aboard a 25-foot boat inthe Pacific is not my usual idea ofentertainment. When my husbandfirst invited me to join him and hisson on their annual fishing trip, anyromantic notions I had about fishingwere swiftly dispelled. In HaidaGwaii at midsummer, the sun seldomshines and temperatures rarely ex-ceed 55 degrees. The words “survivalgear”—printed on the crimson lifejackets and black overalls that ourlodge requires every guest to wear—do not inspire confidence.

But Langara’s natural beauty andabundant wildlife are beguiling. Themagic begins during the journey tothe lodge. After a charter flight fromVancouver to the village of Masset

(population 793), we board a heli-copter for the 20-minute trip to Lan-gara, flying right above the treetopsand low over the water. I once spieda pair of sandhill cranes gliding par-allel to the chopper. The lodge con-sists of two barges connected by anetwork of floating docks, includingone that operates as a helipad. Wedon’t touch land again until the re-turn trip to Masset.

Aboard our fishing boat, we canhear the high-pitched whistles ofbald eagles and watch them dive forfish. Pigeon guillemots and rhinoc-eros auklets ride the waves nearby,and once in a while we catch sight ofa puffin. Pods of orcas and hump-back whales are common sights.

The salmon, too, are beautiful.There are five major species of Pa-cific salmon: coho, Chinook, chum,pink and sockeye. We fish for thefirst two varieties. Cohos also areknown as silvers. Chinook is an In-dian name for the species Canadiansalso call spring salmon and Ameri-cans refer to as kings. A Chinookthat weighs more than 30 pounds iscalled a tyee. The word comes fromthe language of the Nuu-chah-nulthpeople of coastal British Columbiaand means “chief” or “great leader.”The proudest moment of my fishingcareer came when I caught my firstand only tyee.

When you have a coho on the endof your line, it’s exhilarating to watchits acrobatic leaps over the surface ofthe water. The Chinook are powerfulfighters. Just when you think you’velanded one, it will dive deep and

force you to keep the battle going—but be careful lest it snap the lineand escape before it’s ready for thenet. The lodge encourages fishermento release salmon above 40 pounds,in the hope that they will propagatemore supersize salmon.

Sea lions are the bane of Langarafishermen’s existence. This wasn’t al-ways so. As recently as a decade ago,man and beast coexisted peaceably.Salmon swim faster than sea lionsand they aren’t part of the mammals’usual diet. But the sea lions in Lang-ara’s waters developed a taste forsalmon after figuring out that thefishermen could catch their lunch forthem. A hooked salmon moves slowlyenough for a sea lion to catch. If youspot a sea lion, chances are it willgrab your fish before you can get itinto the boat. It might even roar upalongside and snatch your salmon as

you are about to net it—a close en-counter with nature that provides itsown special thrill.

Our trip to Langara this summerwas marked by 25-mile-an-hourwesterly winds, adding a rock-’n’-rollbeat to the rhythm of our fishingboat. Landing a salmon is nevereasy, and trying to do so in a pitch-ing boat adds to the challenge. Butthe weather shifted on our lastmorning, and we were rewardedwith a triple-header: Each of us hada coho on the line. It was raining,but no matter. It was a perfect dayto be out on the water. The wind haddied down, the ocean was calm, andthere wasn’t a sea lion in sight.

Ms. Kirkpatrick, a former deputyeditor of the Journal’s editorialpage, is a senior fellow at the Hud-son Institute.

By Melanie Kirkpatrick

British Columbia’s coastalislands offer big catchesand natural beauty.

Better Data for a Better Economy

T he U.S. economy runs on ob-jective, credible and timelydata. For this we depend

largely on three professional gov-ernment agencies: the Bureau of La-bor Statistics, the Bureau of Eco-nomic Analysis and the CensusBureau. Yet for decades the work ofthese agencies has been hamperedby laws and regulations constrain-ing their performance.

The agencies aren’t allowed toshare data with each other to pro-duce statistics, so they release in-formation that is often inconsistent,and they cannot improve it by com-bining forces. Each must survey thesame businesses. Each builds andmaintains a costly information in-frastructure uniquely designed toconduct its computational and pri-vacy-protecting work.

Most other countries have orga-nized their statistical work to pro-duce more harmony and integra-tion. Over many decades, expertpanel after expert panel, convened

by Congress or the president, hasrecommended that these agenciesbe permitted to cooperate. Littlehas happened.

President Trump’s new reorgani-zation plan proposes a solutionthat merits serious bipartisan con-sideration. It would move the Bu-reau of Labor Statistics—the sourceof statistics on jobs, wages, work-ing conditions, productivity andprices—from the Labor Departmentto the Commerce Department.There, it would become a sisteragency to the Bureau of EconomicAnalysis, which tracks gross do-mestic product, personal income,international transactions and cor-porate profits.

It also would become a sisteragency to the Census Bureau, whichtracks population, wholesale andretail sales, manufacturing invento-ries and sales, residential construc-tion, service sector activity, andhomeownership. With the threeprincipal economic statistics-pro-ducing agencies in the same homeand current legal and regulatorybarriers eliminated, real efficiencies

could be gained and data qualitycould be improved.

First, the agencies could share anadvanced computational infrastruc-ture. Second, they could coordinatetheir data requests from businesses,lightening the burden on respon-dents. Third, the agencies could co-ordinate work to improve estimatesof productivity, trade and service-in-dustry activities and could addressemerging issues such as the digitaleconomy. All these advances wouldprovide Americans better informa-tion to make economic decisions.

We think this proposal’s benefitsare clear, and we urge Congress togive it serious consideration. Yetwe must be mindful that a democ-racy needs legal protections thatrequire the production of objectivestatistics without political interfer-ence. All three agencies have thisprotection now; they need to retainit when reorganized.

Ms. Groshen was commissionerof the Bureau of Labor Statistics,2013-17. Mr. Groves was director ofthe Census Bureau, 2009-12.

By Erica L. GroshenAnd Robert M. Groves

A16 | Friday, August 10, 2018 * * * * THEWALL STREET JOURNAL.

WORLD NEWS

BUENOS AIRES—Argentina’sSenate rejected a bill to legalizeelective abortions, delivering asetback to activists in LatinAmerica who hoped the votewould be a major step forwardin loosening the region’s strictantiabortion laws.

“It definitely was a missedopportunity towards decrimi-nalizing abortion,” said TamaraTaraciuk, senior Americas re-searcher at New York-basedHuman Rights Watch, whichsupported the bill.

After hours of debate, theSenate voted 38 to 31 againstallowing legal abortions duringthe first 14 weeks of pregnancy,an issue that sharply dividedthe nation. Opponents of thebill celebrated the decision onthe streets outside Congresswith fireworks as they wavedArgentine flags.

“We’re convinced this isn’tthe right path,” said Inés Brizu-ela, a ruling-party senator whoopposed the bill. “We can’t im-plement as a public-health pol-icy a practice that everyoneagrees is not good. It is harm-ful because it ends the life ofanother being.”

The vote in Argentina wasbeing closely watched through-out the region and as far awayas New York, as approval wouldhave made the country of 44million the most populousLatin American nation to easeits strict antiabortion law. Ar-gentina would have also be-come part of a broader globaltrend that has seen severalcountries loosen abortion re-strictions. Since 2000, 27 of 28countries that have changedtheir abortion laws have doneso to expand legal access to theprocedure, according to theGuttmacher Institute, a U.S. re-search group that supports le-gal abortion.

In Latin America, 97% ofwomen live in countries where

BY RYAN DUBE

EITANABRAMOVICH/AGENCE

FRANCE-PRESSE/GETTYIMAGES

LASZLO

BALOGH/REUTERS

abortion is highly restricted,Guttmacher said. Elective abor-tions are legal in Uruguay, Cubaand Mexico City. There is anoutright ban on abortions in ElSalvador, Honduras, Nicaraguaand the Dominican Republic.

Argentina’s current law al-lows abortions only in caseswhen a pregnancy results fromrape or when a woman’s healthis at risk.

Supporters and opponentsof legal abortion believed ap-proval of the bill would havegalvanized activists elsewherein the region to pressure theirgovernments to expand accessto procedures to end a preg-nancy.

In Argentina, supporters ofthe bill said they would con-tinue a campaign to pressureauthorities to legalize abortion.

“I thought the senators weregoing to listen to the people,”said Sol Haro, a 19-year-oldstudent. “We are going to keepon fighting for its approval.”

The vote was celebrated bymembers of the Catholic

Church, which thanked theSenate for “taking a stand indefense of life.” In Argentina,the home country of PopeFrancis, the church had in-creased its campaign againstthe abortion law after it wasnarrowly approved in June bylawmakers in the lower house.

Evangelicals also rallied againstthe bill.

“In my opinion, life startsfrom conception,” said Fer-nando Bertolani, a psychiatristin Buenos Aires who opposedthe law. “We have to protectit.”

Despite personally opposingabortion, President MauricioMacri had said he would have

signed the bill into law if Con-gress approved it.

In Argentina, the decades-old campaign for legal abortiongained strength following amassive 2015 protest calling forthe end of violence againstwomen. The protest, which wassparked by the murder of a 14-year-old pregnant girl, raisedthe profile of feminist issuesand attracted young people todemonstrate. Backed by a newgeneration of feminists, iteventually led to increased sup-port for legal abortion.

Health officials and rightsorganizations estimate thereare some 500,000 illegal abor-tions in Argentina each year.

Politicians in favor of legalabortion said they would pres-ent legislation again next yearto change the country’s abor-tion law.

“Women have never hadtheir rights given to them,”said opposition senator MaríaMagdalena Odarda, who sup-ported the bill. “The fight willcontinue.”

Supporters of legal abortion huddled outside the National Congress in Buenos Aires on Thursday.

Proponents of legalabortion vow topresent legislationagain next year.

Rocco Buttiglione, a formerItalian cabinet minister andlawmaker with a series of suchparties. “But they weren’tstrong enough in defendingthat identity. They watered itdown in order to attract voteson the left, and that left anenormous void.”

In Eastern Europe, Catholicleaders have responded morefavorably than in Western Eu-rope to efforts by politiciansto link Christian identity tonationalist ideas.

In Poland, where governmentoffices are frequently decoratedwith 2-foot-tall crucifixes, manyCatholic bishops openly sympa-thize with the ruling nationalistparty’s restrictive policies onrefugees. In October, church

leaders supported a massprayer called “Rosaries at theBorder” that implicitly opposedMuslim immigration.

Few Hungarian bishopshave objected as Prime Minis-ter Viktor Orbán recasts Hun-gary as an explicitly Christiancountry, closed to non-Europe-ans and battling what he calls“Muslim invaders.”

Mr. Orbán uses the term“Christian democracy” in a newsense: to describe the “illib-eral” governance he is usheringin—a model he has said was in-spired by more autocratic na-tions like Russia and Turkey.

Many church leaders ex-press support for Mr. Orbán’spriorities, including the anti-migration fence Mr. Orbán had

built along Hungary’s southernborder in 2015.

“I’m in total agreementwith the prime minister,” Hun-garian Bishop Laszlo Kiss-Rigosaid at the height of Europe’smigration crisis in 2015, say-ing the pope “doesn’t knowthe situation....They’re not ref-ugees. This is an invasion.”

Mr. Orbán, a Protestant,showers the Catholic Churchand other denominations withmillions of dollars in directsubsidies, and ends manyspeeches with the Latin ex-pression “soli Deo Gloria” (“toGod alone the glory”).

“It is not good, not healthy,and dangerous,” said BishopMiklós Beer of Vác, one of thefew Hungarian bishops to op-

pose Mr. Orbán’s adoption ofChristian language for nation-alist ends. “Separation ofchurch and state is a very im-portant basic principle.”

The picture is different inWestern Europe. The leader ofthe southern German state ofBavaria recently mandatedthat all state buildings displaya cross. Markus Söder, the Ba-varian premier and a memberof the Christian Social Union,said on Twitter in April thatthe requirement shows a “clearcommitment to our Bavarianidentity and Christian values.”

The move hasn’t reversedthe CSU’s slide in opinion pollsahead of regional elections inOctober, or dented support forthe far-right Alternative for

Germany. But it has drawn firefrom Germany’s leading Cath-olic prelate, Cardinal ReinhardMarx of Munich, another ofPope Francis’ top advisers,who accused the CSU of “ex-propriating the cross.”

“You don’t understand thecross if you only see it as acultural symbol,” CardinalMarx said.

In Italy, the idea of definingChristianity as a part of thenational identity drew supportfrom much of Italian societynot so long ago. In 2009, theEuropean Court of HumanRights ruled that crucifixes inItalian classrooms, where theyhave hung under legislationdating back to the 19th cen-tury, violated the “right of par-ents to educate their childrenaccording to their convictions.”

The ruling drew protestsfrom the Vatican and frompoliticians across the spec-trum who said the crucifix ex-emplified universal valuessuch as human rights. Thecourt reversed its decision twoyears later, reasoning that theItalian policy didn’t amount toa “process of indoctrination,”since a “crucifix on a wall isan essentially passive symbol.”

Mixing church and state hasbecome more divisive in Italyas antiimmigration politiciansadvance and clash with PopeFrancis.

Several of Italy’s high-pro-file church leaders have criti-cized Interior Minister MatteoSalvini, the leader of the anti-immigration League, for bran-dishing the Bible and a rosaryat political events.

The bill that would mandatethe display of crucifixes inItalian government buildingswas introduced by lawmakersfrom the League in March. Itwould cover “all offices ofpublic administration,” includ-ing polling places, prisons,hospitals and airports, thoughit isn’t specific about where inthe buildings the crucifixwould need to be displayed.

