Cisco Chief Executive’s New Mantra: Simplify Computer Networks

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Mr. Robbins specifically pointed to a new line of switching systems called the Catalyst 9000, which has some novel features, including the ability to scan packets of data for malicious software even if they are encrypted. In just the past three quarters, it has been purchased by 5,800 customers, a record order rate for the company.

Catalyst 9000 also comes with new software used to manage the systems, called DNA Center, which provides a kind of digital dashboard for all the devices connected to a corporate network. The software streamlines what technicians need to do, which previously involved typing in an arcane set of text commands for each networking device to configure and make changes to a network. Cisco estimates that it has taught that skill to more than six million people over the years, building customer loyalty through their investment in training.

But the labor to manage that complexity has turned into a liability, Mr. Robbins said. Companies often spend $15 in operating costs over five years for each dollar spent on network technology, he said.

Seth Price, who manages networks operated by Durham County, N.C., estimated that DNA Center and other Cisco software had reduced the time needed to resolve service problems by 80 percent. Finding and isolating a computer infected with malware — a job that once took months — now takes hours, he said.

DNA Center is also designed to improve security by making it easier to restrict what devices can communicate with one another. That was a key selling point for Children’s Hospital Los Angeles, which has to worry about protecting computers, medical instruments and other devices, said Steven Garske, its chief information officer. The hospital decided to buy 350 of the Catalyst devices last July.

The latest Cisco technology works like “digital alchemy,” said Jerry Sheehan, chief information officer at Montana State University, which is also testing DNA Center.

Mr. Robbins still has plenty to think about. Rivals are promoting similar approaches, including the hardware makers Arista Networks, Hewlett Packard Enterprise, Juniper Networks and Huawei of China, while software specialists include VMware, Cumulus Networks and Apstra.

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Martin Sorrell Beats WPP in Bidding War for Dutch Marketing Firm

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Martin Sorrell, the former chief executive of the advertising giant WPP who is now trying to build a new ad company, beat out his former employer for the purchase of a Dutch marketing firm on Tuesday, a move that WPP claimed could endanger millions of dollars in his stock awards.

Mr. Sorrell’s new firm, S4 Capital, said in a statement that it had bought MediaMonks, which has 11 offices and more than 750 employees. The marketing firm brings in about 110 million euros ($129 million) of annual revenue, and buying it is S4 Capital’s first move in creating “a new era, new media solution embracing data, content and technology,” the statement said.

The purchase price was €300 million, or about $352 million, and will be paid in cash and stock, according to a person familiar with the deal who spoke on the condition of anonymity to discuss specific details.

The acquisition was contentious because WPP, which ousted Mr. Sorrell in April, was also bidding for MediaMonks. Last week, lawyers for WPP sent Mr. Sorrell, 73, a letter saying that he was risking his future stock awards, worth millions of dollars, by aiming to buy the firm.

The letter said that WPP started considering buying MediaMonks in November, and that Mr. Sorrell, who was the conglomerate’s chief executive, “was heavily engaged in this process.” As a result, the pursuit was unlawfully diverting a “maturing business opportunity from WPP” and would most likely breach his confidentiality agreement, the letter said.

WPP said in a statement on Tuesday that it stood by what its lawyers said last week. “Despite subsequent protestations from Sir Martin’s lawyers, we are well aware of the facts, and he has jeopardized” his long-term incentive plan entitlement, a spokesman said.

A spokesman for Mr. Sorrell said the executive “vigorously denies the allegations and is confident that the facts will do the talking.”

Mr. Sorrell was also the subject of a recent report in The Financial Times detailing allegations of bullying behavior, and one in The Wall Street Journal that said his departure from WPP was preceded by a company investigation into whether he had visited a brothel and used WPP money to pay a prostitute. Mr. Sorrell has denied both reports.

“We have a huge amount of respect for Sir Martin,” Wesley ter Haar, founder and chief operating officer of MediaMonks, said when asked about the allegations. “This company is being built on a foundation of culture that MediaMonks already has in place, so we will be building a company for the next generation, which is all about diversity and inclusion.”

He added that the highlight for the company was “the ability to work with a legend in the industry that has disrupted the industry before and is planning to do so again.”

S4 Capital plans to be publicly traded in coming months by using an existing company’s listing and expand through acquisitions. Mr. Sorrell is its executive chairman and contributed 40 million pounds, or $53 million, of the firm’s initial equity funding.

MediaMonks, whose clients include Amazon, Johnson & Johnson and Netflix, will receive shares in S4 Capital and cash as part of the acquisition, according to the statement on Tuesday.

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A Restaurant Takes On the Opioid Crisis, One Worker at a Time

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LEXINGTON, Ky. — Five years ago, Rob and Diane Perez found a spoon and a ramekin in the trash at a branch of their Saul Good Restaurant & Pub, and realized that their top server was doing heroin in the bathroom.

They had already lost the first manager to join their staff; she died in jail after trying to obtain prescription pills illegally. But they didn’t put the pieces together until last year, when they got a call that a cook would not be coming into work because he had overdosed on opioids and died.

