Federal investigators are facing logistical hurdles as they seek to arrest and criminally charge two former JPMorgan Chase employees at the center of the bank’s multibillion-dollar trading loss in London last year, Ben Protess and Jessica Silver-Greenberg report in DealBook.
One of the employees, Javier Martin-Artajo, is on vacation, his lawyers said on Tuesday, adding that he would return to London “as scheduled.†Another, Julien Grout, has returned to his native France, which typically does not extradite its citizens. But his lawyer said Mr. Grout “has absolutely no intention of fleeing.†A third employee, Bruno Iksil, has reached a so-called nonprosecution deal with federal investigators in Manhattan that will protect him from charges as long as he cooperates against his two former colleagues, DealBook reports.
“The authorities need not wait for the employees to return to London to bring charges. Even without arrests, people briefed on the matter said, prosecutors and the Federal Bureau of Investigation in Manhattan could announce the charges this week,†DealBook reports.
ACKMAN’S WINNING QUALITIES PLAY OUT IN DEFEAT  | One of William A. Ackman’s big gambles, on turning around J.C. Penney, has blown up, leading him to make an embarrassing retreat, Michael J. de la Merced and Stephanie Clifford write in DealBook. The hedge fund titan resigned this week from Penney’s board, just days after beginning an unusually public rebellion against his fellow directors. At the same time, he continues to bet against the nutritional supplements company Herbalife, a wager that has not gone his way in recent months. By some estimates, Mr. Ackman has lost about $1 billion on both companies.
Mr. Ackman’s “three-year fight at Penney revealed many of the qualities that underpinned his successes and his failures, including tenacity and a willingness to seize the spotlight,†DealBook writes. “The resolution of that struggle has made clear that Mr. Ackman can claim little in the way of victory.â€
Still, Herbalife has come under scrutiny for a product safety issue that it says it has resolved. In early 2011, the company detected fine shards of metal in its Formula 1 nutrition shake as it left the production line. Over five weeks, the company fixed that problem and a second bout of metal contamination, it said, and there is no evidence that any contaminated product was shipped from the factory. But the New York State attorney general’s office has subpoenaed a former employee of Herbalife to produce internal documents about the issue, according to a person briefed on the matter who spoke on the condition of anonymity because the inquiry had not been publicly disclosed.
Mr. Ackman, as part of his campaign against Herbalife, has been meeting with the attorney general and the Securities and Exchange Commission in hopes of persuading them to pursue an action against the company.
A THRIVING FINANCIAL PRODUCT HAS A RECORD OF FAILURE  | “On Wall Street, strange financial products sometimes exist not because they are good for investors or companies, but because they offer their promoters a way to profit. One of those products may be the Silver Eagle Acquisition Company, which just completed a $325 million initial public offering,†Steven M. Davidoff writes in the Deal Professor column. “Silver Eagle is a special purpose acquisition company, or SPAC, which raises money through an I.P.O. and then casts a wide net in search of a private company to buy.†Its I.P.O. “shows that these entities are thriving despite the record of failure,†Mr. Davidoff writes.
ON THE AGENDA  | Macy’s and Deere & Company report earnings before the market opens. Cisco Systems reports earnings this evening. The producer price index for July is out at 8:30 a.m. Robert A. Profusek, the head of mergers and acquisitions at Jones Day, is on Bloomberg TV at 6 a.m.
KOHLBERG DECLINES TO RAISE BID FOR STEINWAY Â |Â A contest to buy the maker of Steinway & Sons pianos is ending in a diminuendo. But it may not have reached a finale. The private equity firm Kohlberg & Company, which offered last month to buy Steinway Musical Instruments, said on Tuesday that it would not seek to raise its bid in the face of a rival offer. That puts Steinway in a position to complete a buyout deal with the rival bidder, which offered this week to buy the company for $38 a share, or about $475 million. The rival bidder, not yet publicly identified, is the hedge fund Paulson & Company, in a rare foray into private equity, according to a person briefed on the matter who was not authorized to speak publicly.
Kohlberg, which originally bid $35 a share, or $438 million, for Steinway, told the company that it waived its right to negotiate with the board about possibly increasing its bid, Kohlberg said on Tuesday in a regulatory filing. The original so-called go-shop period associated with that bid â€" during which Steinway could invite rival offers â€" ends on Wednesday.