The League’s embrace ofChristian symbols is opportu-nistic, said the Rev. RoccoD’Ambrosio, a professor of po-litical philosophy at Rome’sPontifical Gregorian Univer-sity. “It’s a kind of attempt todefend itself, to say ‘we areChristians, we want the cruci-fix in all public spaces, so youcan’t accuse us of not beingChristians.’ ”

—Anita Komuvescontributed to this article.

ROME—Lawmakers in It-aly’s new parliamentary major-ity want a crucifix to hang inevery government building asa “permanent reminder” of thecountry’s Christian identity.

Across Europe, nationalistsand upstart politicians arepromoting the use of Christianimagery as they seek tochange the Continent’s estab-lished politics and define Eu-rope as Christian in reactionto recent Muslim immigration.

Christian symbols have longbeen a visible part of publiclife in much of Europe, but thenew efforts reflect a more em-phatic embrace of Christianityas central to Europe’s identity.

The moves are stoking dis-agreement among Christianleaders and drawing criticismfrom allies of Pope Francis, whosays that Christianity mandatesgenerosity toward immigrants.

“The cross is a sign of pro-test against sin, violence, in-justice and death,” the Rev.Antonio Spadaro, a close ad-viser to the pope and editor ofa Vatican-vetted magazine, LaCiviltà Cattolica (Catholic Civi-lization), said on Twitter lastmonth, in response to the leg-islative proposal by lawmakerswith the League, an anti-immi-gration party. He called theuse of the crucifix for politicalpurposes “blasphemous.” Andhe warned: “Hands off!”

Many antiestablishmentparties, a rising force in Euro-pean politics, say preservingtheir countries’ Christian iden-tity requires sealing Europe offto Muslim immigrants. Theyare pulling voters from main-stream parties that favor amore secular style of politics.

For decades after WorldWar II, parties that identifiedas “Christian Democrats” werea mainstay of center-right pol-itics in Italy, Germany and theNetherlands. But the decline ofthat tradition has opened upan opportunity for nationalistsand far-right parties to claimthe cross as theirs.

“The Christian Democraticparties saw Christian identityas a way to unite their na-tions, not divide them,” said

BY FRANCIS X. ROCCAAND DREW HINSHAW

European Officials Brandish the CrucifixSome religious leadersobject to the mixing ofChristian symbols andpolitics; ‘Hands off!’

Church leaders in Poland supported a mass prayer in October called ‘Rosaries at the Border.’ Below, Matteo Salvini, leader of the anti-immigration League in Italy, holds a rosary last month, left; Hungary’s Bishop Miklós Beer, in front of the cathedral in Vác last year,center; and Germany’s leading Catholic prelate, Cardinal Reinhard Marx of Munich, in Münster, Germany, in May, right.

WOJTEKRADWANSKI/AGENCE

FRANCE-PRESSE/GETTYIMAGES

ArgentineSenateRejectsAbortionBill

key in lobbying foreign gov-ernments to put sanctions onthe Maduro administration.Mr. Borges, who is in exile inneighboring Colombia, deniedallegations he was involvedin the plot.

The move came after a 29-year-old congressman, JuanRequesens, was detained byseveral armed officers of theBolivarian Intelligence Ser-vice, according to his familyand political party. Securityfootage from his apartmentbuilding showed officerstackling him before takinghim away. Minutes later, Mr.Maduro in a televised addresslinked him to the alleged con-spiracy.

“No one in the country orthe world believes this farceof an attack,” Mr. Borges saidin a Twitter message ad-dressed to Mr. Maduro. “Weall know it’s a setup to perse-cute and condemn those whooppose your dictatorship.”

Venezuela’s governmenthas accused the two con-gressmen of being part of anetwork of at least 19 con-spirators. More than sevenpeople, including Mr. Reques-ens, have been arrested.

But Salvatore Lucchese,the former municipal policechief and government detrac-tor, said in an interview inBogotá that none of those ar-rested were part of the loosecoalition of retired and activemilitary officials, as well asstudent activists, he says or-chestrated the attack.

Mr. Lucchese, who says heis a member, added he wasn’tpersonally responsible, butsaid he knew of the plan.

Mr. Maduro said he wouldinclude Mr. Lucchese in theinvestigation.

BOGOTÁ, Colombia—Twoprominent Venezuelan law-makers face treason and ter-rorism charges as PresidentNicolás Maduro broadens acrackdown on political rivalshe has accused of organizingan assassination plot.

Authorities handed downarrest orders as Venezuelanstried to make sense of thedetails surrounding theblasts, caused by a pair ofdrones mounted with explo-sives that purportedly tar-geted Mr. Maduro on Satur-day as he addressed amilitary parade.

Venezuela’s governmenthas pointed its finger at op-position politicians for theattack that injured seven sol-diers, but speculation hasswirled. Adding to the confu-sion, a former police chiefliving in self-imposed exilesaid he was part of a looselyformed dissident groupknown as the “resistance”that plotted the attack,though his assertion couldn’tbe independently verified.

A web of opposition andresistance groups has sprungup to take on the authoritar-ian government, but they of-ten operate in secret, withcross-purposes and there isno clear leadership.

“It’s really hard to knowwhat’s going on right now,”said Hans Wuerich, a formerstudent activist. “But whatwe can see is that the gov-ernment is using the attackto increase its repression.”

On Wednesday, the govern-ment lifted the immunityfrom prosecution usuallygranted to lawmakers to tryJulio Borges, who has been

BY KEJAL VYAS

Venezuela AccusesTwo CongressmenAfter Drone Attack

LUCA

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© 2018 Dow Jones & Company. All Rights Reserved. * * * * * THEWALL STREET JOURNAL. Friday, August 10, 2018 | B1

TECHNOLOGY: WEWORK RAISES AN ADDITIONAL $1 BILLION FROM SOFTBANK B4

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company, their loyal share-holders and wider society.

The trouble is that noneof this applies to Tesla.

It is hard to think of acompany that cares lessabout sucking up to WallStreet than Tesla. Mr. Muskearlier this year rejected“boring bonehead questions”from analysts on his quar-

terly earnings call, the com-pany offers no guidance onquarterly earnings, and ithas frequently and unapolo-getically reported losses farworse than expected (onlytwice has it made a quar-terly profit, both times asurprise.)

Tesla is also part of a se-PleaseturntopageB10

S&P 2853.58 g 0.14% S&PFIN g 0.56% S&P IT g 0.05% DJTRANS g 0.30% WSJ$ IDX À 0.58% LIBOR3M 2.338 NIKKEI (Midday) 22494.33 g 0.46% Seemore atWSJMarkets.com

generating its own obstacles.This week, New York has

passed legislation that couldhamper the Silicon Valleyheavyweights at a crucial mo-ment as they prep for poten-tial initial public offerings ex-pected as early as next year.Some investors and executivesof the companies have pri-vately expressed concern thatNew York’s restrictions couldspur other cities to follow suit.

Wednesday, despite weeksof lobbying by Uber, rival LyftInc. and others, the New YorkCity Council passed a bill tofreeze new issuances of ride-

hailing licenses, a measureMayor Bill de Blasio embraced.

And on Monday, Mr. de Bla-sio signed legislation that wouldrequire Airbnb to disclose to thecity detailed information aboutits hosts, which could wipe outa share of listings by crackingdown on illegal rentals andspooking other hosts.

For now, the hold on newride-hailing licenses might notbe a crushing blow: The freezeis for one year. And New Yorkis unusual in that it requireslicenses, unlike other citiesthat let drivers simply get ap-proved by Uber.

But New York’s measuresshow how regulation remainsan immense risk to tech stars’financial health. Roughly a de-cade after these companieswere founded, cities around theworld are still wrestling withhow to manage their impact.

“These companies have triedto pre-empt a lot of regulationby reaching deals with states,but this move by New York re-ally could empower cities andlocal governments across thecountry to find new ways toregulate them,” said VeenaDubal, an associate professorat University of California’s

Hastings College of the Law.The San Francisco compa-

nies have long fought regula-tion, especially early on as theybarreled into new cities, floutedlocal laws and sparred with taxiand hotel lobbies. They haveovercome some of the regula-tory onslaught—Uber is now innearly 80 countries and took inmore than $7 billion in revenuelast year, while Airbnb is inabout 190 countries andbrought in $2.6 billion in sales.

Investors have valued Uberat around $70 billion on thepromise its app will become the

PleaseturntopageB2

For Uber Technologies Inc.and Airbnb Inc., New YorkCity has been a cradle ofgrowth, with its 8.5 millionresidents and burgeoning techstartup scene.

But the highflying techfirms are also finding thattheir biggest U.S. market is

BY GREG BENSINGER

Tech Hits New York Speed BumpsLocal measures wouldcap licenses for Uberand Lyft, force Airbnbto disclose hosts

INSIDE STREETWISE | By James Mackintosh

Musk’s Slight to ShareholdersThe stock

market hasbeen kind toElon Musk,who has usedand abused

Wall Street in return. His lat-est piece of showmanship—an offer to take electric-carmaker Tesla Inc. private—amounts to a slap in the facefor shareholders. Worse, Mr.Musk’s reasoning for aban-doning Tesla’s listing isflawed at almost every level.The saving grace is that ifthe deal goes ahead, share-holders can bail out by ac-cepting Mr. Musk’s offer at apremium of 23% above Mon-day’s undisturbed price.

The basic argument is in-creasingly deployed by frus-trated executives and self-promoting private-equitygroups: Companies are doingdumb things to meet quar-terly market expectations,and hurting their long-termprospects as a result. Takethe company private and ex-ecutives no longer have tocare about the short term,allowing them to invest forthe long run and help the

Shares in issue200

0

50

100

150

’11 ’12 ’13 ’14 ’15 ’16 ’17 ’182010

Higher Shares, and More of ThemTesla stock has soared even as the share count almost doubled.

’11 ’12 ’13 ’14 ’15 ’16 ’17 ’182010

$400

0

100

200

300

Share price

IPO$17 a share

THEWALL STREET JOURNAL.Sources: Thomson Reuters

Saudi Arabia has pressed in-dependent energy analysts toalter their estimates of its oilproduction, people familiarwith the matter said, a movethat could put it in conflict withother members of the fractious

Organization of the PetroleumExporting Countries.

The world’s largest oil ex-porter has told OPEC it cut out-put in July, according to dele-gates, but estimates from theU.S. government and indepen-dent agencies say it lifted pro-duction—amounting to a hugedifference of as much as half amillion barrels a day.

The data showing differingtrends between official and in-dependent estimates of Saudioutput is set to be publishedMonday in the cartel’s monthlyreport, potentially causingconfusion in trading marketsabout how much oil is reachingconsumers.

“The Saudis have been givingthe impression they know whatthey are doing…They could losecredibility,” said John Hall,chairman of U.K. consultancyAlfa Energy. “It could increasevolatility” in prices, he said.

The kingdom has called someagencies over the past week,asking that analysts changetheir estimates, according topeople familiar with the discus-sions. Some agencies rebuffedthe request but others bowed tothe pressure, they said.

There is no specific require-ment that Saudi Arabia accu-rately report its production, butthe discrepancy is highly un-usual and adds to tensionswithin OPEC over whether toboost output.

Saudi officials told OPEC del-egates last weekend that thekingdom’s production had fallenby 200,000 barrels to 10.29 mil-lion barrels a day in July, ac-cording to energy ministry offi-

cials. Oil prices rose 1.6% in NewYork Monday.

But according to S&P GlobalPlatts, a provider of energy in-formation, Saudi productionrose to about 10.6 million bar-rels a day last month. The En-ergy Information Administra-tion, a branch of the U.S.Department of Energy, reachedthe same estimate.

The number, which Plattssaid it was standing by, would

represent Saudi’s highest levelof production since mid-2016and would exceed an agree-ment it made that year withother oil-producing nations tocut production in order to sta-bilize prices.

The agencies use contacts ingovernments, storage informa-tion and ship-tracking data toprovide what tends to be reli-able data on the kingdom. Withtheir data, “there is no agenda,

there is no ulterior motive,” Mr.Hall said.

The lack of consensus ex-tends to the kingdom itself. ASaudi oil official and an ad-viser said they were told pri-vately the country’s productionis higher than the official fig-ures. Saudi Arabia’s energyministry didn’t return a re-quest for comment.

But Saudi officials say dis-crepancies over the kingdom’s

production reflect dueling polit-ical pressures from the U.S. andIran. The U.S., concerned aboutrising fuel prices, wants SaudiArabia to replace Iranian oil be-cause it is about to ban Tehran’scrude exports under revivedsanctions.

Iran has criticized SaudiArabia for increasing output,alleging it is a way to respondto U.S. pressure rather thanmarket needs.

Saudi Oil-Production Data Sow Confusion

Out of TuneSaudi Arabia and independentexperts disagree on how muchoil the world's largest exporteris pumping.

Sources: Energy InformationAdministration (EIA); JBC; Platts;Organization of the Petroleum ExportingCountries (Saudi estimate)Photo: Ahmed Jadallah/REUTERS

500,000

–300,000

–200,000

–100,000

0

100,000

200,000

300,000

400,000

barrels a day

January February March April May June July

Saudi Arabia's output,difference from Saudi estimateEIA JBC Platts

Saudi Arabia told OPEC it cut oil output in July, but estimates from the U.S. and independent analysts indicate an increase instead.

The Nasdaq Composite In-dex notched its eighth straightsession of gains Thursday,shrugging off declines in theother major U.S. stock indexesin the latest sign that investorsare retaining their faith in ma-jor technology firms.

The 3.46-point gain took theNasdaq to 7891.78, just 41points shy of its record set lastmonth. In part, investors havebeen seeking out shares oftechnology companies as a ha-ven from the continuing tradetensions between the U.S. andChina and other major tradepartners.

In addition, valuationsacross the market have comedown following another strongquarterly earnings season,though price/earnings ratios ingeneral remain in a range thathas been seen only rarely inprevious market cycles. (Pleasesee related article on B12.)

