Zerohedge

'Once He Leaves, The Case Is Over': Judge Jails OpenAI Bugging Suspect After Saudi Consulate Offers 'Blank-Check' Bail When a foreign government volunteers to bankroll your release from federal custody, it may be time to reconsider the "no ties to a foreign state" defense. On Monday, a San Francisco federal magistrate ordered Abdulrahman Alfozan, the 35-year-old Saudi national accused of bugging an executive conference room at OpenAI's headquarters, detained without bail pending trial, saying there is a "significant" risk he would flee. The ruling came after Judge Alex Tse grilled the defense over an offer by the Saudi Consulate in Los Angeles to pay Alfozan's full bail, which CNBC reports that the judge called "problematic". In other words, the Kingdom offered to post bail for the man accused of bugging the room where OpenAI meets government officials, and the judge decided that was not, in fact, reassuring. But, there's a lot more going on here... "Problematic" Alfozan's lawyer, William Pernik, had asked for release on home detention with GPS monitoring and a co-signed bond, backed by a written undertaking from the Saudi Consulate General. In court, the defense said Alfozan would also put up $1 million in assets on top of the consulate's offer. The defense package also came with dozens of support letters and a commitment from the consulate not to issue him travel documents. Tse wasn't buying it. The judge noted that OpenAI had already fired Alfozan, so there is no job keeping him in the Bay Area, and ordered him back in court next month. Courtroom accounts had the judge likening Riyadh's open-ended support to a "blank check", which is roughly the opposite of what you want a federal judge saying about your sureties. “Even if I set it at $10 million, they are going to pay the entire bond," the judge reportedly said, adding that "there is a real threat here that once he leaves, the case is over." Prosecutors from the Northern District of California had argued that Alfozan's alleged conduct could pose "a danger to the national security of the United States" and that he enjoyed "considerable support" from the Saudi government. The defense countered that nationality is not evidence of flight and that the planned trip was for family and immigration reasons. According to CBS, Alfozan has been a US permanent resident since September 2020 and had applied for citizenship, "Saudi Needs You More Then The U.S.!" The government's case for detention, filed Sunday, is where things got colorful. Prosecutors said Alfozan was in frequent WhatsApp contact with a member of the Saudi Royal Family throughout 2025 and 2026, as recently as Oct. 5, four days before his arrest. The royal (unnamed in the filing) told him about a new Saudi AI program and repeatedly pressed him on when he'd leave OpenAI. The May 2026 exchange is worth quoting from the filing directly: "Saudi needs you more then [sic] the U.S.!" Alfozan's reply: "100" Translation: agreed. According to CBS, Alfozan added he wouldn't leave until his stock vested, which, in fairness, is the most relatable thing anyone in this story has said. To be clear (and the defense will make this point at every opportunity), the filing does not allege the royal directed Alfozan to plant the device or steal anything from OpenAI. It also doesn't say how the two knew each other. But it does describe internal searches concerning meetings between OpenAI and Saudi officials: reports say Alfozan accessed an internal folder labeled "Saudi Gov Docs" and searched for a meeting tagged "HUMAIN x MCIT @OpenAI", a reference to the PIF-backed AI champion and the Kingdom's communications and IT ministry. Prosecutors also flagged that further charges could follow. Regular readers will recall that HUMAIN is the vehicle through which Riyadh has been hoovering up US AI chips (May 14, 2025), with Washington signing off on advanced chip exports (Nov 20, 2025) as part of what we described as American AI imperialism's reliance on the Middle East (Jan 6, 2026). Turns out the reliance may run both ways. Meanwhile, after his arrest derailed a family trip, prosecutors say the Saudi government and a Saudi military official each arranged flights out of the US for his wife, Lujain Alassaf, and their three-month-old son. That trip, recall, was a one-way booking to Saudi Arabia via Istanbul for Oct. 12, three days after the FBI picked him up, as first disclosed last week. Alfozan is also listed as a venture partner at Riyadh's Raed Ventures, whose partners include a member of the royal family; one former CIA official told CNBC the firm is basically an arm of the state. Toilet Paper Tradecraft As a reminder, the underlying case is one we covered when it broke last week. According to the DOJ complaint, OpenAI staff found an encrypted audio recorder wrapped in toilet paper and plugged into a USB port on the back of a TV in an executive conference room on Sept. 30; it had been installed around Sept. 28. OpenAI then added a camera, which on Oct. 5 caught Alfozan entering and checking behind the TV. The same day, security found a second recorder from the same Chinese manufacturer in a bag he'd left in a printer room - along with his wallet and ID. The complaint also cited AI prompts about building, obfuscating, and remotely accessing a recorder, and says he used an internal productivity tool to map executive meeting rooms and leadership schedules. The room in question routinely hosted meetings between OpenAI executives and government officials, including on days close to when the device was allegedly planted. OpenAI said it has no indication that model weights, source code or customer data were accessed. The charge itself - using or trying to use a device to intercept oral communications - carries a maximum of five years and a $250,000 fine (which, as prosecutors seem to appreciate, is a much smaller number than what a one-way ticket to Riyadh is worth). Same Consulate, Same Offer, Different Ending Why would a judge balk at a foreign consulate guaranteeing bail? Because this particular consulate has done it before. In 2016, the Saudi Consulate in Los Angeles posted $100,000 in bail for Abdulrahman Sameer Noorah, a Portland Community College student charged with manslaughter in the hit-and-run death of 15-year-old Fallon Smart. His passport was confiscated and he wore a GPS ankle monitor. Two weeks before trial in June 2017, he cut it off and vanished, turning up in Saudi Arabia a week later, reportedly on a Saudi-issued passport under another name. The Oregonian later tallied more than two dozen Saudi suspects who fled US charges, in several cases after Riyadh posted bail. And since there is no US-Saudi extradition treaty, Noorah has never been back. Passport surrender, GPS monitoring, a consular guarantee: the exact package Alfozan's lawyers offered on Monday. We suspect Judge Tse has read The Oregonian. Bottom Line The timing is not lost on Washington. Late last week, DNI Jay Clayton - who called the OpenAI incident a "serious situation" - warned that the administration and US companies "need to be wary" of AI espionage, singling out China, Russia, Iran and North Korea. Trump Admin, US Businesses 'Need To Be Wary' Of AI Espionage, Intelligence Chief Warns https://t.co/7pwqpqNiLd — zerohedge (@zerohedge) October 19, 2026 Notably absent from that list: the close US ally that just offered to bail out the accused. Officially, nobody has alleged state direction, and Alfozan is presumed innocent. But between the royal WhatsApps, the "Saudi Gov Docs" searches, the military-arranged flights for his family, and a consulate eager to cut a check, prosecutors don't need to prove motive to win a detention hearing - and they didn't. The bigger question is what this does to the Gulf AI trade. Washington has spent two years waving through chip exports to Riyadh and Abu Dhabi on the premise that 'Gulf capital' is a partner in the US AI buildout, not a collector of its secrets. One alleged toilet-paper bug won't unwind those deals, but it hands every export-control hawk in Congress a brand-new exhibit - or, more likely, gets quietly filed under "isolated incident" the next time a HUMAIN megadeal needs a signature. Alfozan is due back in court next month. We'll be watching whether "further charges" arrive before he does. Tyler Durden Mon, 10/19/2026 - 18:50

