A Big Insider Trading Scalp, and a Challenge

A BIG INSIDER TRADING SCALP - AND A CHALLENGE  |  Rajat K. Gupta, the most prominent person to be convicted in the government's insider trading crackdown, was sentenced to two years in prison on Wednesday for leaking boardroom secrets to the fallen hedge fund titan Raj Rajaratnam. But on Thursday, a fundamental part of the government's broad investigation will be challenged by lawyers for Mr. Rajaratnam.

The question is whether the government should have been allowed to use a wiretap in going after Mr. Rajaratnam. His lawyers, who are to make arguments on Thursday before a panel of three judges, say the government misled the judge who signed off on the tactic. Some respected legal experts, including eight former federal judges, have sympathized with that argument. Still, as DealBook's Peter Lattman notes, a ruling in Mr. Rajaratnam's favor is considered a long sh ot.

In any event, the decision will have implications for Mr. Gupta, a former Goldman Sachs director, who got a $5 million fine in addition to the prison sentence. His punishment was less harsh than the government had wanted, reflecting Judge Jed S. Rakoff's view that Mr. Gupta was “a good man.” Judge Rakoff said: “The court can say without exaggeration that it has never encountered a defendant whose prior history suggests such an extraordinary devotion, not only to humanity writ large, but also to individual human beings in their times of need.”

 

BANK OF AMERICA SUED, AGAIN  | 
The housing market crashed five years ago, but the lawsuits keep coming. In a new complaint against Bank of America on Wednesday, federal prosecutors claim the bank's Countrywide Financial unit defrauded Fannie Mae and Freddie Mac by selling troubled loans, and are seeking at least $ 1 billion in penalties. For Bank of America, which recently reached a $2.4 billion settlement related to its purchase of Merrill Lynch, the lawsuit is the latest headache stemming from the financial crisis. Recently, similar cases have been piling up. “There's no central traffic cop,” Dan Hurson, a former federal prosecutor who now defends securities cases, told DealBook's Ben Protess.

 

EUROPEAN BANKS PLAY DEFENSE  | 
Two big banks in Europe, Credit Suisse and Banco Santander, reported lower profit in the third quarter, as they continued to build up their defenses against the Continent's debt crisis. Banco Santander, which reported a 94 percent drop in quarterly profit, set aside more money to cover potential real estate losses. It said net income in the quarter was 100 million euros, compared with 1.8 billion euros in the period a year earlier. Shares of the Spanish bank rose slightly in trading in Madrid on Thursday.

For Credit Suisse, the 63 percent drop in quarterly profit reflected a charge related to the value of its debt. Profit totaled 254 million Swiss francs in the quarter, compared with 683 million francs in the period a year earlier. The bank said it was strengthening its capital in response to concerns from Switzerland's central bank.

 

NEW BOARD FOR BARCLAYS?  |  The incoming chairman of Barclays, David Walker, is cleaning house, according to The Financial Times. When Mr. Walker joins the troubled bank in November, he plans to carry out “a clean sweep” of the board and replace “some key executive positions,” The Financial Times says. Mr. Walker has “spent recent weeks sounding out a selection of top figures over their suitability to join the bank in a variety of roles,” according to the newspaper.

 

ON THE AGENDA  |  Two technology giants, Apple and Amazon, report earnings after the market closes on Thursday. The Economist's Buttonwood Gathering goes into its second day at the National Museum of the American Indian in Manhattan, with some prominent speakers on the schedule. Marc Lipschultz, global head of energy and infrastructure at K.K.R., is on a panel at 9 a.m. Philipp M. Hildebrand, former head of Swiss National Bank who recently moved to BlackRock, is on a panel with Lawrence Summers at 10:15 a.m. Hugh Hendry, chief investment officer of Eclectica Asset Management, is being interviewed at 11:30 a.m. And David Einhorn of Greenlight Capital, who announced his latest short thesis this month, is being interviewed at 12:45 p.m. Bloomberg Link is hosting its Dealmakers Summit at the Signature Theatre, with Jim Millstein and Wilbur L. Ross Jr. appearing on a panel at 9:05 a.m. Donal d J. Gogel, head of Clayton, Dubilier & Rice, is being interviewed at 10:15 a.m. Glenn Hutchins of Silver Lake is being interviewed at 1:55 p.m. Economic data for September to be released on Thursday include durable goods orders at 8:30 a.m. and pending home sales at 10 a.m. Kweku Adoboli, a former UBS trader accused of fraud and false accounting related to a $2.3 billion loss, is to appear in court in London.

 

BEST BUY SHUFFLES MANAGEMENT  |  Best Buy is making another attempt to turn itself around, as it faces the possibility of a buyout bid. The retailer said on Thursday that it was eliminating some management positions, including president of its United States business. One analyst, Carol Levenson, director of research at Gimme Credit, told Bloomberg News that the changes seemed like “too little too late.” Richard M. Schulze, the founder, offered to buy the company thi s summer, and is now trying to amass financing for a bid. He may gain an advantage if Best Buy posts another weak quarter. The company warned on Wednesday that third-quarter profit, to be reported Nov. 20, would be “significantly” below the quarter a year earlier.