They realized that they had lost 13 employees to addiction over 10 years, and that half the cases were related to opioid drugs. “They were not fired,” Mr. Perez said. “They were dead.”

So Mr. Perez, 53, and Ms. Perez, 51, decided to take a nationwide crisis into their own hands. Last September, they opened DV8 Kitchen, a restaurant that not only hires people in treatment for addiction to opioids or other substances, but also focuses its entire business model on recovery, using the restaurant setting as a tool for rehabilitation.

An estimated 115 Americans die every day of opioid overdose, according to the Centers for Disease Control and Prevention. One of the hardest-hit states is Kentucky, which in 2016 recorded nearly 24 opioid-related deaths for every 100,000 people, almost double the national rate, the National Institute on Drug Abuse reports.

Here in Lexington, a charming, pasture-draped city known around the world for its horse farms, there hasn’t been a single day since July 2016 when paramedics have not administered Narcan, the lifesaving drug for opioid overdoses, to at least one person, said Lt. Jessica Bowman, a public information officer for the Lexington Fire Department.

Restaurant culture has long been steeped in alcohol and drugs. Many places offer free shift drinks, and servers earn tips in cash, the common medium for drug transactions. Mr. Perez, who started working in the business at 19, struggled for a decade from alcohol addiction but has been sober since 1990. In restaurants, he said: “There are more late nights than early mornings, and it’s acceptable to have a hangover. You think all this is fun and normal, because everyone else has that lifestyle.”

Still, the Perezes saw restaurants’ unusual potential for helping addicted people recover. “There’s customer service, culinary, baking, finances,” Mr. Perez said. “We can teach you any of these businesses from scratch.”

Cooking, in particular, he sees as “100 percent therapy.” In making bread, for example, “there is something magic about kneading the dough side by side with someone else, not making eye contact,” he said. “It is very tactile and freeing.”

A number of restaurants in the United States are giving workers with addictions a second chance, including Sérénité in Medina, Ohio, and Archie’s Grill in Shelburne, Vt. The Perezes visited several of them, but thought the standards that some set for troubled employees were too low.

“My guess is that they wanted to meet people where they were,” Mr. Perez said, but “I didn’t see a spark in people’s eyes, or pride in the food. I didn’t see professional behavior. I could always tell who the heroin addicts were.” Many of these places, including one of the couple’s favorites, Blochead Pizza in Cincinnati, ended up closing.

At DV8 Kitchen, one of four restaurants they own, the Perezes pay just over $12 an hour on average, which Mr. Perez said is 20 percent above the rate at many local fast-food chain restaurants. In turn, employees are held to exacting standards. There is no bar, and a zero-tolerance policy for tardiness. Tips are pooled, then added directly to paychecks, so no cash is exchanged. (The name is a play on the word “deviate” — a reference to the employees’ aim to detour from their pasts and rebuild their lives.)

The couple also hire from and work directly with treatment centers, adding an additional level of accountability for employees.

“We are not certified experts on this, nor do we claim to be,” Ms. Perez said. “We are just providing the piece of the puzzle that is giving people a job right away when they are getting clean.”

The restaurant, opened with $300,000 invested by local people who believe in the cause, is a plant-filled, garagelike space in a strip mall within walking distance of the area’s three largest rehabilitation centers. Its walls and tables are adorned with colorful graffiti by local artists. An open bakery lets customers watch employees as they pound dough into brioche buns.

The menu is simple — sandwiches, salads, eggs, baked goods — and intended to teach widely applicable cooking skills. Employees greet every guest, bus every table, learn to cook sous vide, and bake their own bread for the sandwiches.

On a recent afternoon, a sign in the kitchen read: “Attention all staff: When cutting cucumbers, use the mandoline at the specific size, every time. Failure to do so will result in termination.” Mr. Perez sheepishly admitted that he occasionally calls the restaurant to make sure that the person answering the phone is greeting customers enthusiastically.

Initially, business at DV8 Kitchen was slow: The restaurant, which proclaims its mission on its website and on the front of each menu, lost $30,000 in its first five months. “When people heard ‘second chance,’ they were either concerned with their personal safety, or they were thinking second chance means second rate,” Mr. Perez said.

The couple soon realized that they couldn’t offer dinner service, since most of their employees — 18 out of 23 are in what Mr. Perez calls active recovery — had to attend support meetings at night.

The Perezes leaned into breakfast and lunch, pushing the homemade breads and baked goods. By March, they said, the restaurant was turning a profit. It started selling the bread wholesale to other restaurants, and DV8 was one of a few places in town that catered breakfast. The hefty cinnamon rolls, made with croissant dough to add more labor to the process, have drawn a cult following.

Marsha Elliott, an office manager at Berea College, south of Lexington, said she originally stopped by DV8 because she had heard the food was good; she only later learned about its purpose. Now, she visits whenever she is in the area. On a recent afternoon, she carried a box containing two cream cheese muffins (her favorite) and four cinnamon rolls.