Another Nor'easter Brews In Atlantic, Putting Mid-Atlantic In Potential Crosshairs Meteorologists are monitoring the risk of a coastal storm developing off the southeastern US early next week, raising concerns about a storm similar to the powerful nor'easter that hit the US East Coast in late September. The potential threat comes as the East Coast has had a quiet hurricane season so far, with no tropical cyclones. "Will need to keep a close eye on another potential strong coastal system which is expected to develop this weekend & slowly drift northwest through the upcoming week," Norcast Media & Weather meteorologist Ryan Kane wrote on X. Kane said, "Strong onshore flow will lead to additional beach erosion & coastal flooding. Rain amounts will depend on exact track of storm. Euro AIFS continues to bump NW on rainfall for late week." Will need to keep a close eye on another potential strong coastal system which is expected to develop this weekend & slowly drift northwest through the upcoming week. Strong onshore flow will lead to additional beach erosion & coastal flooding. Rain amounts will depend on exact track of storm. Euro AIFS continues to bump NW on rainfall for late week. #EcWx — Ryan Kane (@ryankanerWX) October 16, 2026 The National Weather Service's Eastern Region warned on X, "A nor'easter is expected to bring coastal flooding, especially near the time of high tide, beach erosion, gusty winds and potential heavy rain to the Mid-Atlantic through early next week." 🌊🍃🌧️ A nor'easter is expected to bring coastal flooding, especially near the time of high tide, beach erosion, gusty winds and potential heavy rain to the Mid-Atlantic through early next week. https://t.co/IKPodeYfSa — NWS Eastern Region (@NWSEastern) October 16, 2026 Forecast models increasingly point to development, though the track of the system and strength remain highly uncertain as of early Saturday morning.  Tyler Durden Mon, 10/19/2026 - 18:00

Trump Favorable On Trilateral Meeting With Xi, Putin: "I Would Do It" Zelensky Should Get Out of the Way, Trump Suggests President Trump has once again put Zelensky in his place, in a Monday afternoon exchange with reporters he actually again suggested that the Ukrainian leader needs to be booted from leadership, and cut out of negotiations in an effort to find peace in the war with Russia. "Zelensky is a man that should've had this war settled a long time ago. If he would've listened to me, he would've made a much better deal a long time ago and he'd have a million people living... I think it's time for somebody else to negotiate on behalf of Ukraine," Trump said bluntly when engaging with a reporter's question. Reporter: Zelensky says you're on the wrong side of history. Trump: Zelensky doesn't know what he's talking about. I think it's time for somebody else to negotiate on behalf of Ukraine https://t.co/P2dskwE2h1 — Open Source Intel (@Osint613) October 19, 2026 "I'm supporting stopping the war between Russia and Ukraine... Frankly, Zelensky is not helping matters much. I think he doesn't want to stop it. I want to see people not die," the US President also said. This was in response to Zelensky earlier hitting back at Trump over some serious changes in US policy on Ukraine, including an apparent halt or at least throttling of intelligence-sharing: "you're on the wrong side of history" - Zelensky had said. In Trump's own fresh comments, he hit back hard, saying: "Zelensky doesn't know what he's talking about." Trump Favorable To Trilateral Summit (Sans Zelensky) In the wake of prior late Sunday reports, Trump has also newly declared that he is indeed open to participating in a trilateral meeting with Chinese President Xi Jinping and Russian President Vladimir Putin (but without Zelensky's involvement). Trump also offered that could be focused on denuclearization. "I would do it" - Trump stated multiple times, stipulating that he'd like to see it happen if President Xi were on board, and saying it would likely be in China (since Xi just recently visited the US). Watch the crucial moment below: Trump: If Putin and Xi want a trilateral meeting in China, I would like to have it. https://t.co/AEZ6T0PvBh — Clash Report (@clashreport) October 19, 2026 We detailed Sunday that Putin reportedly first floated the idea of a trilateral meeting in an Oct. 9 phone call with Trump. That conversation also produced a deal for the US to buy Russian diesel fuel and facilitate its sale on the global market. Kremlin spokesman Dmitry Peskov confirmed that discussions were taking place over a potential meeting.  After Putin Floated Summit Idea, It's Still at 'Hypothetical' Stage “There is no clear understanding yet regarding the meeting itself or its potential agenda, although all three parties acknowledge the hypothetical possibility of such a meeting taking place,” he told The Wall Street Journal. A senior US official earlier said that while Trump hadn’t agreed to such a summit, he said that the president could be receptive to the idea, given his desire to fulfill a campaign promise to settle the war. Trump had said it would be finished on “day one” of his new term, but he is now approaching nearly two years in office.  The Kremlin has suggested holding the trilateral dialogue on the sidelines of the coming Asia-Pacific Economic Cooperation summit, the people familiar with discussions said. That gathering takes place on Nov. 18 and 19 in Shenzhen, the southern Chinese tech hub.  Asked whether he has agreed to a trilateral meeting with Russian President Vladimir Putin and Chinese President Xi Jinping to discuss the war in Ukraine, President Trump says he has not, but would be open to such a meeting focused on nuclear disarmament instead. “Russia, frankly, has been fine on Ukraine. They haven't been doing much. And the same thing with China,” Trump says. — CBS News (@CBSNews) October 19, 2026 A potential three-way dialogue on Chinese soil would mark a big step for Xi in his efforts to elevate China’s role as a diplomatic power broker, said analysts who study China. Russian officials proposed the idea to Beijing through diplomatic channels and the Chinese side has indicated it wouldn’t object if Trump is on board.  And now Trump is declaring that he is indeed on board. Tyler Durden Mon, 10/19/2026 - 17:20

Houthis Target More Saudi Airports, Aramco Sites As US Issues Urgent Alert For 12 Mideast States Embassies in the Middle East - and broadly the State Department - have issued warnings that the Iran and Yemen conflicts may soon escalate unpredictably, including a blanket new travel alert covering for no less than a dozen regional countries. More missiles were launched on Saudi Arabia Monday: "Yemen’s Houthis said on Monday they carried out attacks on Saudi energy, airport, and military targets including an Aramco facility ‌in Yanbu, the Shaybah oilfield, King Khalid International Airport in Riyadh, and Abha airport," reports Al Jazeera. The Saudi government has yet to confirm that there were strikes on these locations, however. AFP/Getty ImagesAlso, active fighting between Iranian and US forces could erupt once again at any moment. An Iranian official has freshly put US allied states across the region on notice. According to an update in regional media: An adviser to Supreme Leader Mojtaba Khamenei says Iran will respond with attacks against numerous US allies in the Middle East if it’s attacked again. Conservative politician Mohammad Mokhber said Iran would strike “nine countries” if Iranian military bases or “petrochemical” facilities are struck again. His recorded comments posted by Tasnim, a semi-official news agency close to the Islamic Revolutionary Guard Corps, did not name the countries. As for the newest US State Dept. alert that went out to Americans in the region, this high threat standard indicates that severe or life-threatening risks and dangers are present - also with the potential for getting trapped in a country, with possible flight cancellations, airspace closures and travel disruptions. Much of Saudi airspace has been closed for over a week at this point. The fresh warning covering a dozen countries states that "the hostilities have the potential to escalate rapidly beyond that immediate area" and to "develop contingency plans in advance." "Iran and groups supportive of Iran may target other US interests overseas or at locations associated with the United States and Americans throughout the world, including US businesses and other institutions," the alert said. The below countries are listed: Saudi Arabia Yemen Israel Iraq Lebanon Jordan Qatar Bahrain Kuwait UAE Oman Iran  One obvious highly dangerous place of travel remains Saudi Arabia, where the Houthis have been targeting major airports - including Riyadh's main international hub - as well as Aramco oil infrastructure, almost on a daily basis. Already at the start renewed Yemen fighting, the US Embassy in Saudi Arabia warned its diplomats against unauthorized travel through King Khalid International Airport. Americans currently in the Middle East should exercise heightened vigilance due to the complex security environment. Be aware of potential flight cancellations, airspace closures, and travel disruptions. Iranian-supported Houthis have engaged in hostilities against Saudi Arabia, including attacks on civilian airports and other critical infrastructure resulting in civilian casualties and severe travel disruptions. The hostilities have the potential to escalate rapidly beyond that immediate area. Americans traveling to or from the Middle East should monitor information about airport and airline operations and develop contingency plans in advance. Iran and groups supportive of Iran may target other U.S. interests overseas or at locations associated with the United States and Americans throughout the world, including U.S. businesses and other institutions. Read the latest country-specific alerts at: https://t.co/ouQakQV9oV — TravelGov (@TravelGov) October 19, 2026 At this point the international hub remains closed for an indefinite amount of time, with the Houthis again on Monday announcing the airport was targeted by a ballistic missile. There's some speculation that the new heighted State Dept. alert could be a precursor to potential renewed US bombing raids against Iran, despite White House statements indicating this likely won't happen until after the November midterm elections. Tyler Durden Mon, 10/19/2026 - 16:40