With 82% of S&P 500 techcompanies having reported re-sults, second-quarter earningshave risen 32% from the sameperiod a year earlier—agrowth rate that is nearly onpar with the first quarter.

“As long as the economycan keep growing and spend-ing on technology and soft-ware is buoyant, I’d expect thetech sector to sustain theselevels,” said Dan Morgan, aportfolio manager with Syno-vus Trust.

The Nasdaq index becamesynonymous with pricey techstocks during the internetboom of the late 1990s, but itsadvance to dozens of recordsin recent years has been fueledby a handful of companies gen-erating significant recurringgrowth in profits and reve-nue—and, in many cases, ex-erting a strong competitivehold on lucrative industriessuch as media and retail.

Many investors are bankingthat further gains in the Nas-daq will be driven in part bythe mettle of firms such as Ap-ple Inc., which this month be-came the first U.S. company tosport a $1 trillion marketvalue, and Amazon.com Inc.,which accounts for nearly halfof U.S. online sales.

Not all of those companieshave kept moving up in lock-step: Both social-media com-pany Facebook Inc. andstreaming-video provider Net-flix Inc. suffered double-digitshare-price declines in thepast month following earningsthat were deemed disappoint-ing by Wall Street.

BY MICHAEL WURSTHORN

NasdaqExtendsWinningStreak

Corp., a defunct Canadian goldminer that filed the legal ac-tion, is trying to collect on ajudgment over lost miningrights involving Venezuela’sgovernment. It has targetedCitgo, an oil refiner, becausethis is the largest U.S. asset ofthe cash-strapped and crisis-riven country.

Many other creditors ofVenezuela also are circlingCitgo, but Crystallex is thefirst to win a judgment autho-rizing its seizure. Crystallexhad argued that Citgo was ul-timately owned by PdVSA,which is an “alter ego” of Ven-ezuela that is liable for theSouth American country’sdebts. The judge’s decision infavor of Crystallex allows it totake control of shares ofCitgo’s U.S.-based parent com-pany, the first step toward asale of the company.

Venezuela and its variousstate-controlled entities to-gether have $62 billion of un-secured bonds outstanding,with approximately $5 billionso far in unpaid interest andprincipal. Analysts estimatethat the government has ap-

PleaseturntopageB2

A U.S. federal judge autho-rized the seizure of Citgo Pe-troleum Corp. to satisfy aVenezuelan government debt,a ruling that could set off ascramble among Venezuela’smany unpaid creditors towrest control of its only obvi-ously seizable U.S. asset.

Judge Leonard P. Stark ofthe U.S. District Court in Wil-mington, Del., issued the rul-ing Thursday. However, his fullopinion, which could includeconditions or impose furtherlegal hurdles, was sealed. A re-dacted version is expected tobe available at a later date.

The court order raises thelikelihood that Venezuela’sstate oil company, Petróleosde Venezuela SA, will losecontrol of a valuable externalasset amid the country’s deep-ening economic and politicalcrisis. The decision could stillbe appealed to a higher, fed-eral court.

Attorneys for PdVSAweren’t available for comment.Citgo declined to comment.

Crystallex International

BY ANDREW SCURRIAAND JULIE WERNAU

Court Clears SeizureOf Venezuela’s Citgo

By Summer Saidin Cairo

and Benoit Fauconin London

B2 | Friday, August 10, 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.

AAdidas..................B3,B12Advance Publications.B3Aeroflot-RussianAirlines .....................A1

Airbnb..........................B1Albertsons...........B3,B12Alcoa............................B6Alphabet....................B12Amazon.com...B1,B3,B12Apple......................B1,B4AT&T............................A4

BBlackRock..................B10Booking Holdings........B4

CCampbell Soup............B2CBS......................A1,B12CenturyLink...............B11Cerberus CapitalManagement.............B3

Charles Schwab........B10Citgo Petroleum..........B1Comcast.....................B12Crown Resorts............B6Crystallex International.....................................B1

DDean Foods .................B6

EElliott Management...B2

FFacebook..............B1,B12FujiFilm Holdings........B4

GGenentech...................A2Goldman Sachs Group...................................B10

JJPMorgan Chase.......B10

LLPL Financial Holdings.....................................A2Lyft..............................B1

MMonster Beverage....B11

NNational Amusements............................. A1,B12Netflix...........B1,B11,B12News Corp ...........B3,B12Nike......................B3,B12Novartis ......................A4

PPepsiCo........................B2Perrigo.........................B6Petróleos de Venezuela.....................................B1PillPack......................B12

RRite Aid................B3,B12

SSamsung Electronics.....................................B4Sinclair Broadcast Group.....................................B2SoftBank Group..........B4Starboard Value..........B6State Street..............B10

TTesla............................B1Third Point..................B2Tribune Media.............B221st Century Fox......B12

UUber Technologies ......B1United Co. Rusal.........A6

VVanguard Group........B10Viacom...................A1,B2

WWalgreens BootsAlliance..............B3,B12

Walt Disney..............B12WeWork ......................B4

XXerox...........................B4

YYelp..............................B4York CapitalManagement...........B10

INDEX TO PEOPLE

cap on new ride-hail licenses,the city also will set a mini-mum wage for drivers.

The ride-hailing companiessay New York’s measurescould drive up prices andmake it harder for people inlower-income neighborhoods.

Uber on Thursday said itplans to lobby Mr. de Blasio for“comprehensive congestionpricing” to relieve traffic is-

sues. Lyft declined to comment.Airbnb, for its part, has

built a business valued by in-vestors at $31 billion by en-abling people to rent outrooms or entire homes. But itspopularity has a downside forcities: People are buying upproperty to offer short-termrentals, sometimes illegally,straining the housing supplyand driving up prices for

lower-income residents.In New York, the issue re-

volves around a state lawmaking it illegal in most citybuildings to rent an apartmentfor less than 30 days unlessthe tenant is present. To helpenforce the law, the city is re-quiring Airbnb to disclose thenames and addresses of hoststo an agency that can fine thecompany $1,500 for any listingthat isn’t accurately disclosed.

It is a blow to Airbnb in oneof the world’s most tourist-heavy cities, where it countssome 50,000 rental listings.

In San Francisco, as a lawtook effect early this year re-quiring hosts to register,nearly half of the startup’s11,000 listings disappeared.

“Many responsible home-owners are currently facing ag-gressive, unchecked policing,and are fearful of what will hap-pen under this new legislation,”said Josh Meltzer, Airbnb’sNortheast policy chief, in astatement after the New Yorkbill’s passage. The company de-clined to comment further.

Price RiseEquity investors expectingcontinued fast growth haveplowed money into three ofSilicon Valley's closely heldheavyweights.

Valuation, in billions

THEWALL STREET JOURNAL.Sources: Dow Jones VentureSource (Uber, Airbnb); LyftNote: Valuations are for direct equity investments in the companies

$80

0

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40

60

billion

2009 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

Uber$72B

Lyft$15.1B

Airbnb$31Bone-stop shop for urban trans-

portation, driving down faresand pickup times enough to per-suade people to ditch their carsand hail rides—or rent bikesand electric scooters. There arenow about 80,000 ride-hailingvehicles licensed by New York,up from 25,000 three years ago.

But the city argues that alack of regulation for ride-hail-ing, compared with the fixedsupply of yellow taxi medal-lions, has allowed a prolifera-tion of vehicles to clog streets.It capped new ride-hail licenseissuances for at least a year tostudy traffic patterns; if it be-comes permanent, Uber andLyft couldn’t bring more driv-ers on to meet demand.

In addition to the yearlong

Continuedfromthepriorpage

Tech FacesHurdles inNew York

The Last Knight” and “Ghostin the Shell.”

Viacom has been working toturn around its operations asit has dealt with consumersmoving away from cable TVsubscriptions and lacklusterfilm releases.

Bolstered by the box officeperformances of films such as“A Quiet Place” and “BookClub,” the filmed entertain-ment segment’s adjusted oper-ating profit rose to $44 mil-lion in the latest quarter from$9 million a year earlier.

Viacom is also pointing toearly successes from its block-buster “Mission: Impossible —Fallout,” which made its debutin the current period. In itsfirst two weeks, Paramount’s“Fallout” grossed almost $330million, the largest openingamong the six films in theMission Impossible series, Via-com said.

Cord-cutting has hit how

much money Viacom generatesfrom advertising sales andfees from distributors for itsprogramming.

Domestic advertising at Vi-acom fell again in the thirdquarter, dropping 3% to $922million. However, the companysaid the metric improved fromthe prior quarter, helped byhigher prices. Viacom has saidit expects domestic ad revenueto return to growth in itsfourth quarter.

Domestic affiliate revenuefell 3% to $978 million, whileInternational affiliate revenuefell 2% to $175 million.

However, Viacom executivespredicted that domestic affili-ate revenue would return togrowth in the Septemberquarter for the first time inmore than a year, driven byrate increases and the growthof streaming pay-TV bundles.They also expect domestic af-filiate growth would continue

into 2019.“The decline in the Viacom

stock price, as I look at thecharts over the last two years,was fundamentally tied tonegative news in affiliate,”said Viacom Chief ExecutiveBob Bakish on a call with ana-lysts. “And what you’re seeinghere is us coming up the otherside of that, through strategy,through relationships, throughproduct.”

Viacom shares rose 6% onThursday.

Viacom’s profit fell 24% to$522 million, or $1.29 a share.On an adjusted basis, the com-pany reported earnings fromcontinuing operations of $1.18a share, up from $1.17 a sharea year ago. Analysts were ex-pecting adjusted earnings of$1.07 a share.

The company’s year-agoquarterly profit included $285million from a gain on the saleof Epix, a pay-TV network.

Viacom Inc.’s revenue fellin the latest quarter as lowerinternational sales from itsfilmed entertainment division,which includes Paramount Pic-tures, and advertising salesweighed on its top line.

Revenue at Viacom, theprovider of television channelsincluding MTV and Nickel-odeon, declined 3.8% from thesame quarter a year ago to$3.24 billion. Analysts polledby Thomson Reuters expectedrevenue of $3.27 billion.

Viacom’s media networkssegment revenue slipped 2% to$2.5 billion. Filmed entertain-ment revenue fell 9% to $772million, driven in part bylower sales from theaters, li-censing and home entertain-ment outside the U.S. Theyear-earlier period featuredthe releases of “Transformers:

BY ALLISON PRANGAND KEACH HAGEY

Slumping Ad Sales Weigh on ViacomThe company reported a decline in filmed entertainment revenue in its latest quarter. A scene from ‘Ghost in the Shell.’

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Balkin, Mike..............B12

C

Clair, Lee.....................B6

Colyer, Jeff..................A2

D

Deason, Darwin ..........B4

Deripaska, Oleg...........B6

Deutsch, Bob.............B10

Dorrance, Bennett......B2

Dubal, Veena...............B1

F

Fatouros, Bill...............B6

Forester, Matt...........B12

H - I

Hall, John....................B1

Haney, Franklin L........A4

Hendrickson, John......B6

Ianniello, Joseph.......B12

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Jakob, Olivier............B11

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Koh, D.J.......................B4

Kotler, Meredith.........A2

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Lam, Wayne................B4

Loeb, Daniel................B2

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Malone, Mary Alice....B2

Markham, Paul..........B11

McLoughlin, Keith.......B2

Minson, Artie..............B4

Morgan, Dan...............B1

Morrison, Denise........B2

Murdoch, Rupert.......B12

Musk, Elon..................B1

N

Nooyi, Indra.................B2

P

Pavlik, Robert ...........B12

R

Redstone, Shari........B12

Röhrhoff, Uwe.............B6

Ripley, Chris................B2

S

Sauerberg, Bob...........B3

Smith, Charlie...........B11

Smith, Jeffrey.............B6

Standley, John..........B12

Stark, Leonard P.........B1

Strawbridge, George Jr.

.....................................B2

T

Thomson, Robert........B3

W

Warner, Leigh .............B6

rectors months ago. He saidboard members told him inMarch that they disagreed.“Since then, the board mem-bers have refused to engage inmeaningful conversations,” thefiling states.

Mr. Strawbridge is a formerCampbell’s board member.Two of his cousins, BennettDorrance and Mary Alice Ma-lone, remain on Campbell’sboard. All three opposed a callto sell Campbell in 1990.

Campbell said on Thursdaythat its board is examining “allpotential paths forward.” Thecompany said executives willshare details from that reviewwhen Campbell reports quar-terly earnings on Aug. 30.

Third Point and Mr. Straw-bridge didn’t immediately re-spond to requests for com-ment. The Wall Street Journalreported on July 31 that ThirdPoint had built a stake of morethan $300 million in Campbell.

The packaged food industryoverall has seen the departureof many chief executives lately.For example, PepsiCo Inc. CEOsaid Monday that Indra Nooyiis stepping down. Consumersare buying foods perceived ashealthier and less processed,accelerating consolidation andchange at big food makers

Campbell’s interim CEOKeith McLoughlin told employ-ees following Ms. Morrison’sdeparture that as a publiccompany Campbell is alwaysfor sale, but that the boardwas aiming not to sell thecompany.

Activist investor ThirdPoint LLC is pushing for a saleof Campbell Soup Co. with thehelp of an heir to the soupcompany’s founder.

Third Point said in a filingon Thursday that it had spentmore than $686 million sincemid-June, acquiring a 5.65%stake in Campbell.

The investment firm run byDaniel Loeb said that “giventhe significant obstacles” fac-ing Campbell, a sale to an-other food maker is “the onlyjustifiable outcome.”

Campbell’s shares rose 0.7%to $42.28, making ThirdPoint’s stake worth about $716million.

Third Point complained of“years of abysmal oversight”at the soup and snack com-pany. Campbell’s soup saleshave declined over the pastyear while its attempts tomake more fresh food havebackfired.

Campbell Chief ExecutiveDenise Morrison steppeddown in May, and the com-pany said it would conduct astrategic review.