“You wouldn’t pay $4 for a cinnamon roll anywhere else here, but I don’t mind paying a little extra to help people get back on their feet,” she said.

Another regular, Jason Johnston, the director of teaching and learning at the University of Kentucky College of Social Work, had the opposite experience: He came because of the social mission, then discovered that “the food was actually really good,” he said. (Mr. Johnston had two cinnamon rolls on his table for one.)

He said he brings friends to DV8, but often doesn’t tell them that the place is staffed by workers recovering from addiction. When he reveals the truth, “they are always surprised,” he said.

After nine months in business, DV8 seems to be serving its dual purpose as restaurant and recovery setting.

Dan Rison, 29, who greets customers and serves dishes, among other tasks, said he first started taking pain medication when he was 14, after an operation intended to correct a birth defect. He eventually became an alcoholic, was arrested and pleaded guilty to cashing a forged check, and went to jail.

When he got out, he was unable to hold down a job for more than a few months, and once he did find one that he liked, at an antique store, “there was a lot of drug and alcohol abuse during the workday,” he said. “I stopped caring whether or not I lived.”

This is his first restaurant job, and the environment at DV8, he said, builds camaraderie.

“In the darkest part of my addiction, I isolated myself,” he said. “Here, if you withdraw, the guest will notice you aren’t bringing their food or asking how they are doing. Your co-workers will notice if you don’t have a smile on your face.” At DV8, he added, he doesn’t have to hide his past — everything is out in the open.

Mr. Rison is 19 credits away from earning a bachelor’s degree in social work, and would like to earn his master’s in the same subject, so he can give others with addictions the kind of help he received.

Jennifer Ratliff, 42, a cashier and cook, used to work at a Cracker Barrel and a Waffle House, “but a lot of people came in high,” she said. “There was no understanding or togetherness.”

After her husband killed himself several years ago, she turned to opioids to “numb the feeling,” she said, and began selling heroin. Arrested and convicted on drug charges, she lost custody of her three children and served time in prison.

Working the grill, she said, “is a huge coping skill for me.” Making burgers, “adding the spices, the egg on top, making the homemade Dijonnaise,” and then seeing customers’ reaction when they take a bite, brings “a sense of accomplishment,” she said.

Hoang Dong, DV8’s general manager, who worked with Mr. and Ms. Perez at their Saul Good restaurants, said he was concerned at first “about whether or not these people were going to be aggressive, or trainable, or relapse,” he said. Instead, “everyone is wanting to turn their lives around, and they hold each other accountable.”

The most difficult part, he said, is that the restaurant doesn’t have enough jobs to keep up with the number of applicants. “There was a guy I had to turn down from employment because we were full, and he died of overdose a week later,” he said. “I know there is not much we could have done, but I felt horrible. What if I had hired him, and he had a chance?”

Local treatment centers are thrilled about their members’ progress, and how closely they are able to work with DV8.

Jerod Thomas, the chief executive of one center, Shepherd’s House, said that while he had been approached by other employers about hiring people recovering from addiction, no one except Mr. and Ms. Perez wanted to take such an active role in treatment. Other owners “may give somebody a second chance, but that’s not their motive,” he said. “Their motive is to get the work done. Rob wants to get the work done, too, he’s just invested in offering support, and being a part of the treatment team.”

Several local restaurateurs who have also had workers with addictions said that approach seemed difficult to sustain.

The Perezes have “combined the toughest industry with the toughest social problem we have,” said Ouita Michel, the chef and an owner of Holly Hill Inn, just outside Lexington. She added that she would love to hire recovering addicts, but only after they worked at DV8. “That’s why the work DV8 is doing is so valuable.”

Debbie Long, who owns Dudley’s on Short, recalled hiring a man who was highly recommended by his treatment center. “We noticed a decline in productivity, and then the police showed up all of a sudden because he had some outstanding warrants for his arrest,” she said. “We have not heard from him, and we don’t know how to get in touch. You feel bad, but what do you do?”

“Running a restaurant is difficult in and of itself,” she said, “and then you add the employee element, plus knowing these individuals have a past and can relapse at any time. It’s challenge on top of challenge.”

The low turnover rate at DV8 Kitchen suggests it can be otherwise. Only five of the 25 or so recovering people they have hired have left because of a relapse or firing. (The national turnover rate for the hospitality industry, by comparison, was 70 percent in 2016, according to the National Restaurant Association.)

Mr. and Ms. Perez have been lobbying the state government for money to help open other DV8 restaurants, and for incentives for businesses to hire people in recovery from addictions.

Every Tuesday at 3 p.m., the restaurant holds a mandatory workshop for employees. Lawyers explain how to get criminal convictions expunged from records, accountants talk personal finance and professional athletes discuss teamwork.

At one recent workshop, Vitale Buford, a transformational coach who was addicted to prescription drugs, quizzed workers about the everyday troubles they take for granted.

“What are you tolerating?” Ms. Buford asked.

