JPMorgan Chase paid $1 billion last week to resolve a number of government investigations, but the bank’s biggest battles with federal authorities may lie ahead, Ben Protess and Jessica Silver-Greenberg report in DealBook.
JPMorgan is bracing for a lawsuit from federal prosecutors in California who suspect the bank sold shoddy mortgage securities to investors before the financial crisis, people briefed on the matter said. The case, expected as soon as Tuesday, could foreshadow more government actions. Federal prosecutors in Philadelphia are also investigating JPMorgan’s sale of mortgage securities, the people briefed on the matter said.
“Underscoring the breadth of the scrutiny, the people said, JPMorgan and the Department of Housing and Urban Development briefly discussed the possibility of striking a wide-ranging settlement to conclude many of the looming mortgage investigations from federal authorities and state attorneys general,†DealBook reports. “But the housing agency floated a price tag of about $20 billion for the settlement, the people said, effectively derailing settlement talks with JPMorgan lawyers, who were stunned by the size of the proposed penalty and expected to pay a fraction of that sum.â€
The fines JPMorgan agreed to pay last week over its $6 billion trading loss in London sound like a lot of money. But that money was actually coming from shareholders â€" the same shareholders who were ostensibly the victims of the scandal that already cost them $6 billion, Andrew Ross Sorkin writes in the DealBook column.
“It is perversely inappropriate. You are adding injury to injury. All we’re doing is punishing the shareholders more,†said John C. Coffee Jr., a professor of securities law at Columbia Law School. “This is a case where the victims are the shareholders.â€
The case over the trading loss “presents an interesting contrast in how the government pursues corporate wrongdoing,†Peter J. Henning writes in the White Collar Watch column. While two lower-level employees of JPMorgan were formally indicted last week, the bank itself faced only civil charges and no higher level individuals were accused of violations. “The fact is that prosecutors and the police have enormous discretion over whether to bring charges against someone, with a decision not to charge a crime virtually unreviewable by the courts.â€
BLACKBERRY BUYOUT OFFER RAISES QUESTIONS Â |Â BlackBerry said on Monday that it had signed a letter of intent from a group led by Fairfax Financial Holdings, a Canadian insurance and investment company, to pay shareholders $9 a share in cash, pending a variety of conditions, to take the company private, Ian Austen and David Gelles report in DealBook. But the offer does not end the uncertainty surrounding the smartphone maker. The $4.7 billion offer from Fairfax is a powerful symbol of the decline of BlackBerry, which had a stock market value of $83 billion in 2008.
“Any deal is far from done. Fairfax did not identify the other investors in its consortium, which is seeking financing. And while the offer could flush out potential rival offers, it is unclear who might be tempted to come forward, given the company’s uncertain prospects. Investors gave a muted endorsement on Monday, with BlackBerry shares rising 1 percent, to $8.82, but failing to reach the $9 bid price,†DealBook reports.
Steven M. Davidoff was reminded of a surrealist master. “Looking at the BlackBerry announcement, I couldn’t help thinking of that René Magritte painting of a pipe with a statement in French that this is not a pipe,†he writes in the Deal Professor column. “For BlackBerry, this is not a deal, or at least not yet.â€
If the deal is completed, it would be a feather in the cap of Byron D. Trott, whose firm, BDT & Company, is one of the primary advisers to Fairfax and its unnamed partners, DealBook’s Michael J. de la Merced reports. Mr. Trott, often called Warren E. Buffett’s favorite banker, struck off from Goldman Sachs over four years ago and has kept busy with a number of deals.
UNION PUSH FOR I.P.O. FORCES CHRYSLER TO FILE  | “Chrysler filed for a public stock offering on Monday, acting only under pressure from its second-largest shareholder, a trust set up to provide medical coverage for 115,000 retired autoworkers and their relatives,†Bill Vlasic reports in DealBook. “Ordinarily, Chrysler’s plan would be cause to celebrate the automaker’s comeback from its government bailout and bankruptcy in 2009. But it is acting only after negotiations stalled between Fiat, which controls Chrysler, and the trust over the purchase of the trust’s minority stake in Chrysler. The offering could be canceled if Fiat and the trust reach a deal.â€
ON THE AGENDA Â |Â The Bloomberg Markets 50 Summit is held at the New-York Historical Society, with a number of prominent speakers. Stephen A. Schwarzman, chief executive of the Blackstone Group, is on Bloomberg TV at 10:30 a.m. James B. Lee Jr., vice chairman of JPMorgan Chase, is on Bloomberg TV at 10:30 a.m. Marc Lasry, the chief executive of Avenue Capital, is on Bloomberg TV at 11:20 a.m. Larry Ellison, the chief executive of Oracle, is on CNBC at 4:10 p.m.
