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Second Epstein Investigation Begins at Victoria’s Secret, but What’s Changed?

It has been more than a year since L Brands, the owner of Victoria’s Secret, said it was hiring a law firm to investigate its billionaire founder Leslie H. Wexner’s close ties to the convicted sex criminal Jeffrey Epstein, but no findings have been made public and the review has seemed to fade from view.

Maybe a new law firm will fare better.

After Mr. Epstein’s July 2019 arrest, revelations about his sweeping power over the retail magnate’s fortune and how he may have used his link to the lingerie giant to prey on women prompted the company to swiftly declare that it had hired lawyers to conduct a “thorough review” of the matter.

The company enlisted Davis Polk & Wardwell, the white-shoe law firm that it had relied on for legal counsel for years, and which once employed Mr. Wexner’s wife, Abigail. But nothing about the scope of the investigation has been released since, and many former Victoria’s Secret employees, including two who had interacted with Mr. Epstein, said they were never contacted by lawyers.

Now, a second inquiry has begun at the company. A shareholder lawsuit filed in May suggested Davis Polk was too close to L Brands to be truly independent. The shareholder said they asked the board in February to replace Davis Polk or hire another firm as a “check” for its review of Mr. Wexner and Mr. Epstein’s relationship.

Last month, at least five current and former Victoria’s Secret employees were surprised to hear from a new lawyer with no affiliation to Davis Polk. Sarah K. Eddy, a partner in the litigation department of Wachtell, Lipton, Rosen & Katz, said she was commencing a separate investigation on behalf of two independent L Brands board members: Sarah Nash, who became its chairwoman this year, and Anne Sheehan.

In an email obtained by The New York Times, Ms. Eddy said her firm was investigating “allegations raised in shareholder demand letters and civil complaints concerning, among other things, connections between L Brands and Jeffrey Epstein.” The former employees, who spoke on the condition of anonymity citing fear of retribution, all said they had received similar calls and emails. Shareholder complaints have also raised concerns about allegations of misconduct and a culture of harassment and misogyny at L Brands and its lingerie powerhouse, suggesting that the new investigation could be looking into those issues.

Ms. Nash, a former executive at JPMorgan Chase and chief executive of Novagard Solutions, and Ms. Sheehan, an expert in corporate governance, joined the L Brands board last year after an activist investor pushed for more diversity and fewer directors with business and social ties to the Wexners.

Ms. Eddy declined to comment. A representative for Davis Polk did not respond to requests for comment.

The new investigation is the latest jolt for L Brands and Victoria’s Secret, and comes months after the pandemic foiled a plan to sell the lingerie brand to a private-equity firm. Even before the revelations about Mr. Epstein, Victoria’s Secret was battling a decline while facing criticism that its lingerie-clad models were out of step with current views of beauty. That put fresh attention on its management and the board of L Brands, which also owns Bath & Body Works.

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Credit…Astrid Stawiarz/Getty Images for Fragrance Foundation

Mr. Wexner, 83, has sought to distance himself from Mr. Epstein, who died in prison last August in what was ruled a suicide. But L Brands has also faced intense scrutiny about its workplace environment. An article by The Times in February showed that Mr. Wexner and his former chief marketing officer, Ed Razek, presided over an entrenched culture of misogyny, bullying and harassment at L Brands and Victoria’s Secret.

Mr. Wexner stepped down as C.E.O. and chairman of L Brands in May, but nearly all of Victoria’s Secret’s remaining top leaders are men he hired or promoted, including the brand’s interim chief executive, who was appointed to that role despite an extramarital affair with a subordinate that became widely known inside the company. The scarcity of women in the highest ranks of the company has frustrated some employees.

“This year, we have amended our board governance, made significant policy changes, initiated a robust diversity and inclusion strategy, and greatly enhanced associate communication,” Ms. Nash said in a statement. “It’s truly a new day for L Brands and I’m excited about the progress we continue to make for our associates, customers and communities we serve around the world.” She said she was proud that half of its board was now women.