Third Point said its pushhas the backing of GeorgeStrawbridge Jr., the grandsonof the inventor of Campbellcondensed soup, who reportedhis own 2.8% stake in the com-pany in a separate filing.

In his filing, Mr. Straw-bridge said he raised concernswith Campbell’s board of di-

BY MICAH MAIDENBERGAND ANNIE GASPARRO

Activist,CampbellHeirPushSoupMakertoSell

mostly midsize and smallermarkets, and Tribune, with 42stations in major markets, an-nounced their deal in May2017.

Tribune, which has hadother suitors, alleges in itssuit that Sinclair breached themerger agreement by engag-ing in “unnecessarily aggres-sive and protracted negotia-tions” with regulators overtheir requirement that Sinclairdivest stations in certain mar-kets to obtain approval.

The deal structures thatSinclair proposed—whichTribune said were designed toallow Sinclair to maintain con-trol over stations— createdrisks for the deal in violationof the merger agreement,Tribune alleges.

“Our merger cannot becompleted within an accept-able time frame, if ever,” Trib-une Media Chief Executive Pe-ter Kern said in a statement.

On Thursday, Sinclair an-nounced a $1 billion share-buyback program. “It is unfor-tunate that Tribune MediaCompany terminated ourmerger agreement. Nonethe-less, we strongly believe in thelong-term outlook of our com-

pany and disagree with themarket’s current discountedview on our share price,” Sin-clair CEO Chris Ripley said inthe announcement.

Sinclair didn’t respond to arequest for further comment.

During a call to discuss itsquarterly earnings Wednesday,Sinclair had said it was con-tinuing to work with Tribune

to “analyze approaches to theregulatory process that are inthe best interest of our com-panies, employees and share-holders.”

Sinclair is known in its in-dustry for being a tough nego-tiator. But after the FCC’smove, the company denied ithad done anything to misleadthe agency and said its pro-posed spinoffs were “consis-tent with structures that Sin-clair and many other

broadcasters have utilized formany years with the full ap-proval of the FCC.”

Tribune could now be backin play. Others that were pur-suing the Chicago-based com-pany along with Sinclair in-cluded 21st Century Fox andNexstar Media Group Inc.

On Thursday, Tribuneshares rose 2.9% to $34.60,while Sinclair gained 2.6% to$27.80.

Media watchdogs had chal-lenged the deal because ofconcerns that it would put toomany local television stationsunder one roof. But the issuethat led the deal to hit a road-block at the FCC was thestructure of Sinclair’s propos-als to spin off TV stations.

Mr. Pai, the FCC chairman,said evidence suggested thatSinclair’s spinoff proposalswould still leave it in practicalcontrol of those stations “inviolation of the law.”

While Sinclair was givenseveral opportunities to resub-mit its spinoff plans, Mr. Paialso expressed concern abouta possible lack of candor onthe Maryland-based company’spart with regard to the pro-posed transactions.

Tribune Media Co. termi-nated its merger agreementwith Sinclair BroadcastGroup and sued the rival TV-station owner, alleging itfailed to make sufficient ef-forts to get their $3.9 billiondeal approved by regulators.

Last month Federal Com-munications CommissionChairman Ajit Pai said he hadserious concerns about Sin-clair’s submissions as part ofthe agency’s review and sentthe matter to an administra-tive law judge, a severe blowto the merger’s approvalchances.

The suit by Tribune, filed inDelaware Chancery Court onThursday, seeks $1 billion oflost premium to its stockhold-ers and additional damages.

The merger’s collapse andthe lawsuit mark a stunningturn of events for a deal thatwhen it was announcedseemed to have a strongchance of clearing the FCC,which assesses whether mediamergers serve the public inter-est.

Sinclair, which owns morethan 170 television stations in

BY JOE FLINT

Tribune Abandons Sinclair Deal

The media companyaccuses its onetimemerger partner ofslowing FCC approval.

one of the few obvious assetsin the U.S. that can be seizedfor repayment.

The only payment madethis year by Venezuela was$107 million on its PdVSAbonds, due 2020, for whichCitgo is pledged as collateral.That was a clear move by Ca-racas to protect that asset, an-alysts have said.

Without ownership ofCitgo, investors worry PdVSAwould have little incentive tocontinue to pay on the debt

Any sale of Citgo stockwould require U.S. TreasuryDepartment approval, andCrystallex needs to clear otherlegal hurdles before the sharescould be sold.

In trying to lay claim toCitgo, creditors are following afamiliar playbook. Hedgefunds led by Elliott Manage-ment Corp. did somethingsimilar when they went afterArgentine assets followingthat country’s 2001 default,the largest sovereign defaultat the time, on more than $80billion in sovereign debt.

proximately $150 billion totalin debt outstanding to credi-tors around the world.

Venezuela and its state-con-trolled entities includingPdVSA began missing bondpayments last year and havesince spiraled into a wide-spread default. U.S. sanctionsbar creditors from engagingthe Venezuelan government inany kind of restructuring orbuying new debt.

For Venezuela, losing con-trol of Citgo could jeopardizeone of its only remainingsources of oil revenue, the U.S.At the same time, investors inVenezuela’s defaulted debt—aswell at least 43 companiespursuing legal claims againstthe government—risk losing

Continuedfromthepriorpage

Seizure ofCitgo IsAuthorized

THEWALL STREET JOURNAL. Friday, August 10, 2018 | B3

BY WILLIAM BOSTON

CEO Bob Sauerberg said he expects revenue will decline in 2018.

JASONKEMPIN/GETTYIMAGESFORGLAMOUR

BUSINESS NEWS

ball, the company generatedrevenue of €1.08 billion, up16% in currency-neutral terms.Adidas’s revenue in Asia rosenearly 19% to €1.73 billion

Adidas has been playingcatch-up with Nike for years.Although the German chal-lenger has made some biggains and is posting stronggrowth in Nike’s backyard, theU.S. sporting goods maker isstill much larger.

In its May-ended fiscalfourth quarter, Nike generatedprofit of $1.1 billion, an in-crease of 13%, on global reve-nue of $9.8 billion, up 8% on acurrency-neutral basis compa-rable with Adidas’s reporting.

Nike has lifetime deals withsome of the best-known namesin professional sports, such assoccer star Cristiano Ronaldoand basketball greats LeBronJames and Michael Jordan.Nike hosts the NBA legend’s“Air Jordan” brand.

The Nike-Adidas rivalry wason full display at the WorldCup. Adidas had the exclusiverights to put its name on thematch balls and sponsoredmore teams than any otherbrands. But it was Nike’sswoosh that adorned the jer-sey’s of the winning Frenchteam.

—Anthony Shevlincontributed to this article.

BERLIN—Adidas AG’s sec-ond-quarter profit more thandoubled as demand for mer-chandise from the soccerWorld Cup boosted salesgrowth in North America andChina.

The better-than-expectedearnings, reported Thursday,drove the sporting goods com-pany’s stock up more than 7%.The results came as Adidasfaces a fresh challenge on itshome turf from U.S. rival NikeInc., which is establishing aGerman headquarters in Berlinto tap the city’s trendsettingyouth scene.

Adidas’s net income rose to€396 million ($460 million) inthe June-ended quarter, upfrom €158 million in the com-parable period last year. Profitgrowth outpaced that of salesrevenue, which rose 4.4% to€5.26 billion.

The company was amongthe sponsors of the hugelypopular World Cup soccertournament that took placethis summer in Russia. It ben-efited from high sales of itsWorld Cup-branded merchan-dise, Adidas CEO Kasper Ror-sted said.

“We remain firmly on trackto achieve our set targets forthe full year,” he added.

Adidas said double-digitrevenue growth in its name-sake brand offset a decline inrevenue from its Reebokbrand. Sales of Adidas-branded products rose 12% onthe back of strong demand fortraining, running and soccermerchandise. Online channelshave been particularly strong,the company said.

In North America, whereAdidas contends with Nike’sdominance in popular sportssuch as running and basket-

Adidas Enjoys World Cup BounceSoccer tournamenthelps sports-apparelcompany post higherrevenue and profit

The German company’s name was on all World Cup match balls and some team uniforms, though rival Nike also held some rights.

ANTO

NNOVODEREZHKIN/TASS/ZUMAPRESS

2Q 2017 2Q 2018

Asia-Pacific

Western Europe

North America

Latin America

Emerging markets*

Russia/CIS†

€0 billion 0.5 1 1.5 2

Power PlayAdidas posted strong revenue gains in North America and Asia.

Source: the company THEWALL STREET JOURNAL.

*Africa, Turkey, Middle East and Indian subcontinent.†Commonwealth of Independent States

Note: €1=$1.16

ness, and scaling our digitalbusiness,” Mr. Sauerberg said.

Mr. Sauerberg said develop-ing nonadvertising sources ofrevenue is critical as print ad-vertising continues to declineand tech giants dominate thedigital advertising landscape.By the end of 2022, he said,Condé Nast intends for adver-tising to account for half of to-tal revenue; it is currently 70%.

“At a time when Google andFacebook are taking so much admoney out of the marketplace,I’m investing in a more diversi-fied future,” he said. Therecould be painful layoffs ahead,he added, as cost-cutting atCondé Nast continues. “We’regoing to manage our costs as wecontinue to invest,” he said.

Condé Nast has put the titlesBrides, W and Golf Digest onthe market. Mr. Sauerberg saidhe hopes to have signed agree-ments for the three titles byyear’s end. Condé could retainan interest in the golf business,depending on its future owner.

Steve Newhouse, chairman ofAdvance.net, the digital arm ofAdvance Publications, saidCondé Nast’s board supportedthe plan. “We believe CondéNast has a future based on thevalue of the brands that can beincreased over time,” he said.“We’re prepared to go through adifficult transition because wesee value being created.”

key areas as video, data, busi-ness-to-business marketing andconsulting services, and busi-ness-to-consumer services suchas GQ Recommends, which pro-vides advice on men’s fashionand other products and gener-ates affiliate commissions.

Condé Nast is owned byclosely held Advance Publica-tions Inc., and it doesn’t reportits financial results. Mr. Sauer-berg said he expects revenuewill decline in 2018, and thatthe business won’t be profit-able. He said Condé Nast willreturn to profitability in 2020.

“We’ve invested in creatinga data platform, an events busi-

Condé Nast Chief ExecutiveBob Sauerberg outlined a planto return the publisher toprofitability in two years andrevive growth, by diversifyingits revenue away from adver-tising and shedding certainmagazine titles.

Mr. Sauerberg presented thestrategy to staffers on Wednes-day. He said Condé Nast, ownerof magazines including Vogue,Vanity Fair and the New Yorker,aims to boost revenue by $600million by the end of 2022.

In an interview, Mr. Sauer-berg said he is focusing on such

BY JEFFREY A. TRACHTENBERG

Condé Nast Weighs LayoffsAs It Sets Profitability Goal

tization declined 9% in thenews unit. That was becauseof higher costs at Dow Jonesand lower revenue at NewsCorp’s papers in Australia.

The digital-real-estate busi-ness posted a 19% increase inrevenue to $299 million.Ebitda rose 14% in thedivision.

Revenue in News Corp’sbook-publishing segment rose20% to $490 million, boostedby strong sales of “MagnoliaTable,” by Joanna Gaines, “I’llBe Gone in the Dark,” byMichelle McNamara and “GirlWash Your Face,” by RachelHollis. Ebitda for the unit rose82%.

earnings per share of 8 cents.Analysts polled by ThomsonReuters had forecast revenueof $2.65 billion and earningsper share of 6 cents.

In the news unit, circulationrevenue gains were boosted bya 9% increase at Dow Jones,the Journal’s publisher. TheJournal added 100,000 digitalsubscribers in the quarter. Inthe June quarter, the Journalaveraged 1.59 million digitalsubscribers.

Advertising revenue for theentire news unit declined 2%,while circulation and subscrip-tion revenue increased 5%.

Earnings before interest,taxes, depreciation and amor-

much higher percentage of re-curring, subscription-basedrevenues, which should helpoffset a volatile advertisingenvironment,” said News CorpChief Executive Robert Thom-son in a written statement.

Charges related to the Fox-tel transaction contributed toa net loss of $372 million,compared with a loss of $430million in the year-earlierquarter.

Earnings before interest,taxes, depreciation and amor-tization rose 45% to $312 mil-lion.

When leaving out themerger-related charges, thecompany reported adjusted

revenue to $2.69 billion. Ad-justed revenue, which factorsout the effects of the Foxteltransaction, rose 5.2%.

The results also wereboosted by strong sales andprofit growth at the com-pany’s book-publishing anddigital-real-estate divisions.

At the company’s news andinformation-services business,the largest unit that housespublications such as The WallStreet Journal, Times of Lon-don and New York Post, reve-nue increased 1% comparedwith the year-earlier quarter.

“News Corp is now a moresubstantial company after theFoxtel transaction, with a

The consolidation of Aus-tralian television assets helpedNews Corp boost revenue sub-stantially in the June quarter,but also led to a write-off thatweighed on the company’sbottom line.

News Corp in Aprilcompleted the merger ofFoxtel and Fox Sports Austra-lia, and wound up with a con-trolling stake in the resultingentity, which is now one of thelargest pay-TV, sports andentertainment outlets inAustralia.

The deal helped propel a29% increase in year-over-year

BY LUKAS I. ALPERT

News Corp’s Quarterly Revenue Climbs 29%

Rite Aid Corp. investors gotwhat they wanted in the de-mise of the pharmacy’s mergerwith grocer Albertsons Co.

Now they are counting onRite Aid executives to come upwith a new plan to compete ina fast-changing retail industry.Some investors are skepticalthat Rite Aid can go it alone;others believe the retailer canfind growth again by focusingon overhauling its own busi-ness.

“There is plenty of low-hanging fruit to capture,” onemajor Rite Aid shareholdersaid on Thursday.