 

 

 

Mergers & Acquisitions '

Ocwen Wins ResCap Assets With $3 Billion Bid  |  A group led by Ocwen Financial won the race for Residential Capital's loan servicing platform on Wednesday, bidding $3 billion for the bankrupt mortgage lender's assets. DealBook '

 

In Tech, Small Deals Are the Norm  |  Marissa Mayer's strategy for Yahoo fits a broader trend in the industry, The Wall Street Journal writes. WALL STREET JOURNAL

 

Cnooc Holds Out Hope for Nexen Bid  |  “We still expect to get the approval by the end of the year,” Cnooc's chief financial officer told reporters. REUTERS

 

Bumi's Partners Approach a ‘Divorce'  |  “Indonesia's Bakrie family has agreed in principle to pay compensation to coal tycoon Samin Tan for his soured $1 billion investment in their joint stake in Bumi,” Reuters reports. REUTERS

 

General Motors Looks to Buy Stake in Its South Korean Unit  | 
REUTERS

 

INVESTMENT BANKING '

Bank of China Profit Rises 17% on Loan Growth  |  The first of China's biggest banks to report quarterly earnings recorded a strong rise in profit on growth in new loans. DealBook '

 

Visa Names JPMorgan's Scharf as Its New Chief  |  Charles W. Scharf, a former head of JPMorgan Chase's vast retail arm, will take over as Visa's chief executive once Joseph W. Saunders, the company's current leader, retires next year. DealBook '

 

A New Job for Knight Capital's Chief?  |  Thomas Joyce of Knight Capital has told his board that he had “preliminary talks regarding the C.E.O. post” at E*Trade Financial, The Wall Street Journal says. WALL STREET JOURNAL

 

At Goldman Sachs, Self-Flagellation  |  Lloyd C. Blankfein told CNBC about Goldman's response to Greg Smith's book, saying the firm is adept at self-criticism. “Nobody can flagellate themselves as well as Goldman Sachs can,” he said. CNBC

 

Buffett Adds to Wells Fargo Stake  |  Warren E. Buffett told CNBC he bought more shares of Wells Fargo in the last week. CNBC

 

PRIVATE EQUITY '

Buyout Firms Increase Focus on Southeast Asia  |  Moves by the Carlyle Group and K.K.R. show their “increasing interest in one of the world's most promising, but complicated, emerging markets: Indonesia,” The Wall Street Journal writes. WALL STREET JOURNAL

 

K.K.R. Sees Opportunity in Europe  |  Henry Kravis of K.K.R. said at a news conference on Thursday, according to Reuters: “We are not in any way writing off Europe. In fact, we are putting money to work there.” REUTERS

 

Cerberus Is Said to Consider Breakup of Supervalu  |  Reuters reports: “A sale of Supervalu Inc. heralds an eventual breakup of the far-flung supermarket operator, with its diverse brands and assets sold to rival supermarket chain operators and private equity firms, according to people familiar with the matter.” REUTERS

 

HEDGE FUNDS '

Tax Havens Consider Raising Taxes  |  In the Cayman Islands, the Bahamas and elsewhere, officials are confronting growing deficits and debt burdens “that rival Greece,” Bloomberg News reports. BLOOMBERG NEWS

 

One Hedge Fund, Disparate Political Ties  |  Renaissance Technologies is home to James H. Simons, a big Democratic donor, and Robert L. Mercer, who has given to Republicans. WASHINGTON POST

 

Hedge Funders Enter the Boxing Ring for Charity  | 
BLOOMBERG NEWS

 

I.P.O./OFFERINGS '

Facebook Posts Its Biggest Single-Day Gain  |  Investors were quite pleased with Facebook on Wednesday, sending its shares up about 19 percent. NEW YORK TIMES BITS

 

Zynga Revenue Beats Gloomy Expectations  |  The game company Zynga said it generated $317 million of revenue in the third quarter, more than in the period a year earlier and more than analysts were expecting. Its battered stock price rose in after-hours trading. NEW YORK TIMES

 

VENTURE CAPITAL '

Venture Capital Dollars Growing Scarce  |  According to new data, comp anies “that rely on venture capital investment to expand their businesses and hire employees have struggled to raise money this year,” The Washington Post reports. WASHINGTON POST

 

LEGAL/REGULATORY '

A Housing Regulator's Days May Be Numbered  |  Edward DeMarco, the director of the of the Federal Housing Finance Agency, has clashed with the White House on various issues. Now, The Financial Times reports that “senior White House officials” have been “quietly telling housing industry activists in recent weeks that he will be replaced” if the president is re-elected. FINANCIAL TIMES

 

Wall Street Leaders Peer Into Economic Gloom  |  At the Buttonwood Gathering , hosted by The Economist magazine, it was clear that executives were contending with a world that is not easy to figure out. DealBook '

 

Oops! Can I Take Back That Earnings Release?  |  Just a few days after Google's earnings were inadvertently released ahead of schedule, Dow Chemical and Daimler both found themselves in similarly awkward positions. DealBook '

 

Federal Reserve Stays the Course  | 
NEW YORK TIMES

 

Study Finds Illinois Debt Hinders Services  | 
NEW YORK TIMES

 

French T rader Vows to Keep Fighting  |  After a judge upheld the conviction and prison sentence for Jérôme Kerviel, a former Société Générale trader, he told a radio station that he would appeal the decision to France's highest court. NEW YORK TIMES

 

Peugeot to Receive State Assistance  |  PSA Peugeot Citroën is receiving state credit guarantees from France that will help it strengthen its finance unit. NEW YORK TIMES