FIGHTING OVER DETROIT’S CASINO-TAX DOLLARS  | “Detroit had a bit of rare good fortune as it hurtled toward bankruptcy last summer â€" a couple of banks were willing to let it out of some expensive financial contracts, called interest-rate swaps, without paying in full the usual steep termination fees,†Mary Williams Walsh reports in DealBook. “But since then, an insurance company has been seeking to block the deal, lining up allies among Detroit’s other creditors. The insurer, Syncora Guarantee, contends that Detroit’s good deal was struck at its expense, improperly stripping it of cash that Detroit now wants to use to tide itself over as it goes through the biggest Chapter 9 municipal bankruptcy case in American history.â€
Applied Materials and Tokyo Electron Agree to Merge  | The agreement on Tuesday between Tokyo Electron, which makes semiconductor production equipment, and Applied Materials, a chip maker based in Santa Clara, Calif., would create a company with a $29 billion market capitalization. REUTERS
Telefonica Said to Gain More Sway Over Telecom Italia  | Telefónica of Spain has agreed to increase its stake in Telecom Italia, an unidentified person close to the deal said, “ending months of speculation on the future of the debt-laden Italian group and opening the way to asset sales,†Reuters reports. REUTERS
Russia to Sell Stake in Maker of AK-47s to Investors  | “A Russian government-owned conglomerate announced plans on Monday to sell to two private investors just under half of the company that makes Kalashnikov assault rifles,†The New York Times reports. NEW YORK TIMES
US Airways and American Extend Merger Deadline  | US Airways and American Airlines have extended their merger agreement as they fight a government lawsuit seeking to block the deal. DealBook »
Ivanhoe Mines Said to Discuss Deal With Chinese Gold Company  | The China National Gold Group Corporation, that country’s biggest gold company, has spoken with Ivanhoe Mines “about buying a stake in or assets from†Ivanhoe, The Wall Street Journal reports, citing two unidentified people familiar with the matter. WALL STREET JOURNAL
In Latin America, Brazilian Banks Fill Void Left by Global Giants  | As the big international investment banks pull back from Latin America, BTG Pactual and Itaú BBA are expanding there. DealBook »
Citigroup Cuts 1,000 Jobs in Mortgage Business  | The cuts amount to about 8 percent of Citigroup’s mortgage division, Reuters reports. The bulk of the reductions are coming in Las Vegas. REUTERS
On ‘Breaking Bad,’ a Shout-Out to Sorkin  | In Sunday night’s episode of AMC’s “Breaking Bad,†Charlie Rose, portraying himself, cites a fictional column by Andrew Ross Sorkin about a $28 million charitable donation that is made after news linking a drug company’s founders to a meth dealer. DealBook »
Breaking Bad: The Gray Matter of Charity  | The column everyone is talking about: Elliott and Gretchen Schwartz vs. Walter White. DealBook »
K.K.R. Said to Close In on Jones Group  | The private equity firm K.K.R., in partnership with Sycamore Partners, is looking “to cut a deal as soon as this week to buy Jones Group, the Seventh Avenue stronghold that owns labels like Stuart Weitzman, Nine West and Anne Klein,†The New York Post reports. NEW YORK POST
Brixmor Property Aims to Raise $750 Million in I.P.O. Â |Â The Brixmor Property Group, an owner of shopping centers that the Blackstone Group plans to take public, says it intends to raise $750 million in an initial public offering. REUTERS
A Hedge Fund Titan’s Theory of the Economy  | Ray Dalio, the head of the hedge fund giant Bridgewater Associates, explains his view of credit cycles in a 30-minute instructional video. BRIDGEWATER
Under Fire From Investors, CommonWealth to Change Its Ways  | The real estate investment trust CommonWealth said on Monday that it was updating its corporate governance structure and compensation model after months of pressure from activist investors. DealBook »
Chinese Conglomerate Plans $1.8 Billion Reverse Takeover in Hong Kong  | Cofco, a sprawling, state-owned Chinese conglomerate, kicked off on Tuesday a reverse takeover bid worth $1.8 billion that would result in a Hong Kong listing for its commercial property business in mainland China. DealBook »
Moncler’s Chief Expects an I.P.O. in Italy  | “A listing has always been my first choice,†Remo Ruffini, chief executive of the Italian luxury jacket maker Moncler, told The Wall Street Journal. “It’s just a matter of waiting for the right time to do it.†WALL STREET JOURNAL
Twitter Signs CBS as an Advertising Partner  | Furiously adding partners to its Amplify advertising program, Twitter announced on Monday that it had signed CBS, one of its biggest partners yet. NEW YORK TIMES BITS
California City Tests a Way to Cut Benefits  | In San Jose, “the city that bills itself as the capital of Silicon Valley, the economic tidal wave that has swamped Detroit and other cities is lapping at the sea walls,†The New York Times reports. NEW YORK TIMES
Arguments Begin in a Bitter Family Brawl Over a Media Mogul’s Estate  | Samantha Perelman is suing her uncle James Cohen, the head of the Hudson Media empire, over what she says is her rightful $700 million share in her grandfather Robert Cohen’s fortune. DealBook »
For a Better Way to Prosecute Corporations, Look Overseas  | American prosecutors have used deferred prosecution agreements in cases of great public importance without any meaningful oversight, Brandon L. Garrett, a professor at University of Virginia School of Law, and David Zaring, an assistant professor of legal studies at the Wharton School of the University of Pennsylvania, write in the Another View column. DealBook »
Former Tribune Investors Achieve a Legal Victory  | Reuters reports: “Investors who sold Tribune Company stock in a 2007 buyout led by developer Sam Zell won a legal battle on Monday that protects them from being sued twice over that deal, which has been blamed for the media conglomerate’s bankruptcy.†REUTERS
