Mary L. Schapiro, who ran the Securities and Exchange Commission until last year, is only the latest former political insider to join the Promontory Financial Group, which has such a star-studded roster of former bureaucrats that it has become known as Wall Street’s shadow regulator. With these connections, the firm “has emerged as a major power broker in Washington, helping Wall Street navigate an onslaught of new rules and regulatory scrutiny,†Ben Protess and Jessica Silver-Greenberg write in DealBook.
But Promontory is now facing its own scrutiny in Congress. The Senate Banking Committee is set to hold a hearing on Thursday to look at whether regulators inappropriately “outsource†oversight to consultants, who are paid by the banks. “This process raises troubling questions,†said Senator Sherrod Brown, the Ohio Democrat leading the Senate hearing. Promontory has “secured lucrative deals to clean up bank misdeeds like foreclosure abuses and money laundering, according to public records and interviews with regulators and executives,†DealBook writes. “Behind the scenes, the firm acts as an advocate for banks, helping draft letters that challenge crucial rules and discussing reforms with regulators.â€
Banks, too, have concerns with Promontory and its fees that can total as much as $1,500 an hour, people with knowledge of the matter said. “Bank executives, who were not authorized to speak publicly, said they sometimes hired Promontory to appease regulators, who think highly of the firm’s expertise.â€
Promontory rejects the notion that it is beholden to Wall Street, arguing that it answers to boards rather than management. Peter Bass, a former State Department official who is now a managing director at Promontory, said he was “in the business of telling inconvenient truths.†The firm also says it has helped turn around dozens of troubled banks.
HERBALIFE’S LATEST CONTROVERSY  | The nutritional supplements company Herbalife has found itself in the middle of an insider trading scandal. “Federal authorities in Los Angeles are investigating a former senior executive at the accounting firm KPMG on suspicion of leaking secret information to a stock trader about Herbalife and the footwear company Skechers USA, according to people with direct knowledge of the inquiry,†Peter Lattman and Michael J. de la Merced report in DealBook.
KPMG fired Scott I. London, the partner in charge of the audit practice in Southern California. Mr. London has not been charged or entered a plea, but he admitted to wrongdoing in a statement through his lawyer on Tuesday, saying he was “embarrassed†and that he regretted “my actions in leaking nonpublic data to a third party regarding the clients I served for KPMG.†He said the leaks began “to help out someone whose business was struggling.â€
Herbalife, which announced that KPMG had resigned as its auditor, has recently been battling accusations from the hedge fund manager William A. Ackman that its business is fraudulent. In its announcement on Tuesday, Herbalife said it believed its financial accounts for its last three years remained accurate. “It is unclear when Herbalife will hire a new auditor, though any such firm would probably take a fresh look at the company’s financial records,†DealBook writes.
RIVALS VIE FOR LIFE TECHNOLOGIES  | The biotechnology company Life Technologies appears poised to be at the center of a bidding contest. Three private equity giants, the Blackstone Group, the Carlyle Group and K.K.R., along with Temasek Holdings of Singapore, were in talks over making a joint bid of about $11 billion, or $62 a share, for the company, The Wall Street Journal reported on Tuesday evening, citing unidentified people familiar with the matter. Meanwhile, Thermo Fisher Scientific has made a binding offer for Life Technologies, according to Reuters, which cites unidentified people familiar with the matter. “Thermo Fisher is bidding more than $65 per each Life Tech share, two of the people said.†A bidding deadline was on Tuday, but Life Technologies “would likely accept an offer past the bid deadline to keep the process competitive, the people added,†Reuters says.