Trump Admin, US Businesses 'Need To Be Wary' Of AI Espionage, Intelligence Chief Warns Authored by Timothy Frudd via The Epoch Times, Director of National Intelligence Jay Clayton warned that both the Trump administration and American companies "need to be wary" of foreign espionage with the rise of artificial intelligence (AI), which the government now refers to as super intelligence. Clayton, who leads the Trump administration's Super Intelligence Force, told CNBC in a Friday interview that maintaining U.S. leadership in the AI race is critical in the face of potential foreign espionage. He noted that while AI platforms and capabilities can be used for "very good purposes," they can also be used for "nefarious purposes." The intelligence chief's comments came after President Donald Trump's Super Intelligence Force held its first meeting at the White House on Thursday. Clayton told CNBC that the meeting was "very good" and that it built on the voluntary accord signed by Trump and multiple technology industry leaders at the White House on Sept. 29. Asked whether Americans should be concerned about foreign espionage with AI companies, Clayton said Friday that both commercial and state-sponsored espionage are a reality facing the United States. "It's something that our private-sector companies need to be wary of, we as a government need to be wary of," he said. Clayton told CNBC that it was important for the United States to "stay on the cutting edge" of AI capabilities in order to address concerns regarding AI advances by U.S. adversaries. "We're not the only ones developing it. There are vectors in this technology that are coming from some of our known adversaries and competitors," he said. "The Chinese, the Russians, the Iranians, the North Koreans all have significant technical capability. We need to stay ahead of them." Many of the risks posed by AI are linked to cybersecurity and digital infrastructure, Clayton told CNBC. He described the U.S. digital infrastructure as critical infrastructure, covering everything from public utilities, such as water and electricity, to national defense. While cybersecurity risks are not new, the rise of AI "amplifies" those risks, Clayton said. To address the risks, he said the United States is "focused on hardening those systems" and is committed to staying ahead of "nefarious actors" in the AI race. Clayton's warning regarding foreign espionage attempts linked to AI came after prosecutors and company officials said on Oct. 13 that Abdulrahman Alfozan, a Saudi national and software engineer working for OpenAI, was arrested on allegations that he concealed a sophisticated recording device in an OpenAI office. According to a court complaint, the office Alfozan allegedly planted a recording device in was frequently used to hold meetings involving highly confidential information, including government engagements, commercial relationships, product plans, and strategic decisions. In a Tuesday press release, Clayton described the incident as a "serious situation [that] underscores why winning the global super intelligence race is a national security prerogative." During Friday's interview on CNBC, Clayton added that the incident involving the Saudi software engineer at OpenAI "shows the lengths that people will go to try and supplant our leadership in this, or at least stay close to us, in this emerging technology." The intelligence chief's warning also followed a series of AI swarm breaches, which has led some industry leaders to suggest that the pace of AI development needs to be slowed down and the technology needs additional oversight. A report released last month by Anthropic found that the Iranian regime used the company's AI models to track and target U.S. Navy ships in the Middle East. The report also said that a Chinese-linked operation used Claude to track and attempt to recruit Uyghurs who joined the Syrian army to become spies. In addition, Anthropic's report found that individuals affiliated with the Chinese regime used Claude and supporting Chinese AI systems to surveil groups targeted by the regime. Those targeted by the China-linked individuals included members of the Tibetan Buddhist civil society, practitioners of Falun Gong, Catholic cardinals, Presbyterian Church leaders, the New York-based Shen Yun Performing Arts, and NTD, The Epoch Times' sister media outlet. Trump announced the formation of the Super Intelligence Force earlier this month to oversee U.S. AI policies. Clayton told CNBC that the White House task force took a number of actions during its inaugural meeting on Thursday. Those actions included outlining a plan to implement the accords signed by technology leaders, tasking the President's Council of Advisors on Science and Technology with conducting a risk study, establishing committees covering different AI issues, and developing a system for the Department of Labor to regularly report on the impacts of AI on the U.S. workforce and economy. Tyler Durden Mon, 10/19/2026 - 15:40

AI CapEx And Earnings: What Happens When Growth Slows Authored by Lance Roberts via RealInvestmentAdvice.com, AI capex and earnings are now so tightly tied that spending doesn't have to fall to hurt profits. It only has to stop accelerating. Almost half of the S&P 500's earnings growth this year traces back to one activity: companies buying chips, servers, power gear, and concrete to build artificial intelligence. That's the estimate Goldman Sachs published on September 23. It's also the clearest statement yet of how tightly AI capex and earnings are now linked.1 Most investors read it as a story about the spenders. I think they're looking at the wrong side of the ledger. Capex leaves one company's bank account and appears on another company's income statement, so the "AI earnings boom" depends less on how much is spent than on whether spending continues to grow. Every Dollar Of Capex Is Someone Else's Revenue When a hyperscaler commits $10 billion to a data center, that money doesn't vanish into a building. It goes to chip designers and memory makers, to the firms making transformers and cooling systems, and to contractors, electricians, and the local utility. Every one of them books it as "revenue." Then their suppliers book revenue from them. Jerome Levy worked this out early in the last century, and Michal Kalecki formalized it in the 1930s. For the economy as a whole, profits equal investment, minus household, government, and foreign saving, plus dividends.2 I've written about the Kalecki profit equation and the coming reversion before, mostly around deficit spending. Investment sits on the same side of that equation. Here's where it gets interesting. The seller books the revenue immediately. The buyer capitalizes the purchase and expenses it through depreciation over five or six years. In the year the money is spent, the economy records the supplier's profit without recording the buyer's expense. Such is why a capex boom is the most earnings-friendly event in the short run, and why I called it a "golden window" when I wrote about AI capex depreciation risk and record earnings in July. The cycle runs in three stages. Rising spending lifts supplier revenue, margins and hiring. Flat spending freezes supplier revenue while the buyers' depreciation keeps climbing, because every dollar that was "free" in year one starts showing up as an expense in years two through six, which is usually when the market has stopped paying attention. Falling spending turns it all into a drag. Only the first stage is fun. How Big Is The AI Capex Boom Right Now? Goldman puts hyperscaler capex at $800 billion in 2026, up 94% from 2025, heading to $1.2 trillion in 2027 and $1.4 trillion in 2028.1 FactSet's July tally also lands near $800 billion for calendar 2026.3 Hyperscaler capital spending rises from about $412 billion in 2025 to an estimated $800 billion in 2026, $1.2 trillion in 2027, and $1.4 trillion in 2028. Year-over-year growth falls from 94% to 50% to 17% over the same stretch. Source: Goldman Sachs Research, Sept. 23, 2026. 