Midsize pharmacies are un-der pressure as Amazon.comInc. signals that it is looking atentering the sector and aslarger competitors gain moreclout with drugmakers.

Rite Aid and Albertsons ter-minated their merger—valuedat $24 billion including debtwhen first announced—lateWednesday, a day beforeshareholders were scheduledto vote on the deal. Rite Aid’sshares fell more than 11% inheavy trading on Thursday.

Moody’s placed Rite Aid onreview for downgrade follow-ing the canceled deal, sayingthe company was in a weak-ened position and lacked thescale to compete.

It was Rite Aid’s secondfailed merger attempt inroughly a year. Federal regula-tors in 2017 shot down aplanned tie-up with rival Wal-greens Boots Alliance Inc.Rite Aid, now down to around2,600 pharmacies, has a mar-ket capitalization of under $2billion.

“There is no easy recipe forRite Aid,” said Kurt Jetta, ex-ecutive chairman of the TabsAnalytics consultancy, whopreviously advised Albertsons.

For privately held Albert-sons, the deal’s demise cuts offan avenue for the grocer to apublic listing.

Private-equity firm Cer-berus Capital ManagementLP, Albertsons’ main owner,tried to take Albertsons publicin 2015 but backed down aftera weak earnings report fromWalmart Inc. spooked retail in-vestors. Cerberus decided notto try again last year asgrowth in food prices re-mained sluggish, according topeople familiar with the mat-ter.

Amazon, Walmart and Euro-pean discounters, are makingthe U.S. grocery business morecompetitive than ever. At thesame time food prices aren’trising along with broader in-flation, weighing on sales.

Other retailers have triedmergers to increase theirreach with customers and bar-gaining power with suppliers.The rise of e-commerce isquickly rewriting that play-book. Some investors questionwhether a merger betweentwo struggling retailers canput the combined company ina stronger position. Thatleaves many midsize retailerswith fewer obvious options togenerate growth, industry con-sultants said.

“They are a little stuck,”said Bryan Gildenberg, chiefknowledge officer at KantarRetail.

Rite Aid declined to offerfurther comment beyond itsWednesday announcement.Albertsons and Cerberus de-clined to comment.

Investor skepticism doggedthe Rite Aid-Alberstons dealfor months. One Rite Aidshareholder called the termi-nated merger “a colossal wasteof time.”

—Cara Lombardocontributed to this article.

BY HEATHER HADDON

Rite Aid,AlbertsonsFace BigChallenges

Tough to SwallowRite Aid's share price hasdropped since its merger withAlbertsons was announced.

THEWALL STREET JOURNAL.Source: FactSet

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TECHNOLOGY WSJ.com/Tech

’132012 ’14 ’15 ’16 ’17 ’18

Losing GroundSamsung has lost some market share over the past year, while itsprices have steadily risen since its origin.

THEWALL STREET JOURNAL.Sources: Strategy Analytics (market share);BayStreet Research LLC (prices)

100%

0

25

50

75

Samsung

HuaweiAppleXiaomiOPPO

Others

Q22017

Q22018

Smartphone market share Galaxy Note series prices

Galaxy Note 9$950

$1,000

500

600

700

800

900

Note: Base memory variant; these are ‘‘Wholesale price for retailers." Consumers often willpay $50 to $100 more than these wholesale prices, but it varies among carriers and retailers.

TOKYO—Fujifilm HoldingsCorp. said Xerox Corp.’s planto scrap the two companies’56-year-old technology part-nership in office equipmentwould hurt Xerox more than itwould hurt the Japanese com-pany.

The spat between the twopartners—whose merger plansbroke down earlier this year—has become increasingly bitter.Xerox’s new chief executive,John Visentin, said last monthhe didn’t plan to renew the

Xerox has said it can adapt if the companies’ technology pact ends, but Fujifilm’s president said the Japanese firm would suffer less.

LILLIANSUWANRUMPHA/AGENCE

FRANCE-PRESSE/GETTYIMAGES

ing users can execute certaincommands while standing asfar as 30 feet from theirphones. The stylus, when in-serted into the phone, fully re-charges within 40 seconds.

Samsung has revved up thehorsepower of the flagshipphone: Battery life and powerare 20% greater, storage mem-ory in base models has beendoubled, and the device’s edge-to-edge Infinity display hasbeen slightly enlarged to 6.4inches from 6.3 inches.

The smartphone industryhas fallen into an unprece-dented sales slide, as consum-ers hold on to devices longerand many buyers bristle atprices approaching $1,000.

Samsung has been deeplyaffected. Its smartphone ship-ments plummeted to 71.5 mil-lion units for the quarter endedin June, a 10% drop from theprior year, according to Strat-egy Analytics. Meanwhile, Chi-nese rivals like Huawei Tech-nologies Co. and Xiaomi Corp.recorded big boosts in unitsales, and Apple has proved re-silient in the high-end market.

A big driver of the drop wasweak sales of Samsung’s pri-mary Galaxy S9 phone, whichanalysts say could see a salesdrop-off of 20% or more fromthe previous year’s model.

Mr. Koh said the Galaxy S9’sperformance was rebounding,boosted by sales to businessesand large employers. Business-to-business sales make up 10%to 15% of overall shipmentsand Mr. Koh hopes to doublethose figures by 2020.

The Galaxy Note 9 will be atough sell to consumers, espe-cially those who aren’t alreadyusing an older version of thephone, said Wayne Lam, a prin-cipal analyst at IHS Markit.

Samsung said the basemodel of the Galaxy Note 9,with 128 gigabytes of memory,would be priced at $999.99 inthe U.S., and a 512-gigabyteversion would cost $1,249.99.

NEW YORK—Samsung Elec-tronics Co.’s newest flagshipdevice unveiled Thursday looksmuch like last year’s model, re-flecting slowing innovation insmartphones that has contrib-uted to a historic dip in indus-try sales.

The world’s biggest smart-phone maker introduced theGalaxy Note 9 at Brooklyn’sBarclays Center about twoweeks earlier in the year thanits predecessor was revealed in2017—a bid to bolster plum-meting phone sales before rivalApple Inc.’s expected release offresh iPhones next month.

But the South Korean giantdid little to dim a perceptionthat its releases this yeararen’t pushing the envelopeenough to keep pace with ri-vals.

Samsung’s mobile chief, D.J.Koh, said the company hadtaken a more cautious ap-proach to radical new technolo-gies in the aftermath of theglobal recall two years ago ofGalaxy Note 7 devices due tooverheating batteries. He saidhe had strongly emphasizedquality to employees alongwith innovation.

“At the time, I thought thatwas the right decision, theright direction,” he said. Butnow, he said, he believes thecompany should have moved“more vigorously.”

In prior years, the GalaxyNote series won fans by push-ing the limit on new features,some of which were later of-fered by Apple. Seven years ago,the Galaxy Note was the firstmainstream plus-size phone,and a variant of 2014’s GalaxyNote 4 was the first to have acurved screen. Two years ago,Samsung added an iris scannerto unlock the phone.

This year, the Galaxy Note9’s biggest technological leapmay be the S Pen stylus. It isnow Bluetooth-enabled, mean-

BY TIMOTHY W. MARTIN

Samsung Plays ItSafe With NewNote Smartphone

two companies’ technologyagreement when it expires in2021.

Under the technologyagreement, a joint venturethat is 75%-owned by Fujifilmand 25%-owned by Xerox man-ufactures most of the copiersand printers sold by Xerox inthe U.S. and Europe under theXerox brand.

Mr. Visentin said on anearnings call last month thatXerox could prepare for theend of the agreement andchange its supply chain to be-come more competitive.

At an earnings news confer-ence on Thursday, Fujifilm ex-ecutives said they believed itwould be tough for Xerox tofind another supplier. Theysaid Fujifilm could keep up themanufacturing and find a newbrand under which to sell theproducts.

“It would not hurt us verymuch,” Fujifilm President KenjiSukeno said. “I think Xeroxwill suffer greater damage.”

Fujifilm agreed in Januaryto buy a majority stake in Xe-rox, but the U.S. companybacked out of the deal follow-

ing opposition from its biggestshareholders, Carl Icahn andDarwin Deason.

Fujifilm is suing to revivethe agreement.

“But we can’t spend somuch time on this,” Mr.Sukeno said. “We have otherbusinesses to take care of.”

Fujifilm said it would buyback up to ¥100 billion ($901million) worth of its shares, orabout 7.4% of outstandingshares, by April 2019, as partof a plan to buy back a total of¥200 billion worth of sharesby April 2020.

BY MAYUMI NEGISHI

Fujifilm Lobs Barb at Partner Xerox

WeWork Cos. on Thursdaydisclosed it raised another $1billion in funding from Soft-Bank Group Corp., as theshared-office company contin-ues its rapid growth by dou-bling revenue but piling uplosses, according to newly re-leased financial information.

The New York-based com-pany said Thursday its loss inthe first half of the year morethan tripled to $723 millionfrom the year-ago period as itaccelerates opening newspaces and spends more tomarket them. Revenue for the

first half of this year morethan doubled to $763.8 million.

As a private company, We-Work isn’t required to publiclydisclose its financial numbers,but it released the figures tothe media in tandem with a pe-riodic update to bond investors.

WeWork, one of the world’smost valuable startups with avaluation of about $20 billion,said the new funding from itsinvestor SoftBank came in theform of a subordinated convert-ible note that is structured togive the Japanese company anedge in the next fundraisinground. SoftBank already in-vested $4.4 billion in equityfunding in WeWork last August.

If SoftBank leads an equityround of at least $1 billion, thenotes will convert into pre-ferred shares at whatever val-uation the investor sets. If an-other investor leads a funding

round of $1 billion or more,SoftBank will automaticallyget shares that value the com-pany at $42 billion—twice theprevious valuation—or more ifthe shares are priced higher.

The note, which accrues in-terest of 2.8% a year startingnext September, gives We-Work more financial power tolease and acquire new build-ings while modernizing the of-fices with glass walls and up-scale furnishings. The eight-year-old company typicallyhas raised money through di-rect investments, collectingmore than $6 billion, but ear-lier this year it raised $702million in its first bond sale.

“There is no investor closerto us than SoftBank and it wasan opportunistic financingthat we were able to do,” We-Work Financial Chief ArtieMinson said in an interview.

Bond investors appeared toreact favorably to Thursday’sfinancial update. After thenumbers came out, WeWork’s7.785% bonds due 2025 tradedup to 100.75 cents on the dol-lar from 99 cents on Wednes-day, according to MarketAxess.

WeWork has roughly dou-bled its revenue each year, andit did so again in the secondquarter to $421.6 million. We-Work draws most of its revenuefrom monthly rental paymentsit calls memberships, though agrowing share comes from ser-vices. But the costs are pilingup. WeWork logged a net lossof $933 million last year, and itis on pace to surpass that fig-ure this year. Mr. Minson saidthat is because the company isadding more desks and build-ings at a faster pace.

—Sam Goldfarbcontributed to this article.

BY YOREE KOH

WeWork Raises $1 BillionNew funding fromSoftBank comes asshared-office companycontinues rapid growth

cerned with transition issuesor higher levels of churn.

Yelp’s shares rose 27% to$48.33 on Thursday, hoistingthe stock into positive terri-tory for 2018.

“We thought investors weretoo negative,” Mr. Sandersonsaid.

Yelp’s revenue and profitexceeded analysts’ expecta-tions for the second quarter.Revenue rose 12% to $235 mil-lion; analysts polled by Thom-son Reuters were expecting$232 million.

Net income rose to $10.7million, or 12 cents a share,from $7.9 million, or 9 cents ashare, a year earlier. Analystshad expected a penny-a-shareprofit.

nance chief Charles Baker saidon the call. However, he saidexecutives will be cautious inestimating the long-term im-pact the move has on account

retention.MKM Partners analyst Rob

Sanderson said in a note thatthe shift to nonterm advertis-ing was a “clear positive” andthat his firm isn’t as con-

The consensus forecast wasfor growth of 8,000, accordingto MKM Partners.

Yelp, founded in 2004, wasdesigned to connect peoplewith local businesses. In thelatest period, the companysaid it averaged 32 millionmonthly unique visitors on itsapp and 72 million visitorsthrough its mobile webpage.

Operating Chief JosephNachman told analysts on aWednesday conference call thatYelp has been testing the non-term-contract ad model insome markets for about twoyears to see how it affectedcustomers’ ad-buying decisions.

“It’s clear that opening upthe sales funnel is bringing ina lot of new customers,” fi-

Yelp Inc. shares soared onThursday after the online re-view company reported strongadvertising results for its lat-est quarter.

San Francisco-based Yelpsaid late Wednesday that a21% rise in second-quarter adrevenue to $226 million wasdriven by a bigger sales forceand ending a requirement forbusiness customers to committo a fixed time period for adspending.

Paying-advertising ac-counts, which reflects busi-nesses that have paid for adson Yelp over a three-monthperiod, rose by 17,000 fromthe first quarter to 194,000.

BY AISHA AL-MUSLIM

Yelp’s Advertising Strategy Buoys Results

The company estimatesthat total revenues recognizedat check-in will be about 1%lower in the third quarter andabout 5% higher in the fourthquarter, when compared withthe same quarters if revenueswere recognized at check-out.

Net bookings for the secondquarter equaled $23.9 billion,a 15% increase, and on parwith analysts’ expectations.

Second-quarter net incomewas $977.4 million, or $20.13 ashare, compared with $720.2million, or $14.39 a share, forthe same quarter a year earlier.

new revenue accounting stan-dard in January. The switchchanged the time the companyrecognizes revenue from check-out to check-in. The companyalso no longer presents cost ofrevenues or gross profit.

