For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Saturday/Sunday, January 14 - 15, 2017 | A5
* * * *
WORLD NEWS
Foreign Holdings Pose Challenge for Trump Business partners at odds with officials abroad complicate ties for new administration
By Tom Wright in Hong Kong, Alexandra Berzon in Los Angeles and Nicolas Parasie in Dubai At the Wednesday press conference where Mr. Trump described the company’s new structure, he also said he had turned down $2 billion in property deals in Dubai to avoid any possible ethics issue. Dubai investor Hussain Sajwani confirmed he made those offers and that they were declined. But his company and the Trump Organization are still developing two golf courses in Dubai, one of which is set to open to the public by next month. Mr. Sajwani is among several Asian and Middle Eastern partners of the Trump Organization who have faced government probes or been sanctioned for corruption, stock fraud or tax evasion. Such troubles among business partners could prove tricky for a Trump administration’s ties abroad. “The notion that there won’t be new deals doesn’t solve the problem of all the existing deals and businesses,” Walter Shaub, director of the U.S. Office of Government Ethics, said on Wednesday. Problems among some of the Trump Organization’s partners include a tax probe in Indonesia, a conviction for stock ma-
TOKYO—Top Japanese officials pushed back against President-elect Donald Trump’s suggestions that Japan is a drag on the U.S. economy. Mr. Trump on Wednesday named Japan as one of the countries contributing to the U.S. trade deficit, reiterating claims during the election campaign of unfair economic ties with Tokyo. Japanese Finance Minister Taro Aso said Friday it was inappropriate to include Japan with countries that have larger trade surpluses with the U.S. “In terms of trade imbalances, China is No. 1,” Mr. Aso said. More attention should be given to Japanese companies’ creation of around 800,000 jobs in the U.S., Mr. Aso said. —Takashi Nakamichi
KAMRAN JEBREILI/ASSOCIATED PRESS; BEN OTTO/THE WALL STREET JOURNAL (BELOW)
Donald Trump has said his company will be run by his sons and won’t strike new foreign deals, but some he has already made present a challenge to his attempts to separate his presidency from his international business.
Japan Counters Trump’s Criticisms Over Trade Deficit
A gardener watering a green in front of the clubhouse at the Trump International Golf Club, in Dubai; below, Mr. Tanoesoedibjo. nipulation in Malaysia, and Mr. Sajwani’s sentence—later overturned as Egypt’s political situation shifted—for an allegedly corrupt land deal there. Mr. Trump announced this week that his business would be run by his sons and a company executive and that he would have no contact with it under terms of a private trust. Matthew Sanderson, who served as political-campaign attorney for John McCain, Rand Paul and Rick Perry, expressed concern that Mr. Trump’s plan didn’t appear to restrict his business partners from contacting him or other administration officials. “You now have these people abroad and who knows what they are saying?” Mr. Sanderson said. “They can be holding
themselves out as being able to access Trump, able to speak on his behalf since they have this business relationship.” Led primarily by Mr. Trump’s adult children, the Trump Organization has made a major push abroad in recent years. The last 10 announced Trump Organization property deals have been overseas and involve foreign developers. While the company has canceled real-estate licensing agreements in Brazil, Azerbaijan and Georgia since the election, its executives have said they don’t intend to or can’t cancel some of the other deals in Asia and other regions. The Trump Organization didn’t respond to requests to comment on the latest details on its current partners.
In Indonesia, the Trump Organization’s billionaire partner in two multimillion-dollar hoteland-golf-course projects, Hary Tanoesoedibjo, sent a text message last year to a public prosecutor investigating allegations of tax fraud, according to a spokesman for the attorney
general’s office. Mr. Tanoesoedibjo told police the message wasn’t meant to be threatening. A police spokesman said authorities are investigating. A representative for Mr. Tanoesoedibjo said the tax-fraud allegations were without merit. A spokesman for the attorney general’s office stood by the fraud allegations. Another of Mr. Trump’s partners, Malaysian businessman Tony Tiah, was convicted in 2002 of giving false information about share prices to Malaysia’s stock exchange. Mr. Tiah is executive chairman of TA Enterprise, which holds a controlling stake in TA Global Bhd., run by Mr. Tiah’s son. TA Global is set to soon open a Trump-branded hotel in Vancouver. The Trump Organization
didn’t respond to requests to comment about Mr. Tiah. Before the election, Trump Organization general counsel Alan Garten dismissed any concerns about Mr. Tiah. An Egyptian court in 2011 handed Mr. Sajwani a five-year prison sentence and a fine following his conviction for corruption. Egypt’s public prosecutor alleged that his Dubai-based real-estate firm, Damac Properties, benefited from land acquired at below-market value via the country’s former regime. Mr. Sajwani’s conviction was among a wave of similar cases and allegations against businesses with ties to the regime of President Hosni Mubarak, who was ousted that year. An Egyptian court later overturned Mr. Sajwani’s conviction.