Two current employees said they were cautiously optimistic that Wachtell’s independence could allow the new investigation to address the company’s workplace culture.

In May, the company’s board said that Stuart Burgdoerfer, L Brands’ chief financial officer for more than a decade, would also become interim C.E.O. of Victoria’s Secret. Some current and former employees wondered how significantly Mr. Burgdoerfer could improve the company’s culture. Several years ago, while he was engaged in an extramarital affair with an L Brands employee, fliers with both of their photos were placed on car windshields in a company parking lot, saying in part: “Hope you two can buy enough lingerie to make up for the damage you caused your families!!!”

News of the affair and the fliers spread through the company and even reached at least one Wall Street analyst. The matter was never addressed internally with rank-and-file staff. Mr. Burgdoerfer and the employee, who left the company this year, were recently married.

Charles McGuigan, the longtime chief operating officer of L Brands who departed in July, was also in a serious relationship with an employee who worked in store design and construction. Five current and former employees said that the situation was viewed as particularly egregious because Mr. McGuigan also oversaw human resources for a time while in the relationship.

Brooke Wilson, a company spokeswoman, said that the relationships “were fully and thoroughly disclosed to the appropriate people, including the board.” She said that there were no reporting relationships between the individuals or violations of company policy.

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Credit…Pool photo by Dia Dipasupil

Until last year L Brands had given investors few reasons to complain. Mr. Wexner previously had a sterling reputation as the longest-serving C.E.O. in the S&P 500 and was a major force in shaping the American mall through L Brands, which once owned chains like Abercrombie & Fitch and Express. He and his wife are prominent in Ohio as the biggest donors to Ohio State University. (Davis Polk, the law firm the company first enlisted for its investigation, has contributed money to Ohio State’s Wexner Center for the Arts.)

But the ties to Mr. Epstein, who had unusual control over Mr. Wexner’s billions and obtained assets like a New York mansion and private plane through their connection, dented the tycoon’s legacy. Earlier this year, three former L Brands executives told The Times that Mr. Wexner was alerted in the mid-1990s about Mr. Epstein’s attempts to pitch himself as a recruiter for Victoria’s Secret models, but the C.E.O. did not appear to act.

In February, L Brands announced a plan to sell a majority stake in Victoria’s Secret to the private-equity firm Sycamore Partners, whittling the public company down to Bath & Body Works. Once the sale closed, Mr. Wexner planned to step down as C.E.O. and chairman of L Brands but remain on its board.

Then the pandemic hit, dealing an outsize blow to mall chains, especially apparel sellers, and Sycamore backed out of the deal after some legal wrangling. In May, there was a management shuffle at Victoria’s Secret and Bath & Body Works, which are still being run as separate companies within the publicly traded L Brands, and Ms. Nash replaced Mr. Wexner as board chair. Mr. Wexner and his wife remain on the board but three directors retired, including a former Ohio State president as well as two who had served for more than three decades.

Morale has been low in a difficult year that has included hundreds of layoffs in New York and Columbus tied to the pandemic.

While L Brands’ shares soared 92 percent this year through Monday, they remained 64 percent below a 2015 peak.

L Brands will report quarterly earnings on Wednesday.

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AI-drawn voting districts could help stamp out gerrymandering

Gerrymandering is one of the most insidious methods out there of influencing our political process. By legally changing the way votes are collected and counted, the outcomes can be influenced — even fixed in advance for years. The solution may be an AI system that draws voting districts with an impartial hand.

Ordinarily, districts that correspond to electoral votes within a state are drawn essentially by hand, and partisan operatives on both sides of the aisle have used the process to create distorted shapes that exclude hostile voters and lock in their own. It’s so effective that it’s become commonplace — so much so there’s even a font made out of gerrymandered districts shaped like letters.