The Norwalk, Conn.-basedcompany said revenue for thesecond quarter rose 20% to$3.5 billion, ahead of the con-sensus forecast of $3.44 billion.Under the new accountingstandard, the year-over-yeargrowth rates for 2018 comparetotal revenue in 2018 to grossprofit of $3 billion in 2017.

$39.79 a share among analystspolled by Thomson Reuters. Italso guided for year-over-yearrevenue growth of 6% to 9%.

The company posted sec-ond-quarter earnings growthThursday morning after delay-ing the release from Wednes-day afternoon. Shortly afterthe market closed Wednesday,the company said that thoughits results were finalized, itwas “confirming certain busi-ness metrics” that are reportedquarterly. Shares of Bookingfell 5% Thursday.

Booking Holdings adopted a

Shares of Booking HoldingsInc. fell Thursday after thetravel company delayed the re-lease of second-quarter resultsby half a day and provided alower-than-expected outlookfor the current quarter.

The online travel com-pany—with brands such asBooking.com, priceline.com,Rentalcars.com and Open-Table—said it expects adjustedearnings per share of $36.70to $37.70 in the third quarter,compared with estimates of

BY AISHA AL-MUSLIM

Booking Holdings Slides on Outlook Cut

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BANKING & FINANCE

Reported earnings per shareConsensus forecast

Off the MarkAnalyst forecasts often vary greatly from Tesla's earnings per share.

THEWALL STREET JOURNAL.Source: FactSet

$0

–5

–4

–3

–2

–1

2014 2015 2016 2017 20182013

Short-Term RatesHit Three-Year Lows

Interest rates on short-termloans between Chinese bankshave sunk to three-year lows,as Beijing attempts to stimu-late the economy by ensuringlenders have plenty of cheapfunding.

A measure of short-termbank lending rates, Shibor, fellto 1.42% Wednesday, its lowestsince 2015. The gauge, knownin full as the Shanghai inter-bank offered rate, rose to 1.62%Thursday, but remains nearly apercentage point lower than itwas in mid-July.

Credit growth had slowedas China pursued a campaign

to rein in runaway corporatedebt, but concerns about finan-cial risk have recently beenovertaken by the desire tocounteract a possible slowdownand escalating trade tensionswith the U.S.

“The monetary setting hasnow almost entirely reversedthe financial crackdown thatbegan in 2017,” wrote MarkoPapic, chief geopolitical strate-gist at BCA Research.

The shift appears to havebeen engineered by the Peo-ple’s Bank of China, which lenta particularly large 502 billionyuan ($73.44 billion) to com-mercial banks in late July,through a medium-term lendingfacility. The PBOC would typi-cally then mop up some excessfunds in the bond market, but

hasn’t since July 19.“They’ve just been sitting

back,” said Iris Pang, greaterChina economist at ING.

The PBOC may also haveoffered banks cheap fundingthrough other longer-term facil-ities, according to Julian Evans-Pritchard, senior China econo-mist at Capital Economics. Forthose, only monthly data is re-leased, making it difficult to tellwhat was happening daily.

Last week, the Politburo,the decision-making body ofChina’s ruling Communist Party,called for pro-growth fiscalmeasures as well as “reason-able and adequate” liquidityconditions, interpreted as codefor easier credit.

—Mike Bird andSaumya Vaishampayan

fixed-income analyst at GuotaiJunan Securities.

In March, Bloomberg LPsaid it would add Chinesebonds to the flagshipBloomberg Barclays Global Ag-gregate Index over 20 monthsfrom April 2019. It will be thefirst global benchmark to in-clude domestic Chinese debt,which will make up nearly5.5% of the $53.7 trillion indexonce fully added.

Other index providers suchJPMorgan Chase & Co. have

yet to follow suit. GoldmanSachs Group Inc. analysts lastyear estimated that eventualinclusion could in time attractup to $250 billion into China’sbond market.

Beijing has made the mar-ket more accessible, first in2016 by opening it up to for-eign investors with trading ac-counts in mainland China. Lastyear it launched a trading linkwith Hong Kong, allowingtrading by investors with ac-counts in the city.

These factors also appearto have outweighed concernsabout the rising appeal of U.S.Treasurys compared withChinese bonds. The yieldpremium on benchmark 10-year Chinese governmentbonds, compared with theirU.S. counterparts, has shrunkfrom 1.48 percentage points atthe end of 2017 to 0.56 per-centage point. A major reasonis that U.S. Treasury bondshave tumbled in price, liftingtheir yields.

day, they could do so onlytwice a year. The true valueof the company would stillswing around wildly, but noone would know.

The unlikely idea is thatshort sellers are damagingthe business. Mr. Musk saidTesla is the most-shortedcompany in history, and ev-eryone betting on a shareprice fall has an incentive toattack it.

Short sellers spreadingfalse rumors or actively try-ing to find and publicizeproblems with the cars couldin principle damage Tesla.But its big problems haven’tbeen secret: highly publicmanufacturing difficulties,poor production quality anda constant need for newcash. Mr. Musk also hasn’thelped, posting an AprilFools’ joke on Twitter thatthe company was bankrupt.

His daft idea was thatTesla go private with thesame shareholders as today.Now, shareholders can sellwhenever they want and, toMr. Musk’s chagrin, lendshares to short sellers for afee. Restricting the option tosell to twice a year might begood for Mr. Musk’s war onshorts, but it should makethe stock much less appeal-ing to current shareholders.Selling in Mr. Musk’s offerlooks more attractive still.

There is one possible rea-son for going private thatmight make sense, but thatMr. Musk can’t mention. Theprivate markets are awash incash, allowing startups tostay private far longer thanbefore by raising a lot ofmoney at high valuations.

Tesla isn’t the right com-pany to appeal to ordinaryprivate-equity groups, whichprefer steady profits. But theunicorns of Silicon Valleyhave proven attractive tosovereign-wealth funds anda handful of private fundsthat search for growth. Thetrouble is, Mr. Musk’scharms may not work thesame magic on them as onthe public markets.

lect group of listed compa-nies whose shareholders arestrongly supportive of long-term investment. Teslashares have jumped from aninitial public offering priceof $17 in 2010 to $370 onWednesday, even as Mr.Musk repeatedly sold newstock and diluted investorsby paying staff partly inshares. Short-term thinkingisn’t compatible with being aTesla stockholder. It is hardto imagine many private-eq-uity or venture-capitalgroups would have stuckwith Tesla for years as itwent through so much cash.

Short-termist pressure onmanagement can comethrough three routes: boardmembers worried about theshare price, proxy votes byactivists or unwanted bids.Yet the board appears to beentirely made up of Muskfans. Activists have paid noattention to Tesla, partly be-cause its shareholders are sosupportive, but also becauseany switch in strategy wouldinvolve ejecting Mr. Muskand surely crush the stock.The only constraint Mr.Musk faces is finding enoughcash to keep the business go-ing, and the supposedlyshort-termist markets havebeen falling over themselvesto help out.

Mr. Musk makes threeother claims in his email tostaff about the take-privateidea, one misleading, one un-likely and one simply daft.

The misleading suggestionis that what he calls “wildswings” in the stock pricedistract staff, who are share-holders. Going private wouldchange this only by hidingthe volatility: Instead of be-ing able to buy or sell every

ContinuedfrompageB1

Musk’sFlawedTesla Plan

it would be,” added Mr.Deutsch, who retired last year.

JPMorgan’s big-bank rivalshave expanded in asset man-agement, which providessteady revenue that offsetsvolatile earnings in tradingand investment banking. ETFsare part of that effort.

But they remain a tiny sliceof JPMorgan. The revenue fromJPMorgan’s asset-and-wealth-management business ac-counted for less than 13% of thebank’s revenue in the secondquarter. Still, getting wallopedby Goldman stung, analysts say.

Last year, JPMorgan changedtack on fees. In May 2017, thefirm launched a short-term

debt fund, capitalizing on itsreputation for eking out returnson cash. The JPMorgan Ultra-Short Income ETF cost just $18a year for every $10,000 in-vested—its cheapest fund yet.Six months later, the firm intro-duced five ETFs that pick stocksbased on factors such as value,dividend payouts and price mo-mentum. Price: $12.

And last month, the firm de-buted its new lower-priced Be-taBuilders brand of index ETFs.The cheapest, which buys Eu-ropean stocks, costs just $9 ayear for every $10,000 in-vested. Two new BetaBuildersETFs launched this week.

“I don’t know if it’s a phi-

JPMorgan Chase & Co.’sexchange-traded funds rakedin $2.5 billion in July, a recordhaul for the bank that signals aturnaround for the laggingfour-year-old business.

The New York bank’s asset-management division launchedits first ETF in June 2014, butit took more than two yearsfor its funds to crack $1 billionin assets. It was a slow start,especially compared withGoldman Sachs Group Inc.,which debuted its first ETF ayear after JPMorgan but raised$3 billion in just 18 months.

Part of the problem waspackaging. Goldman made asplash by pricing its first U.S.equity ETF at just $9 a yearfor every $10,000 invested, of-fering the glamour of the Gold-man Sachs name at the sameprice as State Street Corp.’sS&P 500 index fund.

By contrast, JPMorganstarted with sophisticated pro-prietary strategies that cost asmuch as $43 a year for every$10,000 invested, making ithard to compete with ultra-low-cost index ETFs sold by Black-Rock Inc. and Vanguard Group.

“We have a product thatcan’t really be described in twowords,” Bob Deutsch, then-headof JPMorgan’s U.S. ETF busi-ness, said at an industry con-ference in January 2017. “Craft-ing that story has been a littlemore difficult than we thought

BY ASJYLYN LODER

JPMorgan’s ShiftOn ETFs Bears Fruit

losophy change, but over thecourse of time we’re alwaysevaluating our product lineup,”said Jillian DelSignore, JPMor-gan’s head of ETF distribution.

JPMorgan also expanded itssales force. It has 16 specialistsselling ETFs, up from two in2015, Ms. DelSignore said.

The changes have worked.ETF assets surged to $7.6 bil-lion at the end of July, triplewhere it was a year ago. Thecheapest funds are some of thebiggest winners, with 60% ofthe assets in ETFs that costless than $20 a year for every$10,000 invested, according toFactSet.

The portfolio manager for

the short-term debt ETF trav-eled to 24 cities in the firsthalf of 2018 to pitch the fundto investors, raising $1.6 bil-lion in assets. And one of thepricier legacy funds from 2014,an international-stock ETF, hasgrown to $1.5 billion.

The JPMorgan BetaBuildersJapan ETF has been its swift-est success, garnering almost$1.8 billion since launching inJune. In that same period,BlackRock’s iShares MSCIJapan ETF has had almost $2billion in outflows, accordingto FactSet.

JPMorgan was the biggestinvestor in the iShares fund,which raises questions about

whether JPMorgan is buying itsown ETFs. It is a common strat-egy in the industry, and Van-guard, BlackRock and CharlesSchwab Corp. all use their ownETFs to build investment port-folios for clients or for otherstrategies. JPMorgan’s newJapanese equity ETF is cheaperthan the iShares fund and ownsmany of the same stocks, whichcould make it a better deal forJPMorgan’s investors.

Ms. DelSignore declined tocomment on whether JPMor-gan was buying its ETFs for itsinvesting customers, sayingonly that her sales team treatsother divisions of the bank asit would any other client.

’We’re always evaluating our product lineup,’ says Jillian DelSignore, head of ETF distribution.

MICHAELBUCHER/THEWALL

STR

EETJOURNAL

SHANGHAI—Foreign inves-tors kept piling into China’s$11.7 trillion bond market lastmonth, despite a tumblingyuan and a narrowing gap be-tween Chinese and U.S. inter-est rates.

Solid demand from centralbanks was probably a majordriver, analysts said. Thesebuyers hold yuan as part oftheir foreign-exchange re-serves and can look pastshort-term currency moves.Chinese bonds are also due tojoin a major international in-dex next year, which has luredmoney managers.

Foreigners’ holdings ofyuan-denominated, domesti-cally traded bonds hit a record1.35 trillion yuan ($197.48 bil-lion) in July, data from theChina Central Depository &Clearing Co. showed. That wasup from 1.30 trillion yuan inthe previous month and 61%higher than a year ago.

Still, these institutions—in-cluding central banks, sover-eign-wealth funds, insurersand university endowment-funds—remain minor playersin the third-largest bond mar-ket behind the U.S. and Japan.They own 1.7%, with mostChinese fixed-income instru-ments held by state-run banksand other domestic financialinstitutions.

“The biggest buyers wereforeign central banks thatneeded to allocate more yuanassets because of the yuan’sstatus as a global reserve cur-rency,” said Peter Ru, Shang-hai-based head of fixed incomeat Neuberger Berman.

The yuan has fallen 4.7%against the dollar this year, hitby an escalating trade spatwith Washington.

“It hasn’t been long sinceChina opened up the market toforeigners, so there are stillnew investors coming in. Be-sides, there doesn’t appear tobe a strong consensus yet thatthe yuan will keep fallingsharply,” said Qin Han, chief

BY SHEN HONG

Investors Are Piling Into China DebtStill RisingForeign holdings of Chinese bonds hit another record, despite a fallingyuan and a narrowing gap with U.S. interest rates.

Note: 1 trillion yuan=$146 billion Source: Wind Info THEWALL STREET JOURNAL.

Howmany yuan $1 dollar buysForeigners’ Chinese bond holdings

6.2

7.0

6.8

6.6

6.4

yuan

F M A M J J A

Yields on 10-year bonds

4.0%

2.0

2.5

3.0

3.5

J F M A M J J A

China

U.S.

Scale inverted to showweakening yuan

J

1.4

0

0.2

0.4

0.6

0.8

1.0

1.2

trillion yuan

J F M A M J J

ETF assets Net ETF flows

LiftoffJPMorgan's ETF business has taken off after a slow start.

Source: Morningstar THEWALL STREET JOURNAL.