The employees scribbled down their answers: not getting custody of their children, being 50 pounds overweight, having strained relationships with parents. Then Ms. Buford told them to write all their excuses for tolerating these problems on a piece of paper, and toss it into the garbage.

As they turned, one by one, toward the trash bin to discard their worries, the backs of their uniforms became visible.

Inscribed on the shirts was a single phrase: “Life changing food.”

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Square Feet: Developers Fight Efforts to Make Them Pay for Public Art

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Catclar Investments in Scottsdale installed a half-million dollars’ worth of art, including large-scale photographic murals and a sculpture resembling a Lego brick, at its Soho Scottsdale condominium development. “Putting art in new developments all over town is a brilliant idea, because it gives life to projects,” said Irene Catsibris Clary, principal at Catclar.

But in other areas across the nation, developers are fighting back.

In Oakland, Calif., the Building Industry Association of the Bay Area sued to block an amendment that added developers of commercial and residential properties to the city’s percent-for-art statute. The group argued that the law violated both the First Amendment, by requiring speech in the form of purchasing works of art, and the “takings clause” of the Fifth Amendment, which limits a public entity’s ability to take control of private property for public use.

“The First Amendment’s free-speech guarantees include the right not to give voice to someone else’s message,” the association said in a statement.

In February, the Federal District Court in San Francisco ruled in favor of the city, saying the Supreme Court has interpreted the “takings clause” to apply only when government officials require something from a developer regarding a specific property rather than a broad class of properties.

Judge Vince Chhabria also ruled that “the ordinance does not require a developer to express any specific viewpoint, because developers can purchase and display art that they choose.”

Despite the increased resistance, some municipalities have found ways to negotiate with builders to sweeten the requirement.

St. Louis Park, Minn., for instance, has no ordinance for public art, but city officials are “able to require it when the developer is getting something in return from the city,” said the city’s community development director, Karen Barton. The negotiations may include public financing or flexibility in land-use requirements, she said.

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Tesla to Build China Plant With Goal of Producing 500,000 Cars a Year

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Tesla has reached an agreement with the Chinese authorities to build a battery and automobile factory in Shanghai, its first plant outside of the United States, the company said on Tuesday.

Tesla said it expected that the plant would eventually produce 500,000 electric vehicles a year, and that the effort would also include a research-and-development center and a sales operation.

The carmaker did not disclose how much it planned to invest in the venture, but it said it would be the sole owner. Other foreign automakers, including General Motors, Volkswagen and Toyota, have been required to form joint ventures with local partners to produce cars in China. But the Chinese government recently said it would ease that requirement, an arrangement that could expose company secrets.

Tesla said in a statement that it expected to begin construction as soon as it had obtained the necessary approvals and permits. “From there, it will take roughly two years until we start producing vehicles and then another two to three years before the factory is fully ramped up,” the company said.

Elon Musk, the company’s chief executive, said the plant would be “a role model for sustainability.”

[Read More: Inside Tesla’s desperate effort to speed up production of its new Model 3 at its factory in California.]

As part of the initiative, Tesla signed an agreement to cooperate with the Shanghai municipal government and an investment agreement with the Lingang Area Development Administration. Lingang is a coastal area southeast of Shanghai that the authorities have been trying to develop for several years.

Ying Yong, Shanghai’s mayor, said in a translated statement that his government “will give full support to the construction of Tesla’s factory.”

The government statement said the effort was the largest manufacturing project backed by foreign investment in Shanghai’s history.

A Tesla factory in China is most likely not something the Trump administration wants to see.

The White House began a trade war with China partly to discourage American companies from shifting operations there. The administration has argued that China often uses unfair methods to either encourage companies to move there or force them to give up or share technology with Chinese companies if they want access to the country.

The trade conflict has already proved costly for Tesla. Thanks to recently imposed tariffs, the price of a new Model S in China has risen by about one-fifth, to nearly $130,000.

Chinese leaders, worried about skies choked with pollution and the country’s growing dependence on foreign oil, have championed electric cars as a possible solution. A Tesla manufacturing plant in China could aid Beijing in its effort to take a strong global position in producing electric cars and other technologies of the future, a vision outlined in the Made in China 2025 plan.

With its decision to open a plant in China, Tesla is responding to carrots and sticks. Producing vehicles in China would help the company avoid Beijing’s longstanding duties on imported cars. Although China has pledged to cut those duties, they remain high compared with those levied by many other countries, including the United States.

But making cars in China offers big benefits to Tesla. It would put the company close to China’s huge automotive supply chain. Even more important, it would provide a firmer foothold in a potentially vast market. China is the company’s second- largest market after the United States. Its revenue there doubled to $2 billion last year. A base there could also help insulate the company from future trade conflicts.

China has a number of electric-car makers, but they tend to make smaller, more affordable vehicles that lack the polish of Tesla’s offerings. The American-made cars can frequently be seen in some of the more upscale areas of Beijing and Shanghai.

