JPMORGAN SETTLES MADOFF CHARGES  | Over the last year, JPMorgan Chase has agreed to legal penalties now totaling $20 billion, but the settlements have not taken as large a toll on the bank as the numbers might suggest, Peter Eavis writes in DealBook. On Tuesday, Preet Bharara, the United States attorney in Manhattan, imposed a record $1.7 billion fine for felony violations of the Bank Secrecy Act for failing to report Bernard L. Madoff’s suspicious activities. On top of that, the bank agreed to pay $350 million to the Office of the Comptroller of the Currency, bringing the total settlement to $2 billion.
But while the now $20 billion sum “could cover the annual education budget of New York City or finance the Yankees’ payroll for 10 years,†the bank has been able to withstand the legal hits in part because it has set aside funds over the last few years to pay out future settlements, Mr. Eavis writes. The bank continues to report solid earnings â€" its shares are up 28 percent over the last 12 months â€" and its shareholders and clients remain loyal.
Mr. Eavis writes: “JPMorgan’s financial success highlights a deep quandary that regulators have to grapple with as they press the largest banks to clean up their acts. The government’s penalties may seem large on paper â€" JPMorgan’s mortgage settlement with the Justice Department last year cost it a record $13 billion â€" but the largest banks seem capable of earning their way out of serious legal trouble.â€
The penalty JPMorgan Chase incurred related to Mr. Madoff’s Ponzi scheme is significant, but it could have been worse for the bank, Ben Protess and Jessica Silver-Greenberg write in DealBook.
While the Madoff settlement is small compared with the record $13 billion it paid to the Justice Department in November over its sale of questionable mortgage securities leading up to the financial crisis, the size of the fine and the rarity of the deferred-prosecution agreement reflect the magnitude of the accusations. At one point, the prosecutors had been considering demanding that JPMorgan plead guilty to a criminal violation of the Bank Secrecy Act, an outcome that could have had devastating collateral consequences.
At a news conference on Tuesday, Mr. Bharara said that the bank’s failure to recognize warning signs enabled Mr. Madoff to commit fraud for decades. “The bank connected the dots when it mattered to its own profit, but was not so diligent otherwise when it came to its legal obligations,†Mr. Bharara said.
Still, the settlement shows that prosecutors are becoming more creative about returning money to victims of fraud rather than pocketing it themselves, Peter J. Henning writes in the White Collar Watch column. As part of the deal, the government will treat the $1.7 billion as the forfeiture of proceeds from Mr. Madoff’s fraud, meaning it can be returned to victims of the crime. Prosecutors also included a provision in the deferred prosecution agreement that does not allow the bank to deduct the fine from its taxable income, so taxpayers are not subsidizing the payment to the victims.
ONE-TIME WAFFLE MAKER TO TESTIFY AT SAC TRIAL Â |Â Timothy W. Jandovitz, a former employee of SAC Capital Advisors who made a brief foray into waffle making, is expected to be the first witness called on Wednesday in the trial of Mathew Martoma, a former SAC trader accused of insider trading, Alexandra Stevenson writes in DealBook. Mr. Jandovitz will likely face questions from the prosecutors on the years he worked with Mr. Martoma at SAC as a health care analyst.
Mr. Martoma is accused of obtaining inside information from a doctor about clinical trials for an Alzheimer’s drug before SAC sold its shares in two companies developing the drug, Elan and Wyeth. The trades helped the firm generate profits of $276 million and avoid losses during the financial crisis.
SHAKE UP AT GOLDMAN  | Goldman Sachs is reshuffling its prominent technology, media and telecommunications investment banking group, David Gelles reports in DealBook. In a series of internal memos, the firm outlined the changes, which call for George Lee, who has been the co-head of the group since 2008, to become the group’s chairman and serve as the chief executive officer for the investment banking division.
