UBS\'s Record Settlement Over Rate Rigging

UBS PAYS $1.5 BILLION FINE OVER RATE RIGGING AS UNIT PLEADS GUILTY  |  The Swiss bank UBS announced a record settlement with global authorities on Wednesday over its role in a scheme to manipulate interest rates. The bank is paying a combined $1.5 billion in fines, and its Japanese subsidiary is pleading guilty. “The UBS subsidiary, which agreed to plead to a single count of wire fraud, is the first unit of a big bank to agree to criminal charges in more than a decade,” DealBook reports.

The complaints describe a scheme spanning from 2005 to 2010 in which UBS reported false rates to make more profit and allay concerns about its health. “The findings we have set out in our notice today do not make for pretty reading,” Tracey McDermott, the enforcement director for the Financial Services Authority of Britain, said in a statement.

The Financial Services Authority published colorful e-mails between UBS traders and brokers outside the firm. For one trader, trying to manipulate rates was somehow heroic. “Be a hero today,” this trader asked in 2009, in all caps. Another wrote in September 2008, “I need you to keep it as low as possible,” promising to pay “whatever you want. I'm a man of my word.”

The British regulator says UBS's misconduct was more serious than that of Barclays, which paid $450 million over similar accusations this summer. Reuters' Felix Salmon writes: “After the Barclays revelations, I actually thought that I couldn't be shocked about the extent of Libo r manipulation. Boy, was I wrong.”

CERBERUS'S CHANGE OF HEART  |  The decision by Cerberus Capital Management to sell its stake in the gun maker Freedom Group “is a rare instance of a Wall Street firm bending to concerns about an investment's societal impact rather than a profit-at-all-costs ethos,” DealBook's Peter Lattman writes. It came after an influential investor raised concerns about Cerberus's ownership of the company that made the rifle used in the Connecticut school shooting.

An official from that investor, the California State Teachers' Retirement System, called Cerberus on Monday, Mr. Lattman reports. “While concern from Cerberus's investors - as well as a swirl of media attention - had an impact on the decision to sell, the leadership of the private equity firm debated through the weekend how to respond to the tragedy and its potential fallout, according to a person familiar with the firm's discussions. On Monday evening, a small group of Cerberus's top executives sat around a conference room table and weighed a range of options to respond to the tragedy, including making a large donation to the Newtown community or promoting mental health research and education. Ultimately, Cerberus decided to make a clean break and sell the gun company.”

With shares of gun makers falling, it's not clear whether the private equity firm will find a buyer for the Freedom Group. “Several foreign gun manufacturers, including Forjas Taurus of Brazil and Heckler & Koch of Germany, could be possible acquirers, according to a banker familiar with the weapons industry.” Mr. Lattman continues: “Though the Freedom Group was unable to complete its initial public offering, the deal has been largely successful, with Cerberus already maki ng a small profit via a dividend payment, a person briefed on the investment said.”

ZUCKERBERG'S $500 MILLION GIFT  |  Mark Zuckerberg is making another big donation, this time using publicly traded stock. The chief executive of the social network announced a gift of 18 million Facebook shares to the Silicon Valley Community Foundation, a donation valued at about $500 million based on the closing price on Tuesday. “We will look for areas in education and health to focus on next,” Mr. Zuckerberg wrote. The donation follows Mr. Zuckerberg's gift of $100 million worth of Facebook shares to Newark public schools in 2010, when the company was private. He also signed on to Warren E. Buffett's Giving Pledge that year.

ON THE AGENDA  |  A Senate Banking subcommittee conducts a hearing at 10 a.m on consumer credit reports. Navistar International, FedEx and General Mills report earnings before the market opens. Bed Bath & Beyond announces results this evening. Data on housing starts for November are released at 8:30 a.m. Leon Cooperman of Omega Advisors and Glenn Hutchins of Silver Lake Partners are on CNBC at 8 a.m. Donald Drapkin, the onetime associate of Ronald O. Perelman and current chairman of Casablanca Capital, is on CNBC at 1:30 p.m. Kevin Rose, a general partner at Google Ventures, is on Bloomberg TV at 6 p.m.