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US Stocks Edge Higher as Oil Prices Boost Energy Companies

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NEW YORK — U.S. stocks are slightly higher Tuesday morning as energy companies rise along with the price of crude oil. PepsiCo is gaining ground after reporting solid second-quarter results. The market has risen recently as investors expect strong earnings reports from various industries in the next few weeks.

KEEPING SCORE: The S&P 500 index added 7 points, or 0.3 percent, to 2,792 as of 10 a.m. Eastern time. The Dow Jones Industrial Average rose 126 points, or 0.5 percent, to 24,904. The Nasdaq composite inched up 2 points to 7,758. The Russell 2000 index of smaller-company stocks was little changed at 1,705.

The S&P 500 is on pace for its fourth gain in a row, and its seventh increase in the last eight days. As of Friday the U.S. and China are in open conflict over trade, but Wall Street has focused instead on last week’s strong jobs report for the month of June as well as earnings reports. Major U.S. banks will start announcing their results Friday.

DRINK UP: PepsiCo’s beverage sales are still struggling as the company tries to adjust to Americans’ changing drinking habits. The maker of Gatorade, Mountain Dew and Tropicana said sales in North America fell, but its earnings were better than expected.

The stock rose 4.4 percent to $112.48.

ENERGY: Energy companies climbed with oil prices again as U.S. crude continued to trade at its highest price since late 2014. On Tuesday it added 1 percent to $74.59 a barrel in New York. Brent crude, used to price international oils, gained 1.7 percent to $79.40 a barrel in London.

Exxon Mobil rose 1.5 percent to $84.11 and Chevron picked up 1.8 percent to $128.30.

BONDS: Bond prices were little changed. The yield on the 10-year Treasury note held steady at 2.86 percent.

EARLY LOSERS: Financial and consumer-focused companies took small losses. Charles Schwab lost 0.7 percent to $51.55 and Raymond James dipped 0.5 percent to $91.89. Cable company Charter lost 0.9 percent to $305.39 and toymaker Mattel slid 1.5 percent to $17.36.

CURRENCIES: The dollar rose to 111.23 yen from 110.82 yen. The euro fell to $1.1712 from $1.1749.

OVERSEAS: France’s CAC 40 was up 0.6 percent and the German DAX added 0.7 percent. The FTSE 100 index of British shares rose 0.2 percent.

Japan’s benchmark Nikkei 225 added 0.7 percent and South Korea’s Kospi gained 0.4 percent. In Hong Kong the Hang Seng dipped less than 0.1 percent.


AP Markets Writer Marley Jay can be reached at His work can be found at

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A Tech Guru Captivated Canada. Then He Fled to China.

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VANCOUVER — Sun Yian was living the Canadian dream.

The Chinese immigrant found fortune harnessing Canadian talent to develop cutting-edge technology, everything from semiconductors to facial recognition, to take back to China. His company grew to more than 1,500 employees across China and North America, and was lauded by Canadian officials as a model for unlocking the Chinese market to create homegrown prosperity.

Then Mr. Sun stopped paying his Canadian workers and fled to China. Left behind are lawsuits from angry investors and Canadian employees who are wondering whether their work could be used to help China’s growing domestic surveillance state.

Canada has long benefited from close business ties to China, and lawmakers have courted the country as a new market for Canadian companies as well as a source of investment. Now, Mr. Sun’s story is fueling calls for heightened skepticism of Chinese money.

“Canadian officials have to some degree been blinded by China’s incredible economic growth and waves of capital spreading worldwide,” said Michael Byers, a professor of global politics and international law at the University of British Columbia in Vancouver. “They’re certainly naïve to China’s approach to acquiring high tech from other countries, and they haven’t pushed hard on getting answers before allowing deals to go through.”

In March 2017, the government of Prime Minister Justin Trudeau approved the sale of a Montreal laser company to a firm partly owned by the Chinese government, despite objections from security officials in the previous Canadian government. In June 2017, Canada waived a security review for a Chinese takeover of Norsat International, a Vancouver high-tech company that provided satellite technology to the United States military.

Mr. Sun’s company, Istuary Innovation Group, initially appeared to represent the positives of Chinese investment. His company brought jobs and high-tech business to Vancouver. But a review of the company’s finances and interviews with former employees reveal a murky web of financial and previously undisclosed ties to the Chinese government.

Mr. Sun, 45, who goes by the name Ethan, founded Istuary in 2013 in a Vancouver Starbucks, just as the Canadian government was welcoming greater Chinese investment. At its peak, the technology incubator and venture fund occupied two floors of a downtown Vancouver office building, where engineers toiled on semiconductors, robotics, big data analytics and facial recognition. By 2017, Istuary had 24 offices around the world, including in Beijing, Shanghai, Los Angeles and Toronto.

The company’s growth helped give Mr. Sun access to Canada’s political elite, relationships that were nurtured through political donations and corporate sponsorships. Photos he posted online show him smiling with Prime Minister Justin Trudeau during a trade mission in China. Government officials in British Columbia praised Mr. Sun for creating Canadian jobs.