A BILLION-DOLLAR GIFT FOR THE MET  | The philanthropist and cosmetics tycoon Leonard A. Lauder has promised his collection of 78 Cubist paintings, drawings and sculptures to the Metropolitan Museum of Art, a trove of works valued at more than $1 billion. “In one fell swoop this puts the Met at the forefront of early 20th-century art,†Thomas P. Campbell, the Met’s director, said. “It is an unreproducible collection, something museum directors only dream about.â€
TEXTING WITH EUROPE’S ANTITRUST CHIEF  | “When the European competition commissioner needs to communicate with the chairman of Google, he doesn’t have to send an emissary or even pick up the phone,†The New York Times reports. “JoaquÃn Almunia sometimes sends Eric E. Schmidt a text.â€
ON THE AGENDA  | President Obama proposes a 2014 budget, which is said to include an increase in the tax rate for carried interest. Christine Lagarde of the International Monetary Fund speaks to the Economic Club of New York at 12:15 p.m. The Federal Reserve’s policy-making committee releases minutes from its recent meeting at 2 p.m. Constellation Brands reports earnings before the market opens, and Bed Bath & Beyond announces results in the evening. Michael Novogratz of the Fortress Investment Group is on Bloomberg TV at 11 a.m. Sam Zell is on CNBC at 4 p.m.
ZOMBIE STOCKS SHOW LIFE  | Fannie Mae and Freddie Mac, the mortgage finance giants that were taken over by the government in the financial crisis, “continue to astound â€" and not in a very encouraging way,†Steven M. Davidoff writes in the Deal Professor column. “The share price of each company has tripled in the last few months, pointing to the foolishness of Wall Street, this time with an assist from the federal government. When zombie stocks show signs of life, you know you are in trouble.†Mr. Davidoff continues: “The weird half-life of the mortgage finance giants is a result of the hoops the government went through during the financial crisis to avoid having the $5 trillion in debt being held by or guaranteed by the companies added to the actual federal debt.â€
Report Identifies Companies Vulnerable to Activist Takeovers  | Fifth Third Bancorp, Ameren and ConAgra Foods are among the companies that would be the most vulnerable to takeover by activist investors, a new study by a research firm finds. DealBook »
A Solution for Penney May Be to Sell Itself, or Some of Its Assets  | With Ron Johnson’s ouster this week, J.C. Penney, a 111-year-old retail chain, is scrambling to ensure that it has a future at all. And the solution may be a sale of some or all of the company. DealBook »
Inside the Clash in J.C. Penney’s Top Ranks  | Ron Johnson, the J.C. Penney chief executive who was ousted on Monday, arrived at the company a star who had helped build Apple Stores. “But his Silicon Valley ways â€" evident from a showy party in early 2012 that he threw to celebrate himself and his plans, replete with a light show, fake snow and flowing liquor â€" jangled from the start,†The New York Times writes. NEW YORK TIMES
J.C. Penney Shows How the Market Overvalues the C.E.O.  | Even if Ron Johnson’s ideas had been the right ones, big organizations with entrenched people and cultures are hard to turn around, Richard Beales of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS
Blackstone Said to Seek Partners for Dell Bid  | The Blackstone Group “is talking to several technology companies about potentially joining its bid†to buy Dell, The Wall Street Journal reports, citing unidentified people familiar with the matter. WALL STREET JOURNAL
Big Dell Shareholder Prefers 2 Rival Bids  | Southeastern Asset management says that proposals from the Blackstone Group and Carl C. Icahn are superior to the $13.65-a-share offer from Michael S. Dell and the private equity firm Silver Lake. DealBook »
Bank of America Hires Goldman M.&A. Executive  | Bank of America Merrill Lynch has hired Luigi Rizzo from Goldman Sachs to become head of mergers and acquisitions for Europe, the Middle East and Africa. DealBook »
Goldman Lowers Forecast for Gold  | Goldman Sachs reduced its predictions for the future price of gold, saying a long rally was turning, Bloomberg News reports. BLOOMBERG NEWS