What can be done? Automate it — at least partially, say Wendy Tam Cho and Bruce Cain in the latest issue of Science, which has a special section dedicated to “democracy.” Cho, who teaches at the University of Illinois at Urbana-Champaign, has been pursuing computational redistricting for years, and just last year was an expert witness in an ACLU lawsuit that ended up overturning Ohio’s gerrymandered districts as unconstitutional.

In an essay explaining their work, they summarizes the approach thusly:

The way forward is for people to work collaboratively with machines to produce results not otherwise possible. To do this, we must capitalize on the strengths and minimize the weaknesses of both artificial intelligence (AI) and human intelligence.

Machines enhance and inform intelligent decision-making by helping us navigate the unfathomably large and complex informational landscape. Left to their own devices, humans have shown themselves to be unable to resist the temptation to chart biased paths through that terrain.

There are effectively an infinite number of ways you could divide a state into a given number of shapes, so the AI agent must be primed with criteria that limit those shapes. For instance, perhaps a state doesn’t want its districts to be any larger than 150 square miles. But then they must also account for shape — you don’t want a snakelike district slithering around the margins of others (as indeed occurs often in gerrymandered areas), or one to be enveloped by another. And then there are the innumerable historical, geographical and demographic considerations.

This illustration from Cho and Cain’s article shows a simplified version of a districting problem showing how partisan districts can be created depending on who’s drawing them. (Image credits: Cho/Cain/Science)

In other words, while the rationale for drawing must be set by people, it is machines that must perform “the meticulous exploration of the astronomical number of ways in which a state can be partitioned.”

Exactly how this would work would be up to the individual state, which will have its own rules and authorities as to how district maps are drawn. You see the problem immediately: We have entered politics, another complex landscape through which humans tend to “chart biased paths.”

Speaking to TechCrunch, Cho emphasized that although automation has potential benefits for nearly every state process, “transparency within that process is essential for developing and maintaining public trust and minimizing the possibilities and perceptions of bias.”

Some states have already adopted something like this, she pointed out: North Carolina ended up choosing randomly from 1,000 computer-drawn maps. So there is certainly a precedent. But enabling widespread use means creating widespread trust — something that’s in mighty short supply these days.

Mixing tech and politics has seldom proved easy, partly because of the invincible ignorance of our elected officials, and partly a justified distrust of systems that are difficult for the average citizen to understand and, if necessary, correct.

“The details of these models are intricate and require a fair amount of knowledge in statistics, mathematics and computer science but also an equally deep understanding of how our political institutions and the law work,” Cho said. “At the same time, while understanding all the details is daunting, I am not sure this level of understanding by the general public or politicians is necessary. The public generally believes in the science behind vaccines, DNA tests and flying aircraft without understanding the technical details.”

Indeed, few people worry whether the wings will fall off their plane, but planes have demonstrated their reliability over a century or so. And the greatest challenge for vaccines may be ahead of us.

“Society seems to have a massive trust deficit at the moment, a fact that we must work hard to reverse,” Cho admitted. “Trust should be and must be earned. We have to develop the processes that engender the trust.”

But the point stands: You don’t need to be a statistician or machine learning expert to see that the maps produced by these methods — peer reviewed and ready to put to use, it should be said — are superior and infinitely more fair than many of those whose boundaries as crooked as the politicians who manipulated them.

The best way for the public to accept something is to see that it works, and like mail-in voting, we already have some good points to show off. First, obviously, is the North Carolina system, which shows that a fair district can be drawn by a computer reliably, indeed so reliably that a thousand equally fair maps can easily be generated so there is no question of cherry-picking.

Second, the Ohio case shows that the maps can provide a fact-based contrast to gerrymandered ones, by showing that their choices can only be explained by partisan meddling, not by randomness or demographic constraints.

With AI it is usually wise to have a human in the loop, and doubly so with AI in politics. The roles of the automated system must be carefully proscribed, their limitations honestly explained, and their place within existing processes shown to be the result of careful consideration rather than expediency.