2025 implied from 94% growth. Calculations: RIA Advisors Notice in the chart above that the bars keep getting taller. Spending continues to set records while the growth rate that drives supplier profits collapses. That's the relationship between AI capex and earnings in one picture. So far, the payoff has been enormous. FactSet now expects calendar 2026 S&P 500 earnings growth of 32.8%, with Information Technology at 65%. Why AI Capex And Earnings Hinge On The Growth Rate Goldman offers a rule of thumb that does most of the work. A $250 billion surprise in 2027 capex, in either direction, would move S&P 500 earnings growth by roughly 6 percentage points.1 Goldman's base case assumes capex rises 50% to $1.2 trillion and delivers about 11% earnings growth. I stretched that sensitivity to a few other outcomes. Applying Goldman's sensitivity of about 6 points of EPS growth per $250 billion of capex, 2027 S&P 500 earnings growth would be roughly 1.4% if capex held flat at $800 billion, 5% at $950 billion, 11% at the $1.2 trillion base case, and 17% at $1.45 trillion. Source: Goldman Sachs Research. Sensitivity extended linearly. Calculations: RIA Advisors If 2027 spending merely matched this year's record, implied earnings growth would fall to about 1%. Read that again. The linear extension is my assumption, not Goldman's, and real outcomes won't be that tidy. The direction isn't in doubt. "Spending is still rising, so where's the problem?" The problem is the size of each year's increase. Goldman's path adds roughly $390 billion in 2026 and $400 billion in 2027, then only $200 billion in 2028. The dollar increase drives supplier revenue growth, and that increase gets cut in HALF in 2028. Consensus already sees some of it, with FactSet's 2027 earnings growth estimate at 16%.4 The reversal also hits harder than the spending cut itself, and this is the part I keep turning over. Suppliers expand for the demand they see. A transformer maker whose orders double adds a shift, hires welders and signs its own equipment orders, which becomes revenue for its suppliers in turn, and so on down a chain that runs all the way to the steel mill and the trucking company. That second round is why the boom feels broader than the hyperscaler numbers alone suggest. It works in reverse too. When growth stalls, the suppliers are left holding capacity, payroll, and inventory built for orders that stopped growing, and operating leverage runs the other way. "The spending doesn't have to fall to hurt earnings. It only has to stop accelerating." Where The AI Money Actually Lands The flow-through is real, but the pipe is narrower than most assume. Much of the hardware is fabricated in Taiwan and Korea. A July Federal Reserve note found that import surges offset much of the gross investment in several quarters.5 An August analysis on Econbrowser concluded the direct GDP effect was roughly a wash outside the second quarter.6 Such leakage is part of why I argued that AI capex spending is masking economic weakness. The industrials and utilities Goldman names are real "winners," but the fattest margins sit with a handful of chip designers. Two pieces of the earnings number deserve a harder look. Semiconductor gross margins are running near 80%, roughly double their historical average. Goldman expects that boost to fade.1 Bob Farrell's Rule #1 applies to margins as much as to prices: excesses revert to the mean. The second piece is stranger. "Large technology companies recorded roughly $150 billion of unrealized investment gains in private companies in the second quarter of 2026, translating to 12% of S&P 500 EPS." - Ben Snider, Chief U.S. Equity Strategist, Goldman Sachs Research Those are marks, not cash. Such is the circular part of this cycle: hyperscalers invest in AI labs, the labs buy compute from the hyperscalers with that money, and the stakes get marked up at each new funding round. A mark can reverse just as quickly, and 12% of index earnings now depends on those rounds going well. What Could Reverse The AI Capex Cycle? The bigger risk is funding, not demand. FactSet expects free cash flow to hit roughly zero or turn negative in fiscal 2026 for every hyperscaler except Alphabet and Microsoft. The group already carries about $700 billion of debt and $820 billion of lease commitments.3 That money is being borrowed at rising rates. The Fed hiked on September 16 to a target range of 3.75% to 4.00%, its first increase since 2023. Chairman Kevin Warsh said "inflation is too high and has been for too long."7 The 10-year Treasury yield closed at 5.10% on October 15th, after touching 5.24% on October 9th.8 Regulation is the "slow-burn" risk. Moratorium bills were filed in at least nine state legislatures this year. Maine's passed in April, then died on Governor Janet Mills' veto.⁹ A federal AI Data Center Moratorium Act (S.4214) sits in a Senate committee with no action.¹⁰ No statewide moratorium has become law yet. However, any bill that does pass can push a project out a year or more, and a year of delay is exactly the kind of drop in capex growth that the earnings math above can't absorb. History has a template. From early 1996 to late 2000, U.S. communications equipment investment more than doubled, from about $62 billion a year to over $135 billion.11 Within one year, it fell by nearly a third. U.S. communications equipment investment rose from about $62 billion in early 1996 to more than $135 billion at the fourth-quarter 2000 peak, then fell to under $93 billion a year later, a drop of roughly 31%. Source: Federal Reserve Bank of Richmond, Economic Quarterly, Fall 2003 The fiber was real. Internet traffic eventually showed up. Shareholders of the companies that built it still got wiped out. Such is how capex cycles usually end, with the asset intact and the "investment thesis" in pieces. Where The Bulls Are Right The bulls have a strong case. The S&P 500 trades at 19x forward earnings, right on its 10-year average of 19.1x, because earnings have outrun prices.4 Those spenders are among the most profitable companies in the world, and Goldman sees 11% earnings growth in both 2027 and 2028.1 I like the AI trade. Mostly. What keeps nagging me is that the "reasonable" 19 multiple sits on an "E" that includes the capex flow-through, record chip margins, and a mark-to-market gain on private stakes, none of which is likely to repeat at this pace. A normal P/E on an abnormal E isn't cheap; it only looks that way. Goldman itself notes that the cyclically adjusted P/E sits near record highs.1 What AI Capex Means For Your Portfolio I'm fairly confident 2027 holds up, since the dollar increase in spending is still about $400 billion. Past that, my confidence drops sharply. The practical move is to watch the rate of change in AI capex and earnings, which few investors track. Each earnings season, compare the increase in capex guidance with the prior year's increase, not the prior year's level. Watch hyperscaler free cash flow and credit spreads, because financing tends to crack before demand does. Watch chip margins for the first sign of reversion. Then check your own exposure. A "passive" S&P 500 index fund owns this cycle whether you meant to or not, because the spenders and the suppliers crowd the top of the index, which means the same few companies sit on both sides of the trade. Rebalancing to your targets after a run like this is risk management, not a market call. The trade-off: trim too early, and you give up return if Goldman is right. I'd rather pay that cost than the one the AI capex bill could bring later. The open question remains whether AI capex spending leads to positive outcomes that beat its cost of capital. The link between AI capex and earnings carried roughly half of this year's profit growth, and that support fades once spending stops accelerating, even at a record level. The earnings bill doesn't arrive when the spending stops. It arrives when the spending stops growing. If your portfolio has quietly become a bet on the AI capex cycle, it's worth knowing how much of your return depends on spending that has to keep accelerating. That's the conversation we have with investors every day at RIA Advisors. Schedule a complimentary portfolio review, and let's pressure-test your exposure together. Questions This Article Answers How does AI capex affect S&P 500 earnings? One company's capex is its suppliers' revenue, while the buyer spreads the cost over years through depreciation. Goldman Sachs estimates that almost half of the 2026 S&P 500 earnings growth comes from AI investment. Can AI capex hurt earnings without falling? Yes. Supplier profits track the yearly increase in spending. Applying Goldman's sensitivity, flat 2027 capex at $800 billion implies roughly 1% S&P 500 earnings growth. How much are hyperscalers spending on AI? Goldman Sachs estimates hyperscaler capex of about $800 billion in 2026, up 94%, rising to $1.2 trillion in 2027 and $1.4 trillion in 2028. FactSet's estimate for 2026 is similar. What could end the AI capex boom? Higher interest rates, tighter financing as free cash flow shrinks, state limits on data centers, weak AI returns, and falling chip margins. Tyler Durden Mon, 10/19/2026 - 15:10

