Panama Paper Scandal Just Getting Started; Riding into the Pac Sun-set; How Victoria Secret Plans to Stay on Top

Paper fail…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The Panama Papers continue their entertaining journey of embarrassing plenty of world leaders. For instance, British Prime Minister David Cameron has been haplessly defending himself after some documents in the Panama Papers unflatteringly revealed how he profited from his late father’s offshore investments, set up by scandalized Panamanian law firm, Mossack Fonseca. His father’s investment fund, Blairmor, shrewdly avoided paying taxes in the United Kingdom by having company board meetings in Switzerland and the Bahamas. Four months before David Cameron became the Prime Minister, he had the good sense to sell his stake for a not-so-whopping $42,000. The Prime Minister called the revelations a ”private matter” but then went on to say that all of his assets are totally legit.  Except it was said eloquently and with a British accent, which always makes things sound even better. Chinese Communist Party Leader Xi Jinping’s brother-in-law, in addition to a few other party members, also owned a piece of a Mossack Fonseca created shell company. But it’s doubtful Jinping’s power and status will be affected. Especially because the (shell) companies in question were conveniently gone with the wind by the time he assumed his leadership role. Interestingly, only one American has been spotted, so far, amongst the 11.5 million documents. It belongs to that of Chicago-based author Marianna Olszewski. But like I said, there are millions of documents to sift through so it could take awhile before other misbehaving Americans are discovered. Or not. These documents were from one but one firm out of hundreds or thousands of firms, both American and foreign, that perform these types of services. Besides, the U.S. is itself a tax haven. Just look no further than Nevada and Delaware. In fact, the U.S. is ranked as the world’s third most popular tax haven. Panama is much less popular, ranking way down at number 13.

Not so gnarly…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

SoCal-based company PacSun is the latest retailer to file for Chapter 11 bankruptcy after posting a $10 million net loss in its fourth quarter. The retailer only managed to nail a profit in just one quarter out of the last six. Add to that increased competition and you’ve got a whole big fiscal mess. But fear not, if you’re a frequent PacSun shopper, as there will be “no immediate impact” on customers at any of the chains approximate 600 stores. As for the retailer’s 2000 employees, their jobs are safe…for now, anyway. Pac Sun, incidentally, also carries the Kendall and Kylie Jenner line, just in case you felt like handing over your hard-earned cash to the Kardashian/Jenner/Kanye clan. Private investment firm Golden Gate will be the lucky group to take PacSun back to being a privately-held company. The investment firm previously lent Pac Sun $60 million back in 2011 and will now magically turn 65% of the company’s debt into equity. Okay, so there’s no magic involved, but there’s definitely some creative math at work. After its bankruptcy reorganization, the company will secure a $100 million revolving line of credit from Wells Fargo. The skate/surf California retailer owes plenty of cash to creditors including $5.7 million to Nike and another $3.8 million to Simon Property Group Inc., the mall operator that is home to many a PacSun stores. Shares of the company plunged as much as 97% in the past 12 months and took another nasty dive today, losing over 40% of its value at one point, as it hit 5 cents. The retailer will join a long and less-than-illustrious list of retailers who also recently filed Chapter 11, including Quiksilver, American Apparel, Wet Seal, Delia’s, Sports Authority…well, you get the grim picture.

In on the secret…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Victoria’s Secret (VS) is one retailer that is most definitely NOT filing for Chapter 11 bankruptcy. The company is actually at the top its fiscal game, posting a 3% sales gain over the previous year and record sales for 2015. But that isn’t stopping the insanely recognizable brand from making some pre-emptive changes, lest the retail climate fiscally change at some inconvenient point. Unfortunately, those changes involve some restructuring that will leave 200 employees without jobs in both the company’s New York and Ohio offices. Victoria’s Secret, whose parent company is L Brands, wants to streamline its operations by separating and concentrating on its top three units: lingerie, beauty and, of course, teen-centric brand, PINK. So what becomes of all the rest of Victoria’s Secret’s other categories of merchandise? They’re going buh-bye. VS, which also owns Bath & Body Works, plans to gradually shift gears away from its iconic catalog. Apparently, the internet managed to make the catalog, among other sales methods, a virtual relic – no pun intended.

Banking Scandal or Ben Affleck Movie?; Airline Ranks and Tanks; Drones to the Rescue

Who gets the movie rights?