“The public needs to have a sense of the reflection, contemplation and deliberation within the scientific community that has produced these algorithms,” said Cho.

It’s unlikely these methods will enter wide use soon, but over the next few years as maps are challenged and redrawn for other reasons, it may (and perhaps should) become a standard part of the process to have an impartial system take part in the process.

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Abandoned mall department stores may become Amazon’s next fulfillment centers

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One of the largest owners of shopping mall real estate in the United Stages, Simon Property Group, has been talking to Amazon about transforming its anchor department stores into Amazon distribution hubs, according to the Wall Street Journal.

In the case of Simon Property, the anchor tenants like J.C. Penney and Sears that used to be stable sources of revenue are now weights around the neck of the retail real estate manager, and transforming their ghostly halls of pale mannequins into warehouses for Amazon orders simply makes sense.

The transformation from showroom to storehouse for everything from books and sweaters to kitchenware and electronics won’t be too much of a stretch for the vacant storefronts of businesses that hvae both filed for Chapter 11 bankruptcy protection.

Simon’s holdings include some 63 JC Penney and 11 Sears stores, according to the Journal’s reporting citing a May public filing from the real estate developer.

This wouldn’t be the first time that Amazon had turned to mall real estate for fulfillment centers. in 2019, the online retailer acquired a massive physical footprint in Akron, Ohio that it turned into a distribution center.

Gone are the days when gum smacking tweens and teens and their beleaguered parents would head to the local mall for a stroll around the retail block. Now shoppers prefer to peruse online and kids find Fortnite to be the Hot Topic to hang in. 

The deal, if it goes through, would be another nail in the coffin for a staple of late twentieth century culture that now mostly exists in the memory of baby boomers and Gen X consumers (thanks millennials and Gen Z).

Malls these days are lifestyle affairs that promise boutique branded shops than the sprawling department stores that had something for everyone. The big-box spaces that the Journal reported Amazon is negotiating for are the 100,000 square foot, multi-story behemoths, that are likely not long for the long tail world of niche commerce anyway.

These days, consumers are looking for brands that appeal to a persona or the bottom line of a pocketbook, and not the mass casual one-stop-shop of late twentieth century department store off-the-rack identities.

The Journal reported that, if the deals went through, Simon would like rent the space at a considerable discount to what it would charge another retailer. The paper estimated that rents could be as low as $4 per square foot to $19 per square foot, while warehouse rents average about $10.

At this point, shopping malls are looking for anything to bring in money. They’ve already tried schools, medical offices and senior living facilities, but the COVID-19 epidemic has thrown all of those plans into the abyss.

And, as the Journal notes, malls are already located in places that make them attractive distribution hubs. Amazon has bought some sites already and FedEx and DHL have done the same, according to the paper.

At this point, Amazon ownership may be a better fate for the real estate than totally abandoning it to empty space and the lingering soundtrack of 80s rock.

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The Station: Via hits $2.25B valuation, letters from readers, layoffs in a time of COVID-19

Hi, and welcome back to The Station, a weekly newsletter dedicated to all the ways people and packages travel from Point A to Point B. I’m your host Kirsten Korosec, senior transportation reporter at TechCrunch. If this is your first time, hello; I’m glad you’re with us.
I have started to publish a version of the newsletter on TechCrunch. That’s what you’re reading now. For the whole newsletter, which comes out every weekend, you can subscribe by heading over here, and clicking “The Station.” It’s free!
Last week, I asked readers to share how …

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With the real estate industry facing headwinds, SoftBank-backed Compass lays off 15% of staff

Compass, the real estate brokerage startup backed by roughly $1.6 billion in venture funding, has laid off 15% of its staff as a result of the shifting economic fortunes created by the global response to the novel coronavirus pandemic, according to an internal email seen by TechCrunch.
Citing economic fallout that has …

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