Morning Agenda: A Member of China’s Elite Tied to JPMorgan

JPMORGAN’S TIES TO A MEMBER OF CHINA’S ELITE  | 

“To promote its standing in China, JPMorgan Chase turned to a seemingly obscure consulting firm run by a 32-year-old executive named Lily Chang,” David Barboza, Jessica Silver-Greenberg and Ben Protess report in DealBook. “Ms. Chang’s firm, which received a $75,000-a-month contract from JPMorgan, appeared to have only two employees. And on the surface, Ms. Chang lacked the influence and public name recognition needed to unlock business for the bank.

“But what was known to JPMorgan executives in Hong Kong, and some executives at other major companies, was that ‘Lily Chang’ was not her real name. It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who at the time was China’s prime minister, with oversight of the economy and its financial institutions.

“JPMorgan’s link to Ms. Wen â€" which came during a time when the bank also invested in companies tied to the Wen family â€" has not been previously reported. Yet a review by The New York Times of confidential documents, Chinese public records and interviews with people briefed on the contract shows that the relationship pointed to a broader strategy for accumulating influence in China: Put the relatives of the nation’s ruling elite on the payroll.

“Now, United States authorities are scrutinizing JPMorgan’s ties to Ms. Wen, whose alias was government approved, as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned Chinese companies, according to the documents and interviews. The bank, which is cooperating with the inquiries and conducting its own internal review, has not been accused of any wrongdoing.”

A TWITTER #FAIL FOR JPMORGAN  | 

JPMorgan Chase, which helped take Twitter public last week, got a very negative taste of the social network’s power on Wednesday evening. The bank canceled a question-and-answer session with James B. Lee Jr., its vice chairman and top deal maker, after Twitter users responded to its request for serious questions with a stream of hostile jokes, DealBook’s Michael J. de la Merced reports.

A spokesman for the firm wrote in an email: “#Badidea! Back to the drawing board!” No one will lose their jobs over the fracas, a person briefed on the matter tells Mr. de la Merced.

SNAPCHAT REJECTS BILLIONS  | 
Snapchat has joined the list of tech companies â€" like Tumblr and Instagram â€" with no money coming in but multiple sky-high takeover offers, Jenna Wortham reports in The New York Times. The leaders of the social media service, who until last month worked out of a beachfront bungalow in Venice, Calif., have balked at the offers, according to three people with knowledge of the overtures, including a recent multibillion-dollar proposal from Facebook.

Facebook’s offer? “Close to $3 billion or more,” all in cash, according to The Wall Street Journal, which cites unidentified people briefed on the matter.

It’s not that Snapchat’s leaders don’t want billions of dollars, Ms. Wortham writes. “In part, it’s because they think making a deal now would leave many billions more on the table.”

ON THE AGENDA  | 
Janet L. Yellen, President Obama’s choice to lead the Federal Reserve, goes before the Senate Banking committee for a confirmation hearing. Gary Kaminsky, a Morgan Stanley vice chairman, is on CNBC at 7 a.m. Walmart Stores, Viacom and Tyco International report earnings before the market opens, while Nordstrom reports earnings this evening.

TAX WIZARDRY THROUGH AN OFFBEAT MERGER  | 

Classic tax shelters used in the 1990s have become unattractive to most companies, thanks to enforcement actions by the Internal Revenue Service, coupled with changes in accounting and reporting requirements, Victor Fleischer writes in DealBook. Yet executives and tax directors have found other ways to avoid taxes â€" taking advantage of tax rules written in the days when assets were tangible and difficult to move: “For multinational corporations, the most common method of tax avoidance relies on moving intellectual property overseas, where profits derived from those assets can be sheltered in low-tax jurisdictions.”

“Other methods of tax avoidance have received less news media attention but are no less troubling. A recent deal by LIN Media, a media company backed by the private equity firm HM Capital Partners and the investment manager Royal W. Carson III, highlights two techniques. LIN Media owns 43 local television stations around the country, including the CBS affiliate WIVB in Buffalo, the Fox affiliate KHON in Honolulu and the CBS affiliate WISH in Indianapolis, along with other media assets,” Mr. Fleischer writes.

“In July, it merged with itself. Who knew this was possible? While the merger was trivial from a business standpoint, it generated half a billion dollars in tax losses that the company used to shelter its gain from an earlier deal and eliminate its tax liability.”