Justice Dept. Files Antitrust Suit to Block Airline Merger  | The complaint said the proposed deal between American Airlines and US Airways, which would create the nation’s biggest airline, would threaten competition and drive up ticket costs. DealBook »
For Airlines, Competition May Be a Benefit  | Airline executives seem to think eliminating competition through mergers is the best strategic response to losing money, Eduardo Porter writes in the Economic Scene column in The New York Times. “But perhaps competition won’t kill them. They might even thrive.†NEW YORK TIMES
The Future of American Airlines  | American Airlines’ plan to exit bankruptcy â€" a merger with US Airways â€" was upended by the antitrust case filed on Tuesday, but American may not be able to wait in Chapter 11 until the case is resolved, Stephen J. Lubben writes in the In Debt column. DealBook »
Baidu to Buy App Store Operator for $1.85 Billion  | Baidu, China’s largest search engine company, said on Wednesday that it had agreed to buy 91 Wireless, a major developer of app stores in China, from NetDragon Websoft for $1.85 billion in cash, Reuters reports. REUTERS
KPN Foundation Raises Concerns With America Movil Bid  | An independent foundation affiliated with KPN, with the power to block a takeover of the Dutch company, said on Tuesday there was “considerable uncertainty about América Móvil’s intentions†in bidding for the company, Reuters reports. REUTERS
Abu Dhabi Fund Is Said to Be in Talks for Batista Assets  | Mubadala Development, the Abu Dhabi sovereign wealth fund, “is in talks to buy some of the assets of former Brazilian billionaire Eike Batista for about $1 billion, two people with direct knowledge of the matter said,†Bloomberg News reports. BLOOMBERG NEWS
Barclays C.F.O. Moves Up Departure, Citing Ill Health  | Christopher G. Lucas, the chief financial officer of Barclays, announced on Wednesday that he was leaving the bank earlier than expected for health reasons. DealBook »
Having a Bonbon with Buffett  | A charity auction for a tour of the See’s Candy factory in Los Angeles with Warren E. Buffett, whose conglomerate owns the company, has attracted bids up to $156,000. WALL STREET JOURNAL
JPMorgan Names Executive in Singapore  | Edmund Lee, the chief executive of DBS Vickers Securities, is joining JPMorgan Chase as senior country manager for Singapore, The Wall Street Journal reports. WALL STREET JOURNAL
ANZ Is Said to Be in Talks to Sell Stake in Indonesian Bank  | ANZ, the Australian bank, is in talks to sell its 39 percent stake in PT Bank Pan Indonesia to the Mizuho Financial Group, Bloomberg News reports, citing an unidentified person with knowledge of the matter. BLOOMBERG NEWS
BlackBerry’s Most Challenging Sales Pitch Yet  | Though BlackBerry announced this week that it would consider takeover bids, the company’s advisers had already been trying, unsuccessfully, for almost a year to find interested buyers, Bloomberg News reports. BLOOMBERG NEWS
Icahn Says He Has Large Stake in Apple  | “Had a nice conversation with Tim Cook today,†Carl C. Icahn, the longtime activist investor, announced on Twitter as shares of Apple surged. DealBook »
A Bet on Loeb That Comes With New Risks  | An initial public offering of Third Point Reinsurance, the reinsurance arm of the hedge fund run by Daniel S. Loeb, may price on Wednesday and raise $322.2 million, Bloomberg News reports. Investors would be “taking on risk from an unprofitable underwriting operation.†BLOOMBERG NEWS
New York and U.S. Begin Investigations Into Bitcoins  | The Senate’s committee on homeland security and New York State’s top financial regulator, Benjamin M. Lawsky, are investigating gaps in the oversight of upstart virtual currencies like bitcoin. DealBook »
Apple Said to Buy Matcha.tv, a Video Service  | Apple bought Matcha.tv, an app that allows people to manage TV and video preferences and get recommendations, VentureBeat reports. It was shut down in May. VENTUREBEAT
Divining the Regulatory Goals of Rivals for the Fed Job  | While Lawrence H. Summers has taken prominent positions on regulatory matters, Janet Yellen has left few footprints, The New York Times writes. “For supporters of stronger regulation, it comes down to a choice between someone they do not know and someone they do not trust.†NEW YORK TIMES
Euro Zone Economy Grew in 2nd Quarter  | The New York Times reports that “Europe broke out of recession in the second quarter,†according to official data released on Wednesday, as stronger domestic demand in France and Germany helped end a six-quarter downturn that sapped confidence and threw millions of people out of work. NEW YORK TIMES
U.S. Accounting Regulator Proposes More In-Depth Reports From Auditors  | The proposal by the Public Company Accounting Oversight Board could provide investors with deeper insights into the health of corporations. DealBook »
Mexican Oil Reforms May Upend Markets  | “A sweeping reform suggested for Mexico’s energy laws has the potential not only to return the country to its early 1980s heyday of energetic oil drilling, when it was one of the world’s most promising producers, but also to reduce further the United States’ dependence on OPEC producers, according to oil experts,†The New York Times reports. NEW YORK TIMES
Bank of England Appears Divided on Monetary Stimulus Efforts  | Reuters reports: “Bank of England policy makers proved to be unexpectedly split on new governor Mark Carney’s long-run commitment to keep interest rates low earlier this month, minutes of their August meeting showed on Wednesday.†REUTERS