A Look at Goldman’s ‘Investing and Lending’ Segment  | An earnings segment known as investing and lending helps show what Goldman Sachs makes from investing its own money, “but it still confounds analysts and investors because the bank does not provide details on the performance of individual assets,†Reuters writes. REUTERS
In Asia, a Field Where Women Are Ahead  | Among private bankers in Asia, who manage money for wealthy clients, women outnumber men three to two, according to an executive recruiting firm, Bloomberg News reports. BLOOMBERG NEWS
UBS to Expand Corporate Advisory Team in Asia  | The Swiss bank plans to increase its corporate advisory and capital markets group in Asia by 10 percent over three years, according to Bloomberg News. BLOOMBERG NEWS
Former British Bank Chief to Give Up Knighthood  | James Crosby, a former chief executive of HBOS, says he will ask authorities to remove his knighthood in light of a damning report published last week that blamed him in part for the mortgage lender’s 2008 collapse. DealBook »
Occupy Wall St. Reaches Settlement Over Library at Park  | The New York Times reports: “The City of New York and Brookfield Properties agreed to pay more than $230,000 to settle a lawsuit filed last year in Federal District Court asserting that books and other property had been damaged or destroyed when the police and sanitation workers cleared an encampment from Zuccotti Park in 2011.†NEW YORK TIMES
K.K.R. Hires New Chief of Japanese Unit  | A new chief executive for the private equity company’s Japanese unit is the latest in a series of senior appointments for K.K.R. in Asia, as it seeks to close a new $6 billion Asian fund and expand regionally beyond the traditional buyout business. DealBook »
K.K.R. Buys Shopping Mall in Albany  |Â
NEWS RELEASE
Aurelius Offers $80 Million in Financing to Clearwire  | “The move by Aurelius, which typically invests in distressed debt, is the latest twist surrounding Sprint’s controversial proposal to buy the roughly 49 percent of Clearwire it does not own,†Reuters writes. REUTERS
Former Icahn Deputy to Start Fund Focused on Health Care  | Alex Denner, a former executive for Carl C. Icahn in health care investing, “is starting an activist hedge fund firm called Sarissa Capital Management, according to three people familiar with the matter,†Bloomberg News reports. BLOOMBERG NEWS
After Split, G.M. Returns to Facebook for a Test  | “General Motors, which made headlines in May 2012 when it stopped running paid advertising on Facebook, said on Tuesday that it had begun a test program of paid ads on facebook.com aimed at consumers who check Facebook on their mobile devices,†the Media Decoder blog reports. NEW YORK TIMES MEDIA DECODER
Broadcasters Do Battle With TV Streaming Upstart  | Major television stations “are determined to shut down†Aereo, which deprives them of retransmission fees by streaming their signals online, The New York Times writes. NEW YORK TIMES
Arming Cable Companies for the Internet Age  | Technology companies are offering cable companies “ways to offer the personal choice of mobile, while justifying the goodies that come to someone who pays for a subscription,†the Bits blog writes. NEW YORK TIMES BITS
First Checks to Be Issued in Mortgage Settlement  | Months after brokering a settlement with banks over mortgage foreclosure abuses, the Federal Reserve and the Office of the Comptroller of the Currency are set to dole out roughly $1.2 billion in cash relief. DealBook »
Banks Used Aid to Repay Bailout, Watchdog Says  | The Wall Street Journal writes: “A number of small banks used $2.1 billion in government cash intended to boost small-business lending to repay bailout funds from the financial crisis, a government watchdog said Tuesday in a report that also concluded the banks lent less money than firms that didn’t take bailout aid.†WALL STREET JOURNAL
Lew’s European Visit Highlights Gulf Over Economic Policy  |Â
NEW YORK TIMES
A Step Backward on Regulating Derivatives  | Bills that will be the focus of a hearing in the House Financial Services Committee “must be stopped if the world is to be made safe from reckless risk-taking by banks,†The New York Times editorial board writes. NEW YORK TIMES
Bird Flu Concerns and North Korean Jitters  | Beijing has allowed remarkable transparency in the coverage of the bird flu outbreak. Bill Bishop writes in the China Insider column that he has to hope the transparency is real. DealBook »