Mergers & Acquisitions »

Concession in Airline Deal Is Criticized  |  In reaching a settlement with US Airways and American Airlines, the Justice Department had a far different view than it expressed when it initially filed suit to block the proposed merger.
NEW YORK TIMES

Petrobras of Brazil Sells Peruvian Unit to Chinese Company  |  The sale by Petrobras of its Peruvian subsidiary, Petrobras Energia Peru, to the China National Petroleum Company for $2.6 billion is aimed at shoring up Petrobras’s balance sheet.
DealBook »

Executives Have a Knack for Well-Timed Stock Sales  |  The Wall Street Journal reports: “Ordinary investors often are dismayed when senior executives sell their own stock before hitting the market with bad news. The situation can be even stickier when corporate insiders declare their company’s outlook bright, sell shares, then disclose bad news.”
WALL STREET JOURNAL

Telefonica Says No Plans to Take Control of Telecom Italia  |  The chairman of Telefónica of Spain told an Italian newspaper that the company does not plan to exercise an option to increase to 100 percent its stake in Telco, the company that controls Telecom Italia, Reuters reports.
REUTERS

INVESTMENT BANKING »

Goldman Sachs Promotes 280 to Managing Director  |  Promotions are up 5 percent over last year, when the Wall Street firm named 266 employees managing director.
DealBook »

Goldman Sachs Is Said to Lose Executives in Brazil  |  Goldman Sachs “lost at least nine managing directors in Brazil this year as revenue from investment banking falls and trading and wealth-management fees increase, four people familiar with the matter said,” Bloomberg News reports.
BLOOMBERG NEWS

Perella Weinberg Hires Goldman Sachs Managing Director  |  Perella Weinberg Partners has hired Jonathan Prather, a managing director within Goldman Sachs’s global industrials group, as a partner in its advisory business.
DealBook »

After Leave of Absence, Barclays Executive Resigns  |  The bank said Hector W. Sants would not return to his post as compliance chief after taking a leave of absence because of exhaustion and stress last month.
DealBook »

Finance Lessons, From the World of Art Auctions  |  The $142 million sale of Francis Bacon’s triptych of Lucian Freud has a matching, perhaps a bit tenuous, trio of lessons for the broader world of finance, Richard Beales of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

PRIVATE EQUITY »

Carlyle-Backed Brazilian Tour Operator Plans Stock Offering  |  A Brazilian tour operator backed by the Carlyle Group could raise as much as 1 billion reais ($428 million) for its existing shareholders through a planned offering.
DealBook »

HEDGE FUNDS »

Short Sellers Place Bets Against Twitter  |  The Financial Times reports: “Investors have wasted little time betting against shares in Twitter after short sellers were afforded their first opportunity on Wednesday to profit from a fall in the messaging platform’s stock price.”
FINANCIAL TIMES

I.P.O./OFFERINGS »

Chegg Falls in Debut, but Chief Remains Ebullient  |  As of midday on Wednesday, shares in the company, which primarily rents textbooks via its website, were down 20 percent below their initial public offering price.
DealBook »

VENTURE CAPITAL »

Redfin Raises $50 Million in Latest Financing Round  |  The online real estate brokerage has raised $50 million in a new round of mezzanine capital, led by Tiger Global Management and T. Rowe Price. Five existing investors, including Greylock Partners and DFJ Venture Capital, also participated.
DealBook »

Former Government Official Joins Bitcoin Start-Up  |  Raj Date, a former official at the Consumer Financial Protection Bureau, has joined the board of Circle Internet Financial, which is trying to help the virtual currency bitcoin have a wider use, The Wall Street Journal reports.
WALL STREET JOURNAL

LEGAL/REGULATORY »

Coffey to Join Kramer Levin in a Return to Law Practice  |  Kramer Levin Naftalis & Frankel is expected to announce on Thursday that it has hired John P. Coffey, known as Sean, to be the chairman of its complex litigation group.
DealBook »

Euro Zone Economy Stagnates as German Growth Slows  |  “The euro zone economy marked time in the third quarter of the year, growing just 0.1 percent from the second quarter, disappointing hopes that a full-fledged recovery was finally taking hold after five years of recession and stagnation,” The New York Times reports.
NEW YORK TIMES

Tax Authorities in Italy Scrutinize Apple  |  The New York Times reports: “Italian prosecutors have opened an investigation into whether Apple paid all its taxes in the country, an official in Milan said on Wednesday.”
NEW YORK TIMES

In Senate Remarks, Yellen to Support Stimulus Plan  |  The New York Times reports: “Janet L. Yellen, President Obama’s choice to lead the Federal Reserve for the next four years, plans to tell senators at her confirmation hearing on Thursday that continuing the Fed’s enormous stimulus campaign is the best way to revive the economy and hasten the program’s end.”
NEW YORK TIMES

Lawyer Admits Mistakes in Chevron Case  |  Steven R. Donziger, the freelance lawyer who has been suing Chevron for 20 years over pollution of the Ecuadorean Amazon jungle, admits in prepared testimony that he concealed his relationship and payments to a court-appointed expert witness who presented a report to the Ecuadorean court that tried the case, The New York Times reports.
NEW YORK TIMES