A Vancouver government agency signed a contract with Chinese industrial parks to expand Istuary’s operations. Istuary joined publicly funded Canadian organizations to do research. Canada’s immigration ministry approved the company for a federal startup visa program that lets foreign entrepreneurs obtain permanent residency.

“The government gave us really good support,” Mr. Sun told a Canadian business summit in 2015, according to a video of his speech posted online.

Yet some of Istuary’s work provoked concern among employees.

Eric Hsu, 39, an American data scientist hired by Istuary’s Vancouver office in 2016, said he worked on artificial intelligence capable of recognizing a person’s face across multiple surveillance feeds or detecting specific human behavior, like fighting. “A lot of these security applications were both humanitarian and ethically troubling,” he said in an interview. “Chinese clients had lots of ideas for ways they would use our applications. Some of those raised red flags.”

An Istuary customer presentation reviewed by The New York Times highlighted the services its technology could offer in Chinese cities. They included the ability to recognize faces through security cameras and run them through databases, as well as track people’s personal relationships. It also highlighted other services, like tracking crowds and land records.

Mr. Hsu said he attended trade shows in China where Mr. Sun pitched Istuary’s artificial intelligence technology to potential customers interested in products designed to prevent prisoner suicides or for detecting criminal activity.

Human rights groups say Chinese authorities have been zealously using big data collection, A.I. and facial-recognition technology to upgrade Beijing’s mass surveillance efforts.

Mr. Sun enjoyed ties to the Chinese government that his Canadian workers and investors say he did not disclose.

Kuang’en Network Technologies, a cybersecurity company he founded in Beijing in 2014, specialized in industrial control systems for some of China’s biggest state-owned enterprises.

State Grid, China’s national power distributor, said it banned Kuang’en, among other companies, in 2016 from bidding on public contracts because of collusion, without offering details. But that year, Kuang’en formed a joint venture with another cybersecurity firm, BeijingVRV, whose powerful Chinese government clients include the National People’s Congress, the finance and foreign ministries, military contractors and public security agencies.

According to corporate documents and Mr. Sun’s employees in China, Istuary and Kuang’en shared funding, workers, technology, office space and shareholders, including Mr. Sun’s wife, Hu Yulan.

Former Istuary employees in Vancouver said the company’s collapse began last spring with a series of missed payrolls and final paychecks in May 2017. Many stayed at their jobs anyway.

“Sun kept giving us false hopes,” said Manivannan Gajendran, who led an Istuary quality testing team in Vancouver. He said he took out a $15,000 line of credit to cover his daily expenses while he waited for money that never came.

By then, Mr. Sun had gone back to China. In August, Istuary investors in British Columbia sued Mr. Sun and his wife, accusing the couple of illegally using funds to purchase two multimillion-dollar homes in Vancouver.

Canada’s immigration ministry suspended Istuary from the startup visa program after learning of the allegations. In an email, a ministry spokeswoman said it had gathered information on Istuary after the company was recommended by an industry association, and “found no reason to reject the designation recommendation at that time.”

Mr. Sun did not respond to interview requests made through his Vancouver lawyer. But he denied the allegations in a letter posted on Istuary’s now-defunct website in October. “We are NOT a Ponzi scheme,” he wrote.

A British Columbia provincial employment department has since ordered Istuary to pay around $2.2 million in unpaid wages to more than 150 employees and has begun collection proceedings in order to seize Mr. Sun’s residential properties, a spokeswoman from the province’s labor ministry said in an email.

The fallout, and Mr. Sun’s broken promises, soon reached the company’s operations in China. According to Laura Fan, an Istuary employee in Guangdong Province, Mr. Sun claimed the company’s cash crunch was because of poor management and Chinese regulatory changes. He also blamed Chinese investors and their “political mission” for pressuring him into striking deals with American chip companies, she said.

In December, Istuary and Kuang’en’s offices began closing across China, without employees being paid for months of work. “These people never got any of their salaries,” Ms. Fan said.

Just before Christmas, former employees said, two people from a Chinese technology firm that had invested in Kuang’en camped out in the Beijing office, hoping to catch Mr. Sun. A few weeks later, debt collectors locked the doors with a heavy chain. On a recent visit to the shuttered office, trash covered a rickety cot and chairs visible in the entryway.

Someone had scrawled a large handwritten message across the glass doors: “The fraudster network fakes bankruptcy, maliciously owes salaries and cons its employees.”

Underneath was an ultimatum: “Pay us the money and we’ll unlock the place.”

Dan Levin reported from Vancouver. Juecheng Zhao contributed research from Beijing, and Cao Li contributed research from Hong Kong.

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As Moguls Gather in Sun Valley, Here’s Who Might Be in the Mood for Deals

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Get the DealBook newsletter to make sense of major business and policy headlines — and the power-brokers who shape them.

Today marks the start of the latest Allen & Company conference in the sleepy Idaho resort of Sun Valley — and, as ever, there will be the possibility of deals being struck on the sidelines.