House Panel Warns Singham-Linked Nonprofits Of Possible Depositions Over Subpoenas Authored by Arthur Zhang via The Epoch Times, Three U.S. tax-exempt organizations linked to Shanghai-based businessman Neville Roy Singham have until Oct. 20 to comply with congressional subpoenas or face further action, including possible depositions of 21 officials and staff members, as lawmakers investigate alleged Chinese Communist Party (CCP) influence through American nonprofits. House Committee on Ways and Means Chairman Rep. Jason Smith (R-Mo.) speaks during a hearing on Capitol Hill in Washington on Feb. 10, 2026. Madalina Kilroy/The Epoch Times   House Ways and Means Committee Chairman Jason Smith (R-Mo.) issued the warning on Oct. 13 to The People's Forum, BreakThrough News, and Tricontinental: Institute for Social Research, accusing them of refusing to provide documents concerning their finances and connections to Singham. "Either these organizations turn over the documents, or their leaders will answer the Committee's questions under oath," Smith said. The committee said potential deposition subpoenas would cover eight people at The People's Forum, seven at BreakThrough News, and six at Tricontinental. Singham Funding Network Under Scrutiny Singham, an American technology entrepreneur living in Shanghai, has financed left-wing advocacy and media organizations through a network of nonprofit entities and charitable accounts. He has participated in at least one CCP propaganda forum in Shanghai. At a February congressional hearing, Smith also identified Singham's business connections to Chinese media ventures, including Shanghai Maku Cultural Communication, which has described its mission using a CCP slogan that promotes Beijing's preferred narratives internationally. The committee alleges that Singham's financial network has helped advance CCP influence operations in the United States. In July, the committee subpoenaed the three nonprofits after they declined earlier requests for financial documents. Its July correspondence cited previous reporting that more than $22 million flowed from Singham's donor-advised fund to The People's Forum and more than $16 million to Tricontinental between 2017 and 2022. The committee also cited approximately $1.1 million going to BreakThrough News between 2022 and 2023. Rep. Darin LaHood (R-Ill.) previously described a funding structure in which money moved from Singham-associated businesses through privately held companies and donor-advised funds before reaching nonprofit recipients. "By the time the money reaches the end user, the original donor's name has been stripped away three or four times," LaHood told The Epoch Times in February. The committee is seeking records of these financial arrangements, communications with Singham or foreign entities concerning finances and organizational control, and information about foreign-linked donations and projects sponsored through other tax-exempt organizations. Congress Examines Foreign Funding, Tax Laws Smith said the investigation is intended to determine whether existing tax laws adequately prevent foreign interests from using U.S. nonprofits to conceal funding sources or exercise influence over American activities. In September, Smith and House Select Committee on China Chairman John Moolenaar (R-Mich.) also asked the Treasury Department and Internal Revenue Service to investigate the broader Singham-linked nonprofit network. BreakThrough News, in an Oct. 9 statement, accused the committee of targeting its journalists for their political views and maintained that it receives no outside editorial direction. Its attorneys have raised First Amendment objections to the subpoena. The committee has rejected those objections, maintaining that its investigation concerns financial arrangements and organizational control rather than political speech. BreakThrough News said journalists Rania Khalek, Zoe Alexandra, and Amanda Yee were among the staff members named in the latest congressional correspondence as potential deposition targets. If the three organizations fail to meet the Oct. 20 deadline, Smith has warned that the committee will pursue more aggressive oversight measures, potentially compelling officials and staff members to testify under oath. The Epoch Times sought comment from the House Ways and Means Committee, The People's Forum, BreakThrough News, and Tricontinental, but none had responded by publication time. Tyler Durden Mon, 10/19/2026 - 14:40

France Slaps 8PM Curfews On Cities As Interior Minister Admits Police 'Lost Control'; Macron Flees To The Gulf France moved Monday to put riot-hit cities under curfew after Interior Minister Laurent Nuñez admitted that authorities had lost control of the streets in several major cities over the weekend. President Emmanuel Macron refused Nuñez's offer to resign and then left for a Gulf tour to secure fuel supplies. Protesters vandalize a retail store during a demonstration near Place de la République in Paris. Carl Court/Getty Images Prime Minister Sébastien Lecornu told prefects to impose "very limited" and "localized" curfews. According to France 24's live coverage, Lecornu ruled out a full curfew for Paris. He said a state of emergency could be declared "if necessary," but that curfews seemed better suited, adding: "I am absolutely determined to restore order." Marseille's prefect banned protests and gatherings from noon to 8 p.m. By Monday evening, Lecornu's office had named the first towns, all in the northern Nord department. Lille, Douai, Wattignies and Denain will be under curfew from 8 p.m. to 6 a.m. on Monday and Tuesday nights, with each mayor's agreement, according to Franceinfo. Lille is where Nuñez said rioters broke into city hall, and Wattignies is one of its suburbs. Lille's Socialist mayor, Arnaud Deslandes, had refused earlier in the day to sign a curfew order, arguing that a late-evening curfew wouldn't match the hours the trouble broke out. Denain was already under curfew: its mayor ordered a weeklong curfew from 9 p.m. starting Sunday, after what the town said were fires, mortar fireworks and paving stones thrown at police by hooded rioters on Saturday. 🚨 ALERTE - L’APPLE STORE de Lille a été PILLÉ. — Frontières (@Frontieresmedia) October 17, 2026 Protesters looting an Apple store in France#Europe #Macron#France #Mexico #Brazil#Protests #Spain #Ukraine#ItalyProtests #Milan #Iran#Marseille #Poland #Paris #FranceProtests #France #Riot #Riots #Lyon #ParisRiots #Europe #Albania #Internationalleaks #India #Uk — International Leaks (@Internl_Leaks) October 19, 2026 Nuñez offered his resignation Sunday. He told France Inter: "I submitted my resignation because I am responsible for everything that is happening." The Élysée said Macron refused "given the need for continued command of law enforcement in the current context." Macron has acknowledged failures in planning and intelligence-gathering, ordered full transparency about them, and asked for new policing tactics "as quickly as possible." Nuñez blamed "hordes of troublemakers and looters" and "far-left activists," and said hundreds of businesses had been looted: "You can't look shopkeepers in the eye." The numbers keep climbing. Nuñez put the arrests at about 400 on Saturday evening, Lecornu later said 1,200, and the Interior Ministry now counts nearly 2,400 nationwide, with almost 1,000 police and gendarmes injured, seven seriously. Authorities estimated Monday that at least 3,000 businesses were damaged or looted. AFP's report on Macron's trip puts the weekend total above 2,500. Paris prosecutors say 855 people were arrested in the capital on Saturday and another 208 on Sunday. Lecornu said no one was killed, calling it "a miracle." #Pillages à Lille, Lyon, Montpellier et Nice en marge de la mobilisation du 17 octobre : Apple Store pillé à Lille, commerces visés dans la Presqu'île lyonnaise, Foot Locker pillé à Montpellier, vitrine brisée à Nice. Vous étiez sur place ? Contactez First Eye. — Agence FirstEye (@firsteyeoff) October 17, 2026 In his Sunday address, Macron said "nothing justifies" what he called "unbridled" violence. He blamed "agitators from ultra-left fringe groups, joined by numerous delinquents," said he felt "anger and shame," and announced neither a state of emergency nor a curfew. Lecornu has since said a whole network could be mobilised to challenge the presidential election timetable. Jean-Luc Mélenchon's response was that the prime minister must name those involved and provide proof. Macron's Gulf tour opened in Kuwait City on Monday, with the UAE, Bahrain and Qatar to follow by Wednesday. Executives from TotalEnergies and Engie are traveling with him to seek commitments on diesel and oil volumes, and the talks include moving pre-positioned kerosene and diesel from Oman to Réunion and Mayotte. Macron said the trip was needed to "secure our supplies," noting that demonstrators had raised fuel prices. Constitutional expert Benjamin Morel told AFP the tour could look like business as usual but might also seem out of touch and suggest a power vacuum. Francis Perrin of the French Institute for International and Strategic Relations does not expect it to move fuel prices, since Gulf states find firm commitments difficult while the region remains disrupted by the US-Iran war and the closure of the Strait of Hormuz. The protests were called over the cost of living and conditions in schools, after weeks of student protests. The CGT union claimed 800,000 marchers on Saturday; Nuñez put the figure at about 550,000, including 110,000 in Paris. The violence has been severe: in Limoges the prefect said the town hall was "largely lost" to fire, and a 17-year-old protester reportedly lost a hand in Saint-Étienne, apparently to a police grenade. A prosecutor has asked the police watchdog IGPN to investigate; Nuñez said he could not confirm that. The Yellow Vest movement has called for another round of protests on Saturday, France 24 reported. 