The other co-head of the group, Anthony Noto, will continue in his role, joined in San Francisco by Daniel Dees, who has been one of Goldman’s most senior bankers in Asia. The investment banking group has won a number of high-profile assignments recently, including leading Twitter’s I.P.O.
ON THE AGENDA  | Minutes for the Federal Reserve’s December meeting are out at 2 p.m. ADP’s payroll report for December is out at 8:15 a.m. The Consumer Credit report for November is released at 3 p.m. The Senate conducts a hearing on support for bank holding companies at 10 a.m. Bed, Bath & Beyond reports earnings after the market closes.
A MODEL FOR ACTION ON INCOME INEQUALITY IN ISRAEL  | In the wake of Mayor Bill de Blasio’s pledge to fight inequality, Israel’s economy could offer a lesson, Steven M. Davidoff writes in the Deal Professor column. Despite intense lobbying efforts to kill the bill, the Knesset unanimously passed the bill, which broke up the “pyramids,†a family or individual who owns a public company that controls other public companies.
Though the United States faces growing inequality and large banks that concentrate assets, the American economy is different. But Mr. Davidoff writes: “Still, while we await the outcome of Israel’s great experiment, it is clear that where there is the perception that harm is being done and where there is the will to change, a democracy can overcome even the most powerful corporate lobbyists.â€
Sandvik to Buy Texas Oil Drilling Equipment Company for $740 Million  | The deal allows Sandvik, a Swedish company that provides specialized equipment for the mining and construction industries, to enter a new product area.
DealBook »
Nestlé Agrees to Biotech Deal  | Nestlé has entered into a long-term agreement with Cellular Dynamics International, a United States biotechnology firm, to aid its research on the link between diet and diseases, Reuters writes.
REUTERS
Citizens Financial to Sell Chicago-Area Branches to U.S. Bancorp  | As part of the deal, U.S. Bancorp’s banking unit will acquire about $5.3 billion in deposits and $1.1 billion in loans, giving it about $11.3 billion in deposits in the Chicago area. Citizens Financial is a unit of the Royal Bank of Scotland.
DealBook »
Oracle Agrees to Buy Cloud-Based Service  | Oracle’s purchase of Corente pushes the once web-shy technology giant further into the Internet age.
DealBook »
European Cable Operator Altice Plans $1 Billion I.P.O. Â |Â Altice, whose operations include cable businesses and mobile assets in several European countries and the Caribbean, is expected to use the money to reduce debt, which could allow it to potentially bid for new assets.
DealBook »
Swiss Banks Prepare to Limit Investment Banking  | UBS and Credit Suisse will curtail their investment banking operations if Swiss capital regulations become too strict, The Financial Times reports.
FINANCIAL TIMES
Another Federal Inquiry Into Banks Over Mortgage Bonds  | Federal investigators are looking into mortgage-bond sales by banks in the years after the financial crisis, The Wall Street Journal reports. The examination is the first known widespread investigation of these bond sales since the financial crisis and targets many of the large banks, including Goldman Sachs, JPMorgan Chase, Citigroup and Morgan Stanley.
WALL STREET JOURNAL
Bank Shutters Commodities Trading Desks  | Bank of America-Merrill Lynch closed its European power and gas sales and trading operations on Tuesday, the fourth large bank to do so, Reuters writes.
REUTERS
Chuck E. Cheese’s Parent Considers Sale  | CEC Entertainment Inc. may be looking to sell Chuck E. Cheese’s, the family dining and entertainment franchise, to private equity, Reuters reports, citing unidentified people familiar with the situation.
REUTERS
Blackstone Plans to Grow Indian Real Estate Portfolio  | The private equity firm Blackstone is accelerating the pace of its acquisitions in Indian office property, The Financial Times reports.
FINANCIAL TIMES
Pantheon Said to Purchase Illinois Private Equity Stakes  | Pantheon, the London-based private equity firm, has won a $500 million bid for buyout fund stakes sold by the Teachers’ Retirement System of the State of Illinois, Bloomberg Businessweek reports, citing unidentified people familiar with the situation.