U.S. Ambassador to EU Urges Support for the Bloc BY STEPHEN FIDLER BRUSSELS—The departing U.S. ambassador to the European Union warned the Trump administration not to cheer for Brexit and said it would be lunacy if it supported further fragmentation of the EU. In unusually strong remarks to reporters before he leaves his post next week, Anthony Gardner also expressed concern that Brexit campaigner Nigel Farage had apparent influence with the new administration,
describing him as a “fringe voice” in European politics. Mr. Gardner said it would be “inconceivable and shameful” if the U.S. were to consider lightening sanctions on Russia, given what U.S. intelligence agencies said was Russian meddling in the election. Mr. Farage, the former leader of the UK Independence Party, who successfully campaigned for the U.K. to leave the EU in June’s referendum, was the first foreign politician to visit President-elect Donald
speak so forcefully at the time of a change of administration. Mr. Gardner was appointed to the post by President Barack Obama in 2014. “We shouldn’t become cheerleaders for Brexit, particularly a Brexit that is more likely to be a hard, and a disorderly, unmanaged Brexit. That would be in my view absolute folly,” he said. If Brexit led to a fragmentation of the European single market he said, “it would be very bad news for American business.”
Trump after the U.S. election. Mr. Gardner, a former lawyer and banker, said indications that Mr. Farage holds some influence with the Trump team are unfortunate. “I hope that Nigel Farage isn’t the only voice they listen to because he is a fringe voice,” he said. Mr. Trump suggested in a tweet in November that Mr. Farage would make a good ambassador to Washington. It is rare for an outgoing ambassador, even political appointees like Mr. Gardner, to
Mr. Farage responded that “Mr. Gardner’s comments are the last desperate defense of Obama’s pro-EU policy. It is very important that Mr. Trump gets rid of this type of thinking and gets with the modern world.” But Mr. Gardner said the Brexit vote had increased a sense of purpose in Europe. “The perceived idea of some is that 2017 is the year that the EU is going to fall apart,” Mr. Gardner said, referring to conversations between Mr.
Trump’s transition team and top EU officials that he said he had been told of. But he said “the EU is not about to fall apart.” Mr. Gardner said the incoming administration should avoid the temptation “to pursue a bilateral and a transactional policy toward Europe and toward the EU, dealing exclusively or principally with our perceived best friends like the U.K. and Germany.” It shouldn’t ignore, he said, the EU institutions in Brussels.