🇫🇷🔥 Limoges city hall set on fire by rioters at the end of the Oct. 17 protest; the bell tower collapsed and the prefect says the building is "largely lost" Rioters attacked Limoges' hôtel de ville late Saturday afternoon after the Oct. 17 cost-of-living march, breaking windows and setting fire to the ground floor; cars were also burned outside. Firefighters arrived shortly after 6 p.m., and the flames reached the roof around 7 p.m. and were still burning at 8:10 p.m. The 43-meter bell tower collapsed. Prefect Maurice Barate said the roof fell onto the lower floors except in the west wing and two-thirds of the facade had disappeared, calling the building "largely lost," a "heritage catastrophe" and a "deliberate act" by rioters. The 19th-century building, opened in 1883 and inspired by Paris's city hall, is a listed monument. Interior Minister Laurent Nuñez confirmed the fire; Prime Minister Sébastien Lecornu said "we will not be intimidated." Earlier in Limoges, fireworks mortars were fired at police near the A20 interchange, a police vehicle was burned and shops were looted. Reported by AFP, franceinfo, Europe 1 and Flash FM. NOT CONFIRMED: Which artworks and decorations inside have been destroyed. Claims that works by Henri-Paul Motte, Jean-Joseph Weerts and Urbain Bourgeois are definitively lost have not been confirmed by officials, and no inventory has been published. I also found no figure on injuries or arrests in Limoges. Saturday's national mobilization against the cost of living drew a very large turnout, with CNews reporting more than 550,000 demonstrators, while violence was concentrated in Paris, Lyon, Marseille and Limoges, including a brief break-in at Marseille's city hall. The loss of a historic city hall turns a day of mostly peaceful marches into a symbolic national event and will dominate the political response. What to watch: the official damage and heritage assessment once the fire is out, arrests and charges for arson, the government's response including any new security measures, and whether the unions and student groups distance themselves from the violence. Sources: AFP; franceinfo / France 3 Nouvelle-Aquitaine; Europe 1; CNews; Flash FM; Haute-Vienne prefecture; Interior Ministry. — 🔥🗞The Informant (@theinformant_x) October 17, 2026 A historic town hall in France's Limoges has been ravaged by fire after a day of violent protests across the country saw widespread arson, pillaging, and more than 1,200 arrests. The clock tower of the 143-year-old Hôtel de Ville building collapsed on Saturday night after rioters set it ablaze. Read our full dispatch below 👇 — The Telegraph (@Telegraph) October 18, 2026 Markets noticed. The French 10-year yield rose 12 basis points to 4.90% Monday, according to France 24. As we reported, French bonds and stocks dropped as the riots worsened, after we had described France entering a "point of no return" on Sunday. Macron has refused an interior minister's resignation before. In October 2018 he turned down Gérard Collomb's first offer, citing confidence in him, and accepted a second one two days later. Cover photo: A protester throws a cobblestone during an anti-government demonstration in central Tirana on October 17, 2026 (Photo by Armend NIMANI / AFP) * * * Emma Da Silva/Associated Press Tyler Durden Mon, 10/19/2026 - 14:10

Secret Service Deputy Director Quits Amid Questions Over Ties To Drone-Defense Maker Fortem Authored by Susan Crabtree via RealClearPolitics, Deputy Director Matt Quinn announced his resignation from the Secret Service in an internal agency email Friday amid questions about his conflicts of interest over the agency's counter-drone technology. Quinn served 23 years as a Secret Service agent before retiring in 2021. He then went to work at drone-manufacturer Fortem Technologies, which sells the DroneHunter product, as a senior vice president for three years before returning to the agency last year to serve as deputy director. His last day will be Nov. 7. As RealClearPolitics first reported, Quinn was criticized by several current and former Secret Service agents for admitting during a mostly softball Sunday CBS News "60 Minutes" interview that the Secret Service was not prepared for an attack by a drone swarm. The piece featured a DroneHunter demonstration without mentioning several technical problems the platform has experienced. RealClearPolitics over the last 48 hours submitted detailed questions to the Secret Service about some of the statements made during the "60 Minutes" interview about the drone technology, its effectiveness, whether the DroneHunter's purchases were competitively bid, and the agency's track record in taking out drones. The "60 Minutes" report did not mention Quinn's prior work for Fortem. The Secret Service did not respond to RCP's questions. Even before Quinn's announced departure, several Secret Service sources were questioning a report in a recent CBS "60 Minutes" segment that the agency used electronic jamming equipment to take down a drone at the Army-Navy game in Baltimore last December. The game was attended by the president and several members of Congress. The sources suggest that the Secret Service is not providing the proper context about the downed drone, while raising concerns that it was most likely a friendly-fire incident. CBS News correspondent Norah O'Donnell sat down with Secret Service Director Sean Curran and Quinn in a joint interview that aired Sunday night, Oct. 11. The three discussed this year's surge in threats to President Trump and his Cabinet and how the agency is trying to adapt to dangers posed by autonomous attack drones, not just lone gunmen. The 13-minute report features scenes of Curran and Quinn at the agency's Rowley Training Center demonstrating counter-drone systems. The segment featured drone-fighting technology, including the DroneHunter, a weapon that uses AI and radar to disable what O'Donnell referred to as "enemy drones." When it's working properly, the DroneHunter captures targeted unmanned aerial vehicles in a net. At one point, Quinn, who concedes during the interview that the agency doesn't have the capability to stop a swarm of drones, narrates as a DroneHunter hexacopter captures an unmanned aerial vehicle in a training demonstration. "Whoa," O'Donnell remarks while watching the capture starting to take place. "What you see is the drone hanging from the drone hunter," Quinn explains. "So, the bad guy drone is now captured. It's gonna take it to a predetermined safe area." Near the end of the segment, O'Donnell states without citing a source: "60 Minutes has learned the Secret Service took down a drone using electronic jamming equipment at the Army-Navy game in Baltimore last December where the president and members of Congress were in attendance." It was just one line in the segment, and there was no explanation of whether the drone posed a genuine threat to Trump and everyone else gathered in the stadium for the annual military academy football rivalry. The report also didn't indicate whether the drone was associated with a foreign actor or was simply a hobbyist's drone that posed no threat at all. Active and retired Secret Service agents are now calling on agency leaders to explain more fully what happened. Their biggest question is whether it was a case of friendly fire. Instead of intercepting an alien drone that may or may not have posed a threat, a Secret Service officer or agent used a handheld drone-jamming gun to disable and take out one of its own surveillance drones monitoring the stadium, the sources tell RealClearPolitics. Trigger-happy A Secret Service source said the Specialized Rifle Unit, a tactical element within the Secret Service's Uniformed Division, got "trigger happy" and took