$8

0

2

4

6

billion

’16 ’17 ’182015

$2.5

0

0.5

1.0

1.5

2.0

billion

’16 ’17 ’182015

York Capital Managementfounder James Dinan and chiefinvestment officer DanielSchwartz. Billionaire hedge-fund investor Dan Loeb ofThird Point LLC was among theinvestors in Cerrano, accordingto people close to the matter.

Mr. Weinberger previouslyoversaw billions of capital ashead of equities at York. Cer-rano focuses on making bothbullish and bearish bets onstocks.

Cerrano lost 1.4% throughJune of this year, after being

up over 5% last year. In the 11months the firm existed, thefund was up slightly. Mr.Weinberger became frustratedwith the time he needed to de-vote to market the fund, thepeople say, and decided to re-turn capital and manage hisown money.

The decision underscoresthe difficulties many hedgefunds are having makingmoney and raising capital, asinvestors rethink the value ofsuch funds.

Hedge funds have generally

performed worse than broaderstock market indexes for muchof the past several years, mak-ing it hard for them to justifyhigh fees. More recently,a widely followed hedge-fundindex maintained by data re-search company HFR declinedby 0.46% in June, pulling downthe industry’s gains for thefirst half of 2018. The indexrose 0.81% in the first twoquarters, which is lower thanthe 2.65% return on the S&P500, including dividends, overthe same period.

A hedge fund backed bysome of the industry’s biggestnames, Cerrano Capital LLC,is closing less than a yearafter it got off the ground, thelatest sign of the difficultiesnew funds are having raisingmoney.

Michael Weinberger’s $230million hedge fund waslaunched last year, hoping toraise as much as $1 billion. Thefund’s early investors included

BY RACHAEL LEVYAND GREGORY ZUCKERMAN

Fund Backed by Industry Leaders Closes

THEWALL STREET JOURNAL. * * * * Friday, August 10, 2018 | B11

MARKETS

AUCTIONRESULTSHere are the results of Thursday's Treasury auction.All bids are awarded at a single price at the market-clearing yield. Rates are determined by the differencebetween that price and the face value.

30-YEARBONDSApplications $43,351,623,300Accepted bids $20,419,916,800" noncompetitively $8,316,900" foreign noncompetitively $0Auction price (rate) 98.248216

(3.090%)Interest rate 3.000%Bids at clearing yield accepted 57.33%Cusip number 912810SD1

The bonds, datedAug. 15, 2018,mature onAug. 15,2048.

BY MICHAEL WURSTHORN

One S&PMarketGaugeNears High

Oil prices steadied Thurs-day after falling sharply on ex-pectations that crude would

be drawninto theU.S.-Chinatrade dis-

pute, along with downwardpressure from bearish U.S.stockpiles data.

Light, sweet crude for Sep-tember delivery closed down0.2% at $66.81 a barrel on theNew York Mercantile Ex-change, reversing gains fromearlier in the session. Brent,the global benchmark, fell0.3% to $72.07.

China published a fresh listof tariffs on U.S. goodsWednesday as trade tensionsescalated. While crude was leftoff the list of targeted products,analysts and traders see its in-clusion as inevitable. OnWednesday, Brent oil prices

COMMODITIES

closed more than 3% lower.“I think the question is not

if, but when. Sinopec is al-ready cutting its purchases ofU.S. crude oil, so even thoughcrude oil is not on the list, it isas good as if it was,” said Oliv-ier Jakob, head of energy con-sultancy Petromatrix. State-owned China Petrochemical isknown as Sinopec.

The weakening demand forU.S. crude in China will meanmore of it ends up in the At-lantic Basin, which is likely topressure the North Sea bench-mark Brent price lower, Mr.Jakob added.

The U.S. Energy InformationAdministration data publishedWednesday showed U.S. crudestocks declined by 1.4 millionbarrels—less than expected—inthe week ended Aug. 3.

Meanwhile, total stockpilesof crude and fuels such as gas-oline rose to the highest levelssince early January.

“Disappointing weekly oil-market statistics showingmore ample than expectedsupplies added to the priceslide,” said Norbert Rücker,head of macro and commodityresearch at Julius Baer.

Further downside for pricesis expected to be limited bythe impending reinstatementof oil-related sanctions againstIran, due in November. Al-ready, many buyers of Iraniancrude have looked to alterna-tive suppliers.

The worst-case scenariocould see between 1.5 millionand 2 million barrels a day ofIranian crude removed fromthe market, said Tamas Varga,who is an analyst at brokeragePVM.

Gasoline futures declined1% to $1.9999 a gallon and die-sel futures fell 0.2% to $2.1119a gallon.

—Stephanie Yangcontributed to this article.

BY SARAH MCFARLANE

Oil Prices FirmAfter Sharp Fall

The S&P 500 has alreadyhit a new record—when in-cluding dividends.

The benchmark’s Total Re-turn Index, which includesdividends in the returns ofthe S&P 500, has movedhigher at a faster pace in re-cent sessions to again surpassits January highs.

That is an encouraging signfor the more well-known S&Pindex, which has repeatedlyflirted with record levels butremains about half a percent-age point below its all-timehigh set Jan. 26. Thursday,the S&P 500 fell about 0.1%,slightly more than the total-return index.

The broad stock-market in-dex, which doesn’t includedividends, is up 6.7% in 2018,just shy of the 8.1% advancefor the total return index, theWall Street Journal’s Marketsnewsletter noted.

In comparison, the tech-nology-heavy Nasdaq Com-posite has hit repeated highsin the past two months, butthe Dow Jones Industrial Av-erage, which is more sensitiveto trade tensions, isstill down 4.2% from its Janu-ary high.

The total return index ac-tually briefly breached itsJanuary record once beforeon July 25, but a slump intech stocks following disap-pointing earnings reportsfrom Facebook Inc. and Net-flix Inc. pulled it back down.It has been steadily climbingagain since the beginning ofthe month.

A run-up in the index’ssmaller-cap stocks and contin-ued strong performanceamong high-growth-orientedcompanies in the consumer-discretionary and tech sectorshas played a big part in push-ing the total-return bench-mark higher over the past sev-eral months, said BespokeInvestment Group, which high-lighted the outperformance ofthe total return index in a re-search note this week.

Earnings have also helped,as companies in the S&P 500wrap up their third consecu-tive quarter of year-over-yeardouble-digit profit growth.

The S&P total return indexhas gained 6.4% in the pastthree months alone, account-ing for much of its gain forthe year.

Those factors have helpedto tamp down volatility, giv-ing indexes a clearer path tomove meaningfully higher.

Escalating trade tensionsand concerns over the FederalReserve’s pace of interest-rateincreases continue to occa-sionally spook the stock mar-ket, but the impact hasn’tbeen as detrimental as it wasearlier this year when majorindexes plunged into correc-tion territory amid fears of apickup in inflation.

Wall Street’s well-knownfear gauge, the CBOE Volatil-ity Index, or VIX, has beensteadily falling to levels thathaven’t been seen since earlyJanuary.

Thursday, the index tradednear 11, down from above 30earlier this year.

four-session streak of gains forthe S&P 500 and Dow Jones In-dustrial Average.

“We’re trying to deal withtariffs, but who knows what[President] Trump could do to-morrow, and we don’t knowwhich of our companies are go-ing to be hurt by trade issues,”said Charlie Smith, chief invest-

ment officer of Fort Pitt CapitalGroup. “But the market is pay-ing attention to whether tariffsare getting ramped up to thepoint it’s hurting S&P earnings.”

The trade sparring betweenWashington and Beijing hasweighed on the stock marketfor much of the year so far, andseveral investors, including Mr.

Tayyip Erdogan’s tighteninggrip on monetary policy iscrimping efforts to tacklehigh inflation.

Emerging markets tend tosuffer from a stronger dollar,not least as greenback-de-nominated debt becomesmore expensive to serviceand pay off. But investor’sbroader concerns over thepotential for a full trade warhave sparked a broader moveout of riskier investments,such as emerging markets.

Still, some developed-world currencies have alsotaken a hit recently.

The U.K. Pound: Sterlinghit its lowest point againstthe dollar in nearly a year,falling 0.5% to $1.2824 in lateNew York trading.

Recent pressure is ex-pected to continue amid con-cern that the U.K. will crashout of the European Unionwithout a trade deal with itsbiggest trading partner.

“We’re questioningwhether any currency is trulysafe,” ING said in a researchnote.

“With the U.S. and Chinagoing back and forth on tar-iffs…U.S. sanctions on Russiaand Turkey, rising tensions inthe Middle East and Europemasked by Brexit and Italianpolitical risks—there is nogetting away from the sum-mer of geopolitical angst,”the bank said.

—Orla McCaffreyand Christopher Whittall

contributed to this article.

The dollar’s persistentstrength continues to rever-berate around global markets,with a range of currenciestaking a hit Thursday.

The geopolitical tensionsthat have pushed investors tohavens such as the dollarwere again on display as the

ruble andTurkish liratook tum-bles. More

broadly, concerns over globaltrade have helped boost thecurrency.

That sort of risk aversionis expected to continue,promising further strengthfor the dollar, analysts say.

The WSJ Dollar Index,which measures the green-back against a basket ofother currencies, was up 0.6%Thursday, reaching a new 14-month high.

The dollar index hasgained 8% since hitting its2018 low Feb. 15, during a pe-riod that has seen the U.S.,China and European Unionplace tariffs on goods rangingfrom soybeans to Harley-Da-vidson motorcycles.

“The U.S. dollar is going tobe a really crucial barometerof how strong or stressedtrade relationships will be,”said Paul Markham, a seniorportfolio manager at NewtonInvestment Management.

Russia’s Ruble: The Rus-sian currency fell to a two-year low against the dollarThursday, declining by almost2% at one stage, followingU.S. sanctions in response toa nerve-agent attack in theU.K. The ruble was 1.6% loweragainst the dollar in late NewYork trading.

Turkey’s Lira: Turkey’scurrency tumbled 4.7%Thursday, after high-leveltalks between the U.S. andTurkey on Wednesday failedto secure the release of a U.S.pastor who Washington saysis being held for political rea-sons.

The lira is down nearly32% so far this year on con-cerns that President Recep

BY JESSICA FLEETHAM

Dollar Advances as Investors Seek Safety

Smith, said the tit-for-tat re-sponses are diluting the bene-fits of the corporate tax cut Re-publicans passed last year.

On Thursday, the S&P 500fell 4.12 points, or 0.1%, to2853.58, while the NasdaqComposite added 3.46, or lessthan 0.1%, to 7891.78. The Dowindustrials declined 74.52, or0.3%, to 25509.23.

Still, corporate earnings forthe second quarter appearedstrong. With 90% of the compa-nies in the S&P 500 having re-ported results, the firms haveposted 25% growth in profitsfrom a year earlier, accordingto FactSet. Even though someof those profits have comefrom the tax overhaul passedlast year, the higher profitshave helped the S&P 500 movewithin striking distance of itslast record—set Jan. 26.

CenturyLink rose $2.43, or13%, to $20.97, putting itamong the S&P 500’s top per-formers, after it reported earn-ings above expectations andraised its 2018 guidance.

Elsewhere, the Stoxx Europe600 added 0.1%. In Asian trad-ing early Friday, the Shanghai

Composite Index gained 0.22%and Hong Kong’s Hang Sengwas flat. Japan’s Nikkei was off0.48%.

—Ben St. Claircontributed to this article.

The S&P 500 edged lower asthe latest round of corporate-earnings reports offered somesupport to a stock market reck-oning with yet another tradevolley.

The broad index struggledto gain traction, even aftershares of several companies,

i n c l u d i n gtelecommuni-cations firmCenturyLinkand energy-

drink maker Monster Bever-age, rose following upbeatearnings results. After wob-bling most of the day, the S&P500 fell for a second consecu-tive session.

Investors said renewedtrade tensions sapped some ofthe market’s enthusiasm afterChina threatened Wednesdayto slap new tariffs on variouschemicals and medical equip-ment, among other goods. Bei-jing released the list of itemsas part of its promise to keeppace with the U.S.’s tradethreats, which caused stocks tosputter Wednesday, snapping a

BY MICHAEL WURSTHORN

Earnings SteadyWobbly Market

THURSDAY’SMARKETS

Treasury AuctionsThe Treasury Department will

auction $122 billion in securitiesnext week. Details (all with mini-mum denominations of $100):

�Monday: $51 billion in 13-week bills, a reopening of an is-sue first sold on May 17, 2018,maturing Nov. 15, 2018. Cusipnumber: 912796QJ1.

Also, $45 billion in 26-weekbills, dated Aug. 16, 2018, matur-ing Feb. 14, 2019. Cusip number:912796QX0.

Noncompetitive tenders forboth issues must be received by11 a.m. EDT Monday and com-petitive tenders, by 11:30 a.m.

� Tuesday: $26 billion in 52-week bills, dated Aug. 16, 2018,maturing Aug. 15, 2019. Cusipnumber: 912796QV4. Noncom-petitive tenders must be re-ceived by 11 a.m. Tuesday; com-petitive tenders, by 11:30 a.m.

StrugglingRenewed trade tensions have slowed the S&P 500's recent climb.

Source: SIX THEWALL STREET JOURNAL.

2865

2825

2830

2835

2840

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Aug. 3 6 7 8 9

The index tracks cost pres-sures building in the pipelinefor many businesses, which canbe a precursor to broader infla-tion. Inflation poses a threat tothe value of a bond’s future in-terest and principal payments.

The report on producerprices did little to changebroad expectations for thepace of future Federal Reserverate increases. Fed-funds fu-tures, which investors use tobet on the path of central-bank policy, show the bulk ofinvestors’ bets remain in favorof two more interest-rate in-creases before the end of theyear. The futures market waspricing in a 70% probability ofthat outcome late Thursday,down from 71% Wednesday.