FROM PAGE ONE
SPACEX Continued from Page One testing on the launchpad in September grounded SpaceX again, adding to losses and causing a four-month delay. Its next launch is planned for Saturday, when it will seek to regain momentum in the face of depressed revenue, jittery customers and a rising backlog of missions. SpaceX, based in Hawthorne, Calif., transformed the aerospace industry with innovative rocket features and software design principles mandated by Mr. Musk, its billionaire founder and chief executive. The 15-year-old company was the first American firm in years to compete for commercial launch contracts, and the first company to launch and return a spacecraft from orbit. SpaceX declined to comment on details of its finances but said it has a solid record of success and strong customer relationships. “We have more than 70 future launches on our manifest representing over $10 billion in contracts,” said SpaceX Chief Financial Officer Bret Johnson. “The company is in a financially strong position and is well positioned for future growth,” adding it has over $1 billion of cash and no debt. The Journal reviewed SpaceX’s financial results from 2011 through the end of 2015 as well as forecasts through the next decade. As a private company, SpaceX isn’t obligated to disclose the figures, and the information has never been widely shared. Mr. Musk, who owns 54% of SpaceX and holds 78% of company votes, has said he isn’t in-
terested in going public until the company is able to transport humans to Mars, which he has said he hopes will happen in 2024. To reach the red planet, SpaceX would need to develop a rocket many times more powerful than its fourth-generation model, which hasn’t flown and is four years behind schedule. SpaceX projected the satellite-internet business would have over 40 million subscribers and bring in more than $30 billion in revenue by 2025, according to the documents. The internet service is currently in planning stages without a factory or a full-fledged team of engineers, according to industry officials and earlier comments by company President Gwynne Shotwell. From 2010 to June 2015, SpaceX managed 18 successful launches in a row before its first accident, versus more than 100 straight so far by its main U.S. rival, a joint venture between Boeing Co. and Lockheed Martin Corp., and more than 75 successful consecutive liftoffs for Europe’s Arianespace SA. SpaceX delivered small operating profits in 2013 and 2014, as revenue jumped to $1 billion from $680 million thanks to contracts from NASA and commercial satellite operators. The company lost $260 million in 2015 when one of its Falcon 9 rockets, carrying two tons of cargo to the international space station, exploded shortly after liftoff in June of that year. The accident thwarted plans to launch more than a dozen rockets that year; it launched six. Last year satellite operators Inmarsat PLC and ViaSat Inc. each shifted one SpaceX launch to Arianespace, citing the delays,
Reaching for the Stars SpaceX projects that soaring revenue from its planned satellite-internet business will dwarf its launch revenue. Revenue
Operating income
Launch Revenue
Satellite Internet Revenue
$40 billion
$40 billion Projections
35
Projections
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
-5
-5 2011
’13
’15
’17
’19
’21
’23
’25
2011
’13
’15
’17
’19
’21
’23
’25
On the Launchpad The company forecasts a dramatic increase in launches in coming years. Accidents in 2015 and 2016 caused planned launches to be delayed. Planned launch
2011
2012
Successful launch
2013
Accident
2014
2015
Projections
2016
2017
Note: specific launch targets for 2011-15 not available Source: the company, early 2016 documents
although they both retain slots on later missions. NASA is conducting a safety review of plans to have SpaceX carry astronauts. SpaceX has said it was committed to working with NASA to resolve issues. Mr. Musk targeted 27
launches for this year; its highwater mark is eight. By 2019, he projected SpaceX will launch 52, according to the documents. SpaceX is building a spaceport near Brownsville, Texas, expected to begin launches in 2018. SpaceX phases in significant
2018
2019
2020
THE WALL STREET JOURNAL.
changes as they become ready, rather than following the industry standard of waiting for a fully overhauled design. This “iterative” approach is typical in Silicon Valley, where software companies quickly roll out new features and fix bugs. SpaceX
says it lowers costs and improves efficiency. SpaceX’s roughly $60 million launch fee for Falcon 9 is onequarter to one-half of what the Boeing-Lockheed venture typically charges. SpaceX’s success enticed Google-parent Alphabet Inc. and Fidelity Investments to invest a total of $1 billion in early 2015, valuing SpaceX at $12 billion. Fidelity has since marked up its stake to a price implying a valuation over $16 billion. After the June 2015 explosion, the company determined the culprit was a 24-inch strut, or low-tech metal support structure, that hadn’t been properly inspected. The company spent six months revamping safety procedures. The second accident last fall destroyed a $200 million commercial satellite and ratcheted up NASA’s concerns. The cause was attributed to problems with new fueling procedures. A phrase on SpaceX’s website said it was “profitable and cashflow positive.” The internal financial documents reviewed by the Journal, though, show an operating loss every quarter in 2015, and also negative cash flow of roughly $15 million. Three weeks after the September accident, SpaceX removed the phrase from its website, suggesting both profit and cash flow had moved into the red for 2016. Senior SpaceX officials haven’t made public statements about profitability. Using the investment from Alphabet, SpaceX plans to eventually launch its own constellation of over 4,000 communications satellites to provide global internet access, forecasting the first phase to go online by 2018.