KNIGHT SAID TO AGREE TO GETCO DEAL  |  The board of the Knight Capital Group agreed on Tuesday to sell the trading firm to a rival, the Getco Holding Company, according to reports in The Wall Street Journal and Bloomberg News. The reported price of $3.75 a share represents a 13 percent premium to Knight's closing price on Tuesday. The deal values Knight at about $1.8 billion, according to the Journal. Through a reverse merger structure, the privately held Getco will gain a public listing, the reports said. An agreement would end a difficult chapter for Knight, after a computer glitch caused crippling losses this summer. Getco's offer, which beat an all-cash proposal from Virtu Financial, is one-third composed of stock, according to Bloomberg.

THE MYTH OF GLOBAL DEAL-MAKING  |  There has been plenty of talk in the last few years of exporting Wall Street-style business to emerging market economies around the world. “Yet, there are increasing signs that global deal-making was always a myth,” Steven M. Davidoff writes in the Deal Professor column. The United States has led the world so far this year in initial public offerings and in volume of mergers and acquisitions, according to Renaissance Capital and Dealogic. “With the slowdown in once-hot emerging markets, the tide is going out, baring all of the problems and issues associated with global deal-making. China is a prime example,” Mr. Davi doff writes. “Now, with the Chinese I.P.O. market at a virtual standstill and the Shanghai market down more than 30 percent from its high last year, that avenue to riches is over. People are starting to say that investment in China resembles a ‘No Exit' sign.”

VETTING KENNETH CHENAULT  |  The White House is said to have approached Kenneth I. Chenault, the chief executive of American Express, about possibly joining President Obama's administration as Treasury secretary or Commerce secretary, according to Bloomberg News. In the event he is chosen, how would Mr. Chenault stand up to scrutiny? “Pretty favorably, actually,” DealBook's Peter Eavis writes. “As with many other banks, the government took an equity stake in American Express under the Troubled Assets Relief Program. While it received $3.4 billion under the program in January 2009, the company paid the money back six months later.”

Mergers & Acquisitions '

Penguin Settles E-Book Case Ahead of Merger  |  The Media Decoder blog reports: “Penguin, trying to ensure a clean slate before its planned merger with Random House, announced on Tuesday that it was settling a lawsuit brought by the Justice Department over the pricing of e-books.”
NEW YORK TIMES MEDIA DECODER

Wells Fargo Buys a Stake in Hedge Fund Firm  |  The bank bought a 35 percent stake in the Rock Creek Group, a Washington-based fund of hedge funds that oversees about $7 billion, Bloomberg News reports.
BLOOMBERG NEWS

SPX Said to Approach $4.2 Billion Deal for Gardner Denver  | 
REUTERS

Already Criticized, Freeport Deals Raise Questions of Conflicts  |  The brouhaha over Freeport-McMoran Copper and Gold's recent acquisitions illustrat es the sometimes unsatisfying way that corporate law deals with conflicts of interest, Steven M. Davidoff writes in the Deal Professor column.
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Billabong Gets a Fresh Offer  |  A consortium led by a director and Sycamore Partners offered $556 million for Billabong International, but investors registered their displeasure, Reuters reports.
REUTERS

UniCredit Says It Might Sell Kazakh Unit  | 
REUTERS

INVESTMENT BANKING '

A Boon for Bank Shareholders, But Less So for Employees  |  Bloomberg News writes: “For employees at the biggest Wall Street banks, 2012 brought a humbling post-crisis reality of job cuts, lower pay and tarnished reputations. For investors, it was a happier story.”
BLOOMBERG NEWS

After Cab Ride, More Troubles for Morgan Stanley Banker  |  Criminal charges against William Bryan Jennings, the Morgan Stanley banker who pulled a pen knife on a cab drive r, were dropped. But Morgan Stanley officials say the banker violated the firm's code of conduct, The Wall Street Journal reports.
WALL STREET JOURNAL

Jefferies Posts $71.6 Million Profit in 4th Quarter  |  The investment bank said on Tuesday that it earned about $71.6 million in profit for the fourth quarter, up 48 percent from the same time a year ago as its core businesses showed marked improvement.
DealBook '