Some of the biggest names in tech and media, from Jeff Bezos of Amazon to Bob Iger of Disney, will be in attendance. (The nearby airport, as it tends to be at this time of year, will likely be jammed full of private jets.) They will arrive knowing that conditions are perfect for discussing a new round of deal-making.

The conference is tightly closed off from the public and reporters, and the relaxed atmosphere lends itself to early-stage negotiations. (Warren Buffett once said it was perfect for ABWA, or “acquisitions by walking around.”) The Sun Valley get-together has an impressive track record, as the breeding ground for Comcast’s acquisition of NBCUniversal, Mr. Bezos’s purchase of The Washington Post and Disney’s takeover of ABC/Capital Cities.

But what might shake out this year? Here are DealBook’s guesses about which attendees might strike up deal talks in between panel discussions, rounds of golf and drinks in the Sun Valley Lodge bar.

John Malone: The cable mogul is one of the most active deal-makers around. And as telecom giants increasingly look to combine with media properties to gain new sources of income — and fend off competition from Silicon Valley — analysts have wondered whether he and his companies, Charter Communications and Liberty Media, are on the hunt for a new property. Among his current interests are regional sports networks — some of which would be up for grabs as part of 21st Century Fox’s potential sale to Disney or Comcast — and Spanish-language outlets.

Masa Son: The SoftBank founder has amassed nearly $100 billion for his Vision Fund, which has invested in everything from Uber to the messaging service Slack to the dog-walking app Wag. Given his rather expansive vision, it’s possible that he could be interested in buying a media company. (He’s currently pursuing a bid to stage two new soccer tournaments with FIFA, and would like to take control of its gaming and merchandise rights.) Or perhaps he would also like to own all of Slack, after having already invested in the company. Its C.E.O., Stewart Butterfield, is an invitee as well.

Tim Cook: Apple’s chief has faced questions for years about what to do with the iPhone maker’s enormous cash hoard. (It stood at $163 billion in February.) The company has pledged to take that down to nearly zero — and one way to do that would be through acquisitions. Given that Mr. Cook and his team are pushing more heavily into content to compete with Netflix and Amazon, now might be the time to broach conversations with any of the media moguls in attendance.

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Brett Kavanaugh Likely to Bring Pro-Business Approach to Supreme Court

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anastasios pallis

President Trump’s nomination of Judge Brett M. Kavanaugh to the Supreme Court, his second nominee, could further cement the high court’s pro-business tilt.

In his dozen years as a federal appellate court judge, Judge Kavanaugh has tended to side with business interests in resolving regulatory issues and employment disputes in cases involving the environment, consumer protection and technology.

“The Champagne corks are going to pop at the Chamber of Commerce and in the C.E.O. offices across America,” said Dennis Kelleher, president of Better Markets, a nonprofit group that advocates stringent financial regulation.

A graduate of Yale Law School, Judge Kavanaugh served as a clerk to Justice Anthony M. Kennedy, whose retirement, announced less than two weeks ago, opened the seat that Judge Kavanaugh has been nominated to fill. Judge Kavanaugh has had a hand in writing some 300 judicial opinions for the Court of Appeals of the District of Columbia.

Business groups, for now, were careful not to strike an overly celebratory note in commenting on the nomination.

“We congratulate Judge Brett Kavanaugh and look forward to reviewing his record on legal issues important to the business community,” said Blair Latoff Holmes, a spokeswoman for the United States Chamber of Commerce.

Consumer Issues

In one of Judge Kavanaugh’s best-known rulings, he said the legal structure of the Consumer Financial Protection Bureau was unconstitutional because it was led by a single director, unlike other agencies with several commissioners. Judge Kavanaugh sought to remedy the problem by empowering the president to fire the director.

Judge Kavanaugh’s legal reasoning ultimately was rejected by a full panel of the appellate court for the District of Columbia.

Much of the debate in the coming months will focus on Judge Kavanaugh’s view on social issues and whether a sitting president can be subject to prosecution or other legal claims. But Mr. Kelleher said equal attention should be given to his track record in siding with business or in finding ways to strengthen the hand of the executive branch.

Net Neutrality

Judge Kavanaugh took a position favored by some big telecommunications companies when he wrote a dissenting opinion in an appellate case that had upheld the Obama administration’s so-called net neutrality regulation. The rule passed by the Federal Communications Commission required big internet providers to treat data equally and to not favor some data companies over others.

The judge said the rule violated the First Amendment by interfering with the editorial decision-making of internet providers.

Judge Kavanaugh’s view ultimately triumphed when the Trump administration and the F.C.C., under new leadership, rescinded the net neutrality rule.

The Environment and Employment

In other decisions, he has taken a tough line on environmental regulations. In one case he was part of a divided bench that struck down a provision of the Clean Air Act. The ruling was later overturned by the Supreme Court.

In employment-related cases, Judge Kavanaugh has a mixed record, sometimes siding with businesses and sometimes with employees.