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The latest scandal to come out of the banking world has its very own name – “The Panama Papers.” It seems a Panamanian law firm called Mossack Fonseca helped a slew of politicians, celebrities, businessman etc. to create offshore accounts and shell companies for the last forty years. It’s estimated that 500 banks all over the world enlisted the help and resources of Mossack Fonseca to help them set up these shell companies since 1977. Fast forward to a year ago when an anonymous source leaked some 11 million documents to Germany’s biggest newspaper, Suddeutsche Zeitung, which then enlisted the help of the International Consortium of Investigative Journalists. The ICIJ shared information and hunted down leads for over a year in an effort to publicize “The Panama Papers” that contain information on some 214,000 offshore companies. The documents also have plenty of unflattering details about Russian President Vladimir Putin, FIFA officials and over 30 other people and companies that are blacklisted by the U.S. government. These include people indicted for corruption and have ties to drug trafficking and terrorism. Strangely enough, Mossack Fonseco only seems to know the true identities of just over 200 companies out of the over 14,000 that the firm managed to incorporate just in the Seychelles. Now banks across Europe find themselves under the microscope as regulators try to establish if and how those banks found ways to hide assets. The Kremlin, ironically, is calling the allegations “a series of fibs” and thinks its just an attempt to thwart Putins chances in upcoming elections, which are said to be rigged anyway. FIFA, another group that could use a lesson or two on business ethics, called the allegations “ridiculous.” To be fair, it’s not clear to certain people that any actual illegal activity occurred. Of course the banks denied any wrongdoing while Mossack Fonseca calls itself the victim of a data breach.

Bumpy landing…

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Results are in for the Airline Quality Rating and you might just be surprised. Or not. Virgin America took the top spot, even earning the best score in the baggage handling rate category. While Virgin America no doubt takes pride in getting the best ranking, Sir Richard Branson is not exactly celebrating considering Alaska Airlines is buying him out for $2.6 billion. Alaska Airlines, by the way, is paying $57 in cash per share, – a 47% premium over Virgin America’s closing price on Friday. Incidentally, Alaska Airlines came in fifth, though it was ranked highest when it came to fewest customer complaints. But it is anyone’s guess how this buyout will impact Virgin America’s rating next year. In any case, JetBlue came in at number two with Delta, shockingly enough, earning a very respectable third place ranking. Overall industry performance improved slightly. Really slightly. Six carriers actually improved, while another six did not. Spirit came in dead last, but in all fairness, Spirit is new to the list. Also in all fairness, Spirit ranked the highest in customer complaints, which makes sense considering that its culture is best described as “take it or leave it.” Amerian Airlines plunged three spots from last year to number 10. Which sounds about right. American, by the way, is the largest carrier in the world, just not on the United States. United is and yet it doesn’t exactly boast an enthusiastic following. Hawaiian Airlines ranked number one for on-time performance. And that’s really great. Especially if you’re going to Hawaii. Which unfortunately, I am not.

Start-up STAT…

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Bay Area start-up Zipline just scored $18 million in funding  – but not from just any investors.  Microsoft co-founder Paul Allen and Yahoo Founder Jerry Yang saw fit to plunk down tons of cash for the drone company but the question is: what makes this drone company different from all the other drone companies? At least for Paul Allen and Jerry Yang. I suppose it has something to do with the fact that Zipline founder Keller Rinaudo is using his drone technology not for delivering books and groceries, but rather to save lives in third-world countries. Zipline’s drones will be delivering blood and much-needed medical supplies to remote, hard-to-reach areas in Rwanda. Rinaudo, a Harvard-trained scientist said that there is “nothing more precious than blood and medicine” and plans on making those items much more accesible than they have ever been. He also wisely pointed out: “Getting medicine to remote places is both a huge market and a global challenge.” As of now places in Rwanada get resupplied a few times a year. But Rinaudo is planning for his drones to make up to 150 drops a day come July. The government of Rwanda is footing the bill to make that happen. And unlike many other types of drones that can’t operate properly in inclement weather, Zipline’s drones can, are able to carry up to 3.5 lbs. and fly within a 75 mile range. Considering that Rwanda is one of the poorest nations in the world, it will become the first country to employ commercial drone delivery, all while Amazon and other companies continue fighting regulatory battles and FAA hurdles.