The softer-than-expected in-flation data is “driving the mar-ket,” said Subadra Rajappa,head of U.S. interest-rate strat-egy at Société Générale.

The Treasury sold $18 bil-

lion of 30-year bonds Thurs-day afternoon, the last ofthree note and bond auctionsthis week. The governmentauctioned $26 billion of 10-year notes Wednesday, withinvestors buying a larger-than-average proportion of the sale.The 10-year Treasury yieldreached 3% last week for thefirst time since June.

“Any time you see yieldsheading for that level, you tendto see a decent amount of de-mand,” Ms. Rajappa said.

U.S. government bondsgained Thursday after the La-bor Department said producer

prices remainedflat in July, fall-ing short ofeconomist fore-casts for them

to rise.The yield on the benchmark

10-year Treasury note fell fora second consecutive day to2.935% from 2.969% Wednes-day. Yields fall as bond pricesrise.

Yields fell Thursday after theLabor Department said the pro-ducer-price index was flat inJuly, and that prices excludingthe often-volatile food and en-ergy categories rose 0.1%. Econ-omists surveyed by The WallStreet Journal had expected a0.2% increase in overall prices,and a 0.2% rise for prices ex-cluding food and energy.

BY DANIEL KRUGER

Treasurys Jump on Inflation Data

CREDITMARKETS

A currency-exchange board in Istanbul. Turkey’s lira fell 4.7% Thursday and is down nearly 32% for the year so far.

SEDATSUNA/EPA

/SHUTT

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CURRENCIES

SurgingWSJ Dollar Index, year to date

THEWALL STREET JOURNAL.Source: Dow Jones Market Data

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B12 | Friday, August 10, 2018 THEWALL STREET JOURNAL.

contributor to the run-up inmajor indexes over the pastseveral years, continues tocommand big multiples thatworry some investors.

“Valuations have gottenmore extreme in the last threeto five years,” said MikeBalkin, a portfolio manager atWilliam Blair. “The FANGstocks have looked especiallyexpensive, but if you didn’town them, your performancesuffered,” he said, referring tothe crowded trade of Face-book Inc., Amazon.com Inc.,

Netflix Inc. and Google parentAlphabet Inc.

Tech companies in the S&P500 are trading at 21 timestheir earnings over the past 12months, well above thebroader index and most othersectors.

That is partly because in-vestors have sought safetyamong shares of technologycompanies, which have con-tributed to much of the long-running rally, at any sign oftrouble in the market this year.

But some analysts warn

that higher-valuation stockstend to struggle over the longterm. An analysis of price/earnings ratios found thatstocks with richer valuationsled to weaker returns over a10-year stretch, according toCredit Suisse Group AG.

Wall Street’s infatuationwith technology stocks brieflystalled last month after Face-book and Netflix reportedfinancial results belowinvestors’ expectations. Thosestocks have stumbled 11% and17%, respectively, over the past

month and trimmed valuationsof S&P 500 tech companiesslightly.

Investors are questioningwhether those companies andothers in the tech sector cancontinue their heady growthpaths unabated. New regula-tions in Europe and the pros-pect for tougher oversight inthe U.S. have dentedperformance. Facebook, forexample, said its Europeanuser base took a hit after atough new European privacylaw went into effect in the

MARKETS

second quarter.“Investors are now asking

how long can growth stocksreally continue to outperform,”said Matt Forester, chief in-vestment officer at BNY Mel-lon’s Lockwood Advisors. “It’sreasonable to questionwhether some of those expec-tations had been too high.”

Some money managers areusing the weakness amongtech companies to urge clientsto trim tech-heavy portfoliosand put that money into themarket’s cheaper corners.Wells Fargo Investment Insti-tute, for example, cut its viewof tech stocks to “neutral” forthe second half of the year andis favoring shares of financialcompanies.

Inflows into tech-focusedfunds have slowed this year, somuch so that some funds, suchas the iShares U.S. Technologyexchange-traded fund has lost$350 million this year, accord-ing to FactSet.

Some investors have beenplowing that money into otherassets, such as short-term gov-ernment bonds, whose yieldshave jumped to their widestmargin against the S&P 500’sdividend yield in years, whileothers have opted for more-defensive footing among equi-ties, such as shares of financialfirms, utilities and health-carecompanies, where valuationsare more attractive.

The shifting landscape hasled to a rare break in leader-ship for tech stocks. Thehealth-care and the financialsectors of the S&P 500, cor-ners of the market that hadbeen out of favor, are outpac-ing the tech sector’s 6% gainso far this quarter, while in-dustrial stocks aren’t far off.

Facebook’s earningsspooked investors enough to“begin shifting assets to themore value-oriented areas” ofthe market, said Robert Pavlik,a senior portfolio manager atSlateStone Wealth, in a recentnote to investors. “We believethis is just the beginning forayinto these groups.”

HEARD ON THE STREETEmail: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard

Stock-market valuations arelower now than they have beenfor a while, but that doesn’tmean shares are cheap.

Despite another robust cor-porate earnings season, theS&P 500 has inched up lessthan 1.5% over the past threeweeks as simmering trade ten-sions and signs of slowinggrowth at big technologycompanies sapped investorconfidence.

Those issues have helpeddrive stock valuations downnear their lowest levels of theyear, even with the broadstock-market index hoveringjust 0.7% shy of its Januaryhigh.

The S&P 500 trades at 18.8times earnings over the past12 months, a basement valua-tion that is lower than themarket’s February trough,when the index’s valuation wasaround 19 times earnings, ac-cording to FactSet. At the S&P500’s peak in January, the in-dex traded at nearly 22 timesearnings.

Strong corporate earningsare making stocks look lesspricey than they did before.Companies in the S&P 500have posted double-digit profitgrowth for the past threequarters to help earnings catchup with the S&P 500’s 6.7% ad-vance this year.

For the latest quarter, prof-its are on track to register arise of 25% from a year earlier,one of the fastest rates ofearnings growth since 2010,according to FactSet.

But by other measures,stocks still look expensive: TheS&P 500 is currently trading inthe 88th percentile of histori-cal valuation, Goldman Sachssaid in a recent report, whilethe median stock is at the 97thpercentile.

Stock prices are steep, inpart, because of the surge inshares of technology compa-nies.

The popular corner of themarket, which has been a big

BY MICHAEL WURSTHORN

Valuations Slip as Stocks Near Records

Sources: Federal Reserve; Standard & Poor’s; Thomson Financial; FactSet; Haver Analytics; Credit Suisse THEWALL STREET JOURNAL.

15%

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S&P 500 forward price/earningsand annualized 10-year returnsJanuary 1965-December 2007

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Price/earnings ratio over thepast 12 months, by sector

Energy

Consumer discretionary

Technology

Consumer staples

Industrials

S&P 500

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Telecom

Performance overthe past month

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11.1

Adidas Is inBetter ShapeThan Nike

The U.S. is the spiritualhome of the global sporting-goods boom. But the morefit of the two sportswear gi-ants feeding its consumersnow is European.

Adidas grew sales by 10%year over year in the quarterthrough June, the companysaid Thursday. That included16% growth in North Amer-ica and 27% growth in China.Nike’s recent return togrowth in the U.S. doesn’tseem to be tripping up itsGerman rival.

Investors were worriedthat Adidas would slow afterconstant-currency growth of18% in 2016 and 17% in 2017.But the slowdown hasn’tbeen as dramatic as somefeared. The stock leapt morethan 9%.

Arguably even better newswas that Adidas isn’t cuttingprices. Despite the dollar’sstrength, which pushes upsourcing costs, the com-pany’s gross margin rose to52.3% from 50.1% a year be-fore.

The key to such margingains is selling shoes at fullprice. This should continue,given the company’s tight in-ventory position. Despitedouble-digit sales growth,the value of inventoriesended the quarter 2% lowerthan a year before at con-stant currencies.

It is hard to justify whyAdidas shares trade at a dis-count to Nike’s, which haverisen as evidence of a U.S.turnaround has emerged.Adidas is growing sales andprofits faster than Nike, yetthe German stock trades at23 times prospective earn-ings, compared with 29times for Nike.

It is getting harder to finddiscount Adidas sneakers.Bargain hunters should con-sider its stock instead.

—Stephen Wilmot

broadcast network, Fox Newsand the FS1 network.

That will make it morecompetitive in the currentmedia environment, theysaid.

As consumers increasinglymove toward streaming con-tent on platforms such as

Rite Aid investors mighthave to get used to the singlelife.

The drugstore chain andgrocer Albertsons an-nounced Wednesday eveningthat they terminated theirplanned merger. That marksthe second Rite Aid deal inabout a year to fall through:Walgreens Boots Alliancehad planned to buy Rite Aidlast summer before regula-tory concerns forced a muchless ambitious asset sale.

The latest scuttled deal isno tragedy for most share-holders. Indeed, both leadingproxy-advisory firms had op-posed the deal. InstitutionalShareholder Services hadwarned Rite Aid sharehold-ers would own too small ashare of the combined com-pany. “We have heard theviews expressed by ourstockholders,” CEO JohnStandley said in a news re-lease. Mr. Standley alsoadded that Rite Aid is “exe-cuting our strategic plan as astand-alone company.”

its net loss this fiscal yearwill be $125 million to $170million because it is gettingsqueezed on drug prices. Anda smaller retail presencemakes it easier for healthplans to exclude Rite Aidfrom preferred pharmacynetworks, according to ana-lysts at RBC Capital Markets.

Going it alone might notbe desirable, but Rite Aidmight not have many otheroptions. Total debt amountsto nearly five times the cur-rent fiscal year’s projectedearnings before interest,taxes, depreciation andamortization. That wouldmake a deal by a private eq-uity buyer less compelling.Selling to a larger pharmacychain doesn’t seem practicalin light of those regulatoryissues.

The busted deal withAlbertsons was never greatfor Rite Aid shareholders.Now it is up to Rite Aid exec-utives to deliver somethingbetter to investors.

—Charley Grant

However, shares fell morethan 11% Thursday. Some ofthat was investors betting onthe deal dumping the shares,but another reason is the re-ality that it is a tough timeto be in the drugstore busi-ness. Investors are hardly en-thusiastic about brick-and-mortar retailers of any sort.Worse for pharmacy chains,potential disruption from

Amazon looms large afterthe retailing behemothbought online pharmacy Pill-Pack earlier this summer.

Rite Aid’s biggest handi-caps are lack of scale and toomuch debt. The heavily con-centrated market for generic-drug buyers makes it hardfor smaller players to get agood deal on pricing. JustMonday, Rite Aid announced

InfirmaryRite Aid share price

Source: SIX THEWALL STREET JOURNAL.

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Rite Aid’s Escape Cuts Both WaysIf you are going to plot a

coup, make sure your secrettexting software actuallykeeps its secrets. In a lawsuitwith Shakespearean over-tones, National Amusements,which controls CBS, claims atop executive at the broad-cast network used a self-de-structing-message app to en-courage board members toseize power from its parent,which is run by Shari Red-stone.

Those texts from ChiefOperating Officer Joseph Ian-niello have been recovered.CBS has asked that they beredacted, claiming they are“business confidential.” Na-tional Amusements says theyshow Mr. Ianniello’s ambitionto get the top job at CBS,which Ms. Redstone opposed.

Media outlets have re-quested that they be un-sealed. Perhaps Mr. Ianniellowill understand what Mac-beth grasped: life is “a taletold by an idiot, full of soundand fury, signifying nothing.”

OVERHEARD

Investors’ Guessing Game: What Is the ‘New Fox’ Worth21st Century Fox is soon

to become a very differententity.

Investors, who have beenfocused on the sale of Fox’sassets to Disney, need tostart looking ahead to whatthe company is calling NewFox.

On Wednesday, the com-pany released fourth-quarterearnings that exceeded ex-pectations. It reported earn-ings of 57 cents a share,beating estimates of 54 centsa share, and revenue of $7.94billion, exceeding estimatesof $7.56 billion.

In a call with analysts,management began gestur-ing toward the new entity:Stripped of Fox’s film and TVstudios, the smaller New Foxwill be focused on news andsports, including the Fox

Netflix and Amazon.com,traditional pay-TV has suf-fered.

But news and sports areinsulated from the disrup-tion, to some degree. Thereis still an interest in viewingthat content live.

As management boastedon the call, Fox News hasdominated Nielsen ratings asthe most-watched cable-news network in America.

They might have addedthat the show’s close align-ment with Donald Trump hasfurther raised its profile.

So should investors staywith Fox after the Disneydeal closes?

Analysts are starting tograpple with the valuation ofwhat would be a roughly $13billion media company.

Fox shares are up 62% in

the past year, and hit a re-cord high in June as Disneyand Comcast fought overthe assets.

The price of the news andsports assets has likely beeninflated along with the restof the assets going to Disney.

The offer price for Fox’sassets has always been be-low the market price, andthe difference is the valua-tion the market is puttingon what will become NewFox.

When Disney made its ini-tial offer in December of $28a share, Fox was trading at$32.75 and jumped to$34.88; now, with Disneytaking the assets at $38 ashare, Fox shares endedThursday’s trading at $45.60.This could also change bythe time the deal closes,

likely late this year.Finally, investors need to

keep in mind Rupert Mur-doch’s other media business,News Corp, which includesThe Wall Street Journal andthe New York Post, amongother entities.

Mr. Murdoch might lookto re-merge New Fox withNews Corp in the comingyears. (They were split in2013.)

The prospect of a profitmachine such as Fox Newsbeing merged with a fuddyold newspaper company, al-beit one that has tried to di-versify, is unlikely to pleaseinvestors.

An era in Fox’s history iscoming to a close. As a newone begins, investors shouldpay close attention.

—Elizabeth Winkler

$50

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Out With the Old21st Century Fox share price

Source: FactSet

THEWALL STREET JOURNAL.

Disney offers $38 a share

Disney offers$28 a share

Comcast offers$35 a share