BLOOMBERG BUSINESSWEEK
Consortium Said to Seek $2 Billion for Skillsoft  | The private equity firms Berkshire Partners, Advent International Corporation and Bain Capital are exploring selling Skillsoft, an educational software provider, for $2 billion, Reuters reports, citing unidentified people familiar with the situation.
REUTERS
Middling Performance at Brevan Howard  | Brevan Howard Asset Management, one of the world’s largest hedge funds, is reporting disappointing returns in its flagship fund and taking a hit in its emerging markets portfolio, Reuters reports, citing unidentified people familiar with the situation.
Hedge Funds Distinguished by Polar Fleeces  | Hedge fund employees, like those at Steven A. Cohen’s SAC Capital Advisors, wear polar fleeces to assert their independence from Wall Street, a CNBC video segment reports. Get your own hedge fund fleece on eBay, where some are currently up for grabs.
CNBC
Elliott International Steady in 2013  | Paul Singer’s hedge fund Elliott International rose 11.8 percent in 2013 and has not reported a month with negative returns in a year and a half, The Wall Street Journal writes.
WALL STREET JOURNAL
Alibaba Bans Bitcoin  | Alibaba, the Chinese Internet behemoth that is expected to go public this year, has banned Bitcoin from its shopping websites, The Financial Times reports.
FINANCIAL TIMES
Loss for Container Store on I.P.O. Costs  | The Container Store, a storage and organization retailer, reported losses in its fiscal third quarter resulting from expenses related to its initial public offering in November despite higher sales, The Wall Street Journal reports.
WALL STREET JOURNAL
Office Depot Mexico Prepares I.P.O.  | Grupo Gigante aims to use the proceeds from an initial public offering of Office Depot’s Mexican unit to help pay off loans it used in 2013 to buy a stake in the office supply stores, Bloomberg News reports. The offering will be Mexico’s first equity deal of the year.
BLOOMBERG NEWS
Oscar, a New Health Insurer, Raises $30 Million  | Oscar, a health insurer co-founded by the venture capitalist Joshua Kushner, has raised $30 million in new capital from existing investors, the firm plans to disclose this week.
DealBook »
Twitter Co-Founder Reveals New App  | Biz Stone, the co-founder of Twitter, unveiled a new start-up called Jelly, an app that allows users to ask visual questions using Twitter and Facebook and receive answers from followers, the Bits blog writes.
NEW YORK TIMES BITS
Uber Says No I.P.O. is Imminent  | Travis Kalanick, the Uber chief executive, said he is not planning to take his company public anytime soon. “We’re just growing a business. We’re only three-and-a-half years old,†Mr. Kalanick said, The Wall Street Journal reports.
WALL STREET JOURNAL
House Financial Services Chairman to Seek Volcker Rule Change  | Representative Jeb Hensarling is soon expected to propose legislation that could open up a huge loophole in the Volcker Rule.
DealBook »
The Real Belfort Story Missing From ‘Wolf’ Movie  | Jordan Belfort has had a great cinematic run in the new Martin Scorsese film “The Wolf of Wall Street,†but for many of his victims the ending is beyond an insult, Joel M. Cohen, a lawyer who prosecuted Mr. Belfort, writes in the Another View column.
DealBook »
Sum of Batista Parts Still Doesn’t Add Up  | It’s tempting to think there might be investment opportunities in a $2.5 billion collection of companies that were worth $60 billion just a few years ago. But that would be wrong, contends Christopher Swann of Reuters Breakingviews.
DealBook »
Question Over Chief’s Role Resurfaces for JPMorgan  | With annual meeting season bearing down, JPMorgan’s question on whether to separate the chairman and chief executive positions held by Jamie Dimon is resurfacing, writes David Reilly in The Wall Street Journal.
WALL STREET JOURNAL