out an agency surveillance drone without communicating with others to find out whether it was an agency asset. "SRU was, to my knowledge, the drone hunter team, and [they] failed to deconflict," the source told RealClearPolitics. The SRU officers were celebrating until they realized it was a "blue-on-blue" incident, the source added. Two sources told RCP that the downed Secret Service drone fell either onto or just to the side of Interstate 395, where the agency recovered it. Several sources also said the DroneHunter failed to operate as planned on the day O'Donnell was scheduled to appear at the training center for the demonstration. Since Quinn returned to the Secret Service, several agents have questioned whether he should have recused himself from any decisions on DroneHunter purchases because of his ties to the manufacturer. The Secret Service didn't respond to a set of emailed questions RCP posed about the Army-Navy game drone downing. Such a friendly-fire incident would not be the first time this year that a federal law enforcement agency was involved in shooting down a U.S. government drone. The U.S. military accidentally shot down a U.S. Customs and Border Protection drone using a high-energy anti-drone laser system near Fort Hancock, Texas, in February. Reports on the incident said the CBP didn't coordinate the flight with the military task force assigned to the U.S.-Mexico border. Still, the agency's silence around the Army-Navy incident is once again stoking internal agency concern that Secret Service leaders have yet to fix all siloed communications between agency assets that are supposed to be working in tandem to protect President Trump. Another case of siloed communications? The friendly-fire accusations cite a disconnect between the Secret Service's drone surveillance operators and a team dedicated to disrupting drones that may pose a threat to Trump. The sources say they are raising concerns about the incident because they are deeply worried that the agency has yet to fix the communications confusion that contributed to the assassination attempt against Trump in Butler, Pennsylvania. The shooting wounded Trump, killed retired fireman Corey Comperatore, and seriously injured two other men, James Copenhaver and David Dutch. Congressional investigators found that on July 13, 2024, information about shooter Thomas Crooks moved through two largely separate channels - local police and the Secret Service - and also failed to spread within the Secret Service's own network. 'Nothing changes here' A Biden administration Department of Homeland Security official moved quickly after former Secret Service Director Kimberly Cheatle's resignation in 2024 to reassure Rowe, the incoming acting director at the time, that operations would continue unchanged under his new leadership - even as the agency struggled to defend itself to Congress and the public over Trump's near-assassination. Newly released documents obtained by the Center to Advance Security in America, a conservative watchdog organization, through ongoing Freedom of Information Act litigation reveal new internal reactions to the Butler shooting. The files also provide new detail about the fallout after Cheatle's resignation as Secret Service director days later. Then-DHS Secretary Alejandro Mayorkas issued an agency-wide email at 1:08 p.m. on Tuesday, July 23, 2024, on his statement regarding Cheatle's resignation, under pressure from lawmakers after her testimony to Congress and Rowe's appointment. In the statement, Mayorkas commended Cheatle for what he cast as her "tireless dedication," "honor," and "integrity" over nearly three decades in the Secret Service. "Over the past two years, she has led the Secret Service with skill, honor, integrity and tireless dedication," he said. Six minutes later, at 1:14 p.m., a DHS official forwarded that same statement - this time to Rowe alone - with a personal note attached: "Nothing changes here, Ron, I have your back." "Thank you," Rowe replied. The identity of the person who forwarded the email to Rowe was redacted in the first version CASA received. CASA Director James Fitzpatrick says the DHS and the Secret Service withheld the name, citing personal privacy and a concern that disclosure could interfere with law enforcement proceedings. CASA appealed the redaction, and a judge agreed to overturn it, revealing that Patrick "PJ" Lechleitner, acting director of Immigration and Customs Enforcement from July 2023 to January 2025, sent the note to Rowe. CASA Director James Fitzpatrick interpreted Lechleitner's "nothing changes" remark as an endorsement of the status quo at both DHS and the Secret Service after a disgraceful breakdown in security. "Through aggressive FOIA litigation, CASA uncovered documents from the Biden [DHS] showing that an official reassured Ron Rowe just hours after Cheatle resigned that 'nothing changes here' after one of the biggest security breakdowns in the history of the country in Butler, PA," he told RCP. Contacted by RealClearPolitics, Lechleitner said the comments he made to Rowe at the time were from one "cop to another" that "nothing changes" - "everything is good between ICE and the Secret Service." "Honestly, I had worked with Ron, and we were all career people before [our political appointments]," he said. The message was simply one of support, Leichleitner explained. "It was just [that the] relationship remains regardless of the leadership that moves around," he said. Lechleitner also said his career background before heading ICE was in DHS's Homeland Security Investigations department, which often works directly with the Secret Service to provide additional federal agents to assist with security at events. In fact, several HSI agents had augmented security for the Butler rally. Trump removed Lechleitner along with other key Biden immigration enforcement officials on his first day in office. DEI and a lack of training 'had nothing to do with' Butler failures A second document provided to CASA through the FOIA process provides details of the "murder board" prep sheet - mock question-and-answer exercise agencies use to prepare officials for hostile congressional questioning - used to ready Rowe for his July 30, 2024, appearance before a joint hearing of the Senate Judiciary and Homeland Security committees. Talking points in the document, as described by CASA, include assertions that a forthcoming investigation would show a "thorough security plan" had been in place, that "DEI issues had nothing to do with" the security breakdown, that there was "not a lack of USSS training," and that there had merely been "an unwanted outcome" in Thomas Crooks' near-killing of Trump. The document also states the agency would "take steps to ensure an unwanted outcome like this does not occur again." Six weeks later, in September 2024, a second near-miss attempt was made on Trump's life at his golf course in West Palm Beach, Florida. During that incident, a Secret Service agent shot and missed Ryan Routh, who was hiding in the shrubs near the sixth hole while pointing a rifle at Trump and his security team. Congressional investigations and a GAO report have concluded that inadequate preparation and training contributed to the near-killing of Trump at the July 13, 2024, Butler rally. Fitzpatrick argues the prep materials show Rowe working to shield the Biden administration's DEI mandates and the Secret Service's training problems from scrutiny rather than fully reckoning with the agency's failures. "Not only that, but during Rowe's preparation for this July 30, 2024, testimony to a joint Senate committee, he attempts to mask the various downfalls of the Secret Service and goes out of his way to try to protect the Biden DEI initiatives that the agency was obsessed with at the time," Fitzpatrick said. CASA says the FOIA litigation is ongoing and that it expects additional records to surface as the redaction appeal proceeds. The Secret Service did not respond to a request for comment. A dissenting voice from inside the agency Rowe's Senate testimony contradicts assertions by numerous former senior Secret Service agents and at least one current agent who has spoken out against the agency's DEI policies, which he asserts directly contributed to the Butler shooting. Rashid Ellis, a 13-year veteran of the agency who has served in an elite unit and on top protective assignments, last year sat down for an interview with the Independent Women's Forum, a Virginia-based conservative nonprofit. "My initial thoughts when seeing the Butler assassination attempt was dread," Ellis says in a video. "My stomach was in knots watching it because we had known for years that this was coming." Ellis went further in the interview, saying he believes internal DEI agendas at the agency had long taken precedence over its protective mission, and that this dynamic is directly connected to what happened in Butler. A graduate of The Citadel military college in South Carolina, Ellis has held a string of high-level assignments over his 13-year career, including a stint on the agency's Counter Assault Team, an elite tactical unit, and a posting on the Presidential Protective Detail. He has also taught counter-surveillance as an instructor at the Secret Service's training center. Ellis, who is African American, argued in his lawsuit that the agency's diversity-based hiring and promotion practices have damaged morale and fueled a wave of departures among senior agents. Tyler Durden Mon, 10/19/2026 - 13:25