In one case involving Fannie Mae, the government-sponsored mortgage firm, Judge Kavanaugh joined his colleagues on the appellate court in reinstating a lawsuit in which a black employee claimed his supervisor created a racially hostile workplace.

Judge Kavanaugh, according to Scotusblog, wrote that “being called the N-word by a supervisor” even a single time was enough to “establish a racially hostile work environment.”

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DealBook Briefing: The New Scotus Pick Could Be a Boon for Business

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Despite appearances, this is not a novelty acquisition. It’s the latest of a series of moves by Uber and its rival Lyft to take control of city transportation. Each wants its app to be the only thing urbanites need to get around, offering cars, bikes, scooters and public transit (and some day maybe flying taxis).

But given Uber’s track record, will cities welcome these ambitions?

Jeff Bezos at last year’s Allen & Company conference. Credit Drew Angerer/Getty Images

Business moguls return to Sun Valley

Mark Zuckerberg and Jeff Bezos are expected in the Idaho resort this week. So too are Rupert Murdoch and John Malone, the cable mogul and the serial deal maker. It can only mean one thing: Allen & Company’s annual media conference is about to begin.

The gathering, which starts today, has been the birthplace of many deals, from Comcast’s purchase of NBCUniversal to Mr. Bezos’s takeover of The Washington Post. And with the media industry braced for a wave of consolidation, we can expect plenty of potentially important hushed conversations at the Sun Valley Lodge or on the resort’s patio.

Awkward pairings: Disney’s Bob Iger and Comcast’s Brian Roberts, battling for control of 21st Century Fox, were both invited. So too were Les Moonves of CBS and his boss, Shari Redstone, who are fighting each other for boardroom control.

McKinsey has stopped working for I.C.E.

The NYT reports that the consulting giant will no longer work for Immigration and Customs Enforcement after former partners became alarmed about ties to the agency given its role in separating immigrant children from their parents. (What the consultancy did for I.C.E. was unclear.)

McKinsey didn’t end the contract as soon as it heard concerns — three days after the NYT ran an investigation, the consulting firm merely modified the terms. But the disclosure that McKinsey was working with I.C.E. “caused a lot of discussions and alumni reactions,” according to one former partner.

In other government contract news: Activists marched outside the headquarters of Salesforce to protest its work with Customs and Border Protection.

Credit Derek R. Henkle/Agence France-Presse — Getty Images

The trade war’s other fight: soybeans vs. economic history

The WSJ’s Greg Ip has a nice explanation of how imposing tariffs on imported goods can act as a tax on exports:

Exports and imports tend to rise and fall together, proof that the underlying relationship still holds. If the U.S., for any reason, cuts its imports from a trading partner, that country’s economy and currency both weaken, so it buys less from U.S. companies.

But in the U.S.-China trade war, one product could test that theory: soybeans. Beijing imposed a 25 percent tariff on American soybeans last week in retaliation to Trump administration levies. But Raymond Zhong of the NYT explains that China bought $14 billion worth of the crop from America last year, and while it is pushing its farmers to grow more — 90 percent of the soybeans it consumed last year were imported — its homegrown supply probably can’t keep up.

Until China expands its soy acreage or finances cultivation elsewhere, American soy exports look safe.

Revolving door

JPMorgan Chase has appointed Carsten Woehrn as head of infrastructure M.&A. in Europe, the Middle East and Africa, a new position.

Uber is hiring a manager for I.P.O. readiness, in case you weren’t aware that it intends to go public. (Uber)

The speed read


• Twenty-First Century Fox is said to be working on a higher bid for the European satellite broadcaster Sky. (FT)

• SoftBank plans to spin off its telecom business — a deal meant to highlight its value, when all anyone wants to talk about is the Vision Fund. (FT)

• Martin Sorrell has beaten his old firm, WPP, in the fight for a Dutch ad company. (Guardian)

Politics and policy

• Boris Johnson resigned as Britain’s foreign secretary, further weakening Prime Minister Theresa May’s government. (NYT)

• The casino magnate Sheldon Adelson is backing a Nevada ballot initiative on choice of power provider. On the other side: Warren Buffett, whose NV Energy is the state’s biggest utility operator. (Reno Gazette Journal)

• President Trump attacked Pfizer for its drug prices, but its shares ultimately shook off the tweet. (FT)


• Privacy and consumer groups are railing against Facebook’s facial recognition push. Lawmakers want answers from Alphabet over Gmail privacy and Apple and Alphabet about smartphone privacy.

• YouTube says it is fighting misinformation with “authoritative” context and links to reputable sources. Twitter is cracking down on fake accounts, but that raises questions about its recent growth.

• China is producing AMD-licensed chips almost identical to those made by the American firm, raising trade war and national security concerns. (Ars Technica)

Best of the rest

• The Dow and S.&P. 500 enjoyed their biggest gains in over a month yesterday. Thank the banks. (NYT)

• The U.S. economy might be growing faster than the government says. (WSJ)

• China’s economic reform might not be going as well as you might think. (CNBC)

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