Jefferies's Exceptionalism  |  The investment bank has some advantages that its much bigger banking rivals lack - and that does not bode well for Wall Street firms when they report results next month, Antony Currie writes in Reuters Breakingviews.
DealBook '

Macquarie Plans to Shut Singapore Infrastructure Fund  | 
BLOOMBERG NEWS

PRIVATE EQUITY '

Carlyle Completes Sale of Auto Parts Supplier  |  The Carlyle Group sold Metaldyne, which it had bought in bankruptcy, for about $820 million to another private equity firm, Reuters reports.
REUTERS

Bain Capital Names Ex-JPMorgan Executive Senior Adviser  | 
WALL STREET JOURNAL

HEDGE FUNDS '

Third Point's Bet on Greek Bonds Pays Off  |  Third Point, the hedge fund run by Daniel S. Loeb, made a $500 million profit on i ts holdings in Greek bonds, The Financial Times reports, citing unidentified people familiar with the firm.
FINANCIAL TIMES

S.&P. Lifts Greece's Credit Rating Out of Default  | 
ASSOCIATED PRESS

Hedge Fund Fights for Argentina in Debt Battle  |  Gramercy Funds Management leads the group of hedge funds that participated in Argentina's debt restructuring, but now “past legal problems at the firm are coming into focus,” The New York Times reports.
< a href="http://www.nytimes.com/2012/12/19/business/gramercy-funds-in-middle-of-argentinas-debt-battle.html?ref=todayspaper"> NEW YORK TIMES

I.P.O./OFFERINGS '

Instagram's Plan to Make Money Prompts Backlash  |  The New York Times writes: “On Tuesday evening, the complaints, which included angry Twitter posts and images on Instagram protesting the changes, prompted action. Kevin Systrom, a co-founder of Instagram, wrote a blog post saying the company would change the new terms of service to make clearer what would happen to users' pictures.”
NEW YORK TIMES

VENTURE CAPITAL '

Online Retailers Open Physical Stores  |  The New York Times writes: “After years of criticizing physical stores as relics, even e-commerce zealots are acknowledging there is something to a bricks-and-mortar location.”
NEW YORK TIMES

LEGAL/REGULATORY '

Another SAC Trader Draws Scrutiny  |  Reuters reports: “U.S. authorities are examining trading by one of SAC Capital Advisor s' most successful portfolio managers, Gabriel Plotkin, as part of a probe into the $14 billion hedge fund firm's investment in Weight Watchers International Inc last year, according to a person familiar with the investigation.”
REUTERS

S.E.C. Said to Interview Candidate for General Counsel  |  Geoffrey Aronow, a partner at law firm Bingham McCutchen and a former enforcement director at the Commodity Futures Trading Commission, is a “leading candidate” to become the next general counsel of the Securities and Exchange Commission, according to Bloomberg News.
BLOOMBERG NEWS

U.S. Inquiry of Google Is Expected to Continue in January  |  The expected delay comes after the chairman of the Federal Trade Commission consistently said the agency was aiming to finish the inquiry by the end of 2012, The New York Times reports.
NEW YORK TIMES

The American at the Bank of England  |  Adam Davidson writes in The New York Times Magazine about Adam Posen, a member of the Monetary Policy Committee of the Bank of England. “It's impossible to imagine the uproar if President Obama ever nominated a British academic to work at the highest level of the Federal Reserve. But when Posen arrived, in September 2009, his job was to provide an outsider's perspective.”
NEW YORK TIMES

Former Managing Director Sues Deutsche Bank for Age Discrimination  | 
REUTERS

The Impact of the Latest Insider Trading Convictions  |  The convictions of Anthony Chiasson and Todd Newman in a lucrative insider trading case may well send a message to Matth ew Martoma, the former SAC Capital portfolio manager, about the risks he runs if he fights recently filed charges, Peter J. Henning writes in the White Collar Watch column.
DealBook '

How Local Tax Rates Affect High-Income Professionals  |  What impact do high state and local taxes have on Wall Street executives and fund managers? The example of professional athletes offers some insights, Victor Fleischer writes in the Standard Deduction column.
DealBook '