Marc Elias' Legal Team Threatens Media With Lawsuit For Questioning Roy Cooper's Health Authored by Jonathan Turley via Jonathan Turley, Marc Elias has long been at the center of controversial election tactics, including criminal investigations. If lawyers had to take an oath to first do no harm, the court-sanctioned Democratic lawyer would leave Hippocrates gobsmacked. Well, Elias is back and his legal team is threatening the media with what appears an entirely meritless defamation lawsuit on behalf of former Gov. Roy Cooper, the Democratic nominee for the United States Senate. This seems to be an effort to deter the media from raising the issue of the health of Cooper, who is 69 years old. Such health related issues have been much in the news for politicians ranging from former President Joe Biden to Sen. Mitch McConnell (R-Ky.). It is obviously a legitimate matter for media inquiry and the threat seems designed to deter others from raising the issue before the midterm elections. In typical Elias fashion, it is a smash-mouth approach that only generated national coverage of the issue - working against the interests of his client. The North State Journal reported that it had asked the Cooper campaign if there were any health problems that might impede him from completing his term: "North State Journal (NSJ) has previously emailed questions to the campaign eight times this year, and all but two went unanswered. The ninth time, NSJ received a cease-and-desist letter threatening legal action from the Elias Law Group. The Journal reports on such stories as "the only statewide newspaper in North Carolina." In a letter to make this "exceedingly simple and crystal clear to you," the lawyer for the Elias Law Group warned the Journal that any suggestion that Cooper is "'experiencing a neurological issue,' or that any health condition would prevent him from completing his term, is categorically false and defamatory." While I have taught torts for 30 years, I must be missing the Elias Group's simple clarity on this issue. In demanding that the media "cease and desist," the Elias Group lays out the defamation law in North Carolina in making "false, defamatory statements of or concerning the plaintiff, which were published to a third person, causing injury to the plaintiff's reputation." Notably, the Elias Group stated that "a publication that is obviously defamatory constitutes defamation per se." That specific assertion is challengeable if it is referring to the common-law per se categories. Such a publication can be defamation, but the per se categories are laid out as a matter of state law. (The letter goes on to make a more specific per se defamation claim). The common law per se categories began as categories of slander where damages would be presumed in the same way as libel. The allegation would fall into one of the "per se" categories of defamation. Under the common law, these per se categories of defamation allow for presumed damages and include: (1) disparaging a person's professional character or standing; (2) alleging a person is unchaste; (3) alleging that a person has committed a criminal act or act of moral turpitude; (4) alleging a person has a sexual or loathsome disease; and (5) attacking a person's business or professional reputation. North Carolina has a broad definition of defamation per se, including alleging that the person (1) has committed an infamous crime; (2) has an infectious disease; (3) imputes a person's trade or profession; or (4) otherwise tends to subject one to ridicule, contempt, or disgrace. That last category is obviously somewhat elastic. The letter references a more specific basis for a per se category for "imputing insanity or impairment of mental faculties is libelous per se." Jarman v. Offutt, 239 N.C. 468, 472 (1954). The Elias Group adds menacingly, "The North State Journal - and you personally - would be liable for any such publication." What the letter does not address is the fact that Cooper is a public figure. In New York Times v. Sullivan, the Supreme Court crafted the actual malice standard, requiring public officials to shoulder the higher burden of proving defamation. Under that standard, an official would have to show either actual knowledge of its falsity or a reckless disregard of the truth. The standard was later extended to public figures. The Supreme Court has held that public figure status applies when someone "thrust[s] himself into the vortex of [the] public issue [and] engage[s] the public's attention in an attempt to influence its outcome." A limited-purpose public figure status applies if someone voluntarily "draw[s] attention to himself" or allows himself to become part of a controversy "as a fulcrum to create public discussion." Wolston v. Reader's Digest Association, 443 U.S. 157, 168 (1979). It is legally absurd to suggest that a media outlet would be liable for defamation, let alone defamation per se, for raising the mental or physical fitness of a candidate for political office. It is indicative of Elias's sledgehammer approach that often does more harm than good for his Democratic clients. A few months ago, Elias caused a stir during the unsuccessful Democratic gerrymandering effort by reminding Democratic leaders that they could simply eliminate the entire Virginia government. What is equally baffling is the desire of Cooper to be associated with Marc Elias while trying to appeal to Republican and independent voters. Despite his losses in cases such as National Republican Senatorial Committee v. Federal Election Commission, Elias is still a favorite of many on the left for his aggression and partisan loyalty. What makes him notorious for some makes him popular for others. It was Elias who was the general counsel to the Clinton presidential campaign when it secretly funded the infamous Steele dossier and pushed the false Alfa Bank conspiracy. (His fellow Perkins Coie partner, Michael Sussmann, was later indicted but acquitted). Clinton campaign officials denied any involvement in the Steele Dossier. When journalists discovered after the election that the Clinton campaign hid payments for the Steele dossier as "legal fees" among the $5.6 million paid to Perkins Coie, they were reportedly stonewalled. The campaign was ultimately sanctioned by the Federal Election Commission for the subterfuge. New York Times reporter Ken Vogel said at the time that Elias denied involvement in the anti-Trump dossier. When Vogel tried to report the story, he said, Elias "pushed back vigorously, saying 'You (or your sources) are wrong.'" Times reporter Maggie Haberman later wrote that "Folks involved in funding this lied about it, and with sanctimony, for a year." Elias's group later unsuccessfully led efforts to challenge Democratic electoral losses. In Maryland, Elias's team supported another abusive gerrymandering scheme that a court found not only violated Maryland law but the state constitution's equal protection, free speech and free elections clauses. The court found that the map "subverts the will of those governed." One media site accused Elias and his group of "making millions off gerrymandering efforts" while publicly denouncing Republican gerrymandering. In 2024, Elias's legal team was also accused of pushing "to bar third-party presidential candidates - including Cornel West - from swing state ballots where they might siphon votes from the Democratic nominee [Kamala Harris]." Likewise, the New York Times reported that Elias's firm's work "on behalf of a Soros-funded PAC in Texas...was opposed by a left-leaning election watchdog as undermining laws intended to limit the influence of major donors." His group's work for New York redistricting was ridiculed as not only ignoring the express will of the voters and also effectively negating the votes of Republican voters. In 2024, the Chief Judge of the Western District of Wisconsin criticized the Elias Law Group for one of its challenges. Judge James Peterson (an Obama appointee) said that the argument "simply does not make any sense." Cooper, however, wanted Elias and his legal team to represent him and must have approved threatening a media outlet rather than answering a predictable question from a journalist. Jonathan Turley is a law professor and the New York Times best-selling author of "Rage and the Republic: The Unfinished Story of the American Revolution." Tyler Durden Mon, 10/19/2026 - 12:40