Xstrata Board Said to Support Glencore\'s Revised Offer

The board of Xstrata is expected to back a sweetened takeover bid from Glencore International, a person briefed on the matter said on Sunday, keeping what would be one of the biggest mergers in years back on track.

Xstrata's board was set to make its announcement by Monday morning, as a regulatory deadline - already extended once - was scheduled to expire. The person briefed on the matter cautioned that some details were still being finalized, and that any agreement could still fall apart.

Should Xstrata's directors proceed with their recommendation, it would help keep afloat a merger that would create a behemoth in the world of mining and minerals. But questions about the company's restive shareholders have weighed down talks between the two sides.

First unveiled in February, the proposed transaction would unite Glencore, a giant commodities trading house, with Xstrata, its longtime mining partner. Together, the two would create an international mining c ompany with both significant physical assets and an enormous trading operation with invaluable insights into global demand for minerals.

The talks have drawn in many of London's top deal makers, generating enormous fees for the bankers involved - if the transaction is approved.

But the talks had been weighed down for months over questions about who would lead the combined company, and how much it would cost to retain key Xstrata executives.

Early in September, Glencore raised its takeover bid, offering 3.05 of its shares for each share in Xstrata. In exchange, however, the commodities trader proposed that its chief executive, Ivan Glasenberg, would take over the unified company six months after the merger was completed. Under the original terms of the deal, Xstrata's chief, Mick Davis, and his management team were set to retain control.

The changes in the new offer raised the possibility that top mining executives would depart, leaving the combined co mpany without veteran leaders in its core business. Mining is expected to comprise 84 percent of the unified company's operating profits, based on last year's earnings.

Glencore and Xstrata have since been negotiating a series of retention bonuses aimed at holding onto key executives, though those payouts - worth more than $200 million - have raised the ire of several major shareholders.

A number of institutional investors, including BlackRock and Legal & General, have been said to oppose the retention payments as too extravagant. That has prompted Xstrata to revise the bonus packages to more closely link them to performance targets, though they remain largely the same size.

Glencore and Xstrata have reportedly been working on ways to revise the shareholder voting procedures to allow investors to express disagreements over the payouts while still approving the deal.

One wild card remains the sovereign wealth fund of Qatar, the second-biggest sharehold er in Xstrata behind only Glencore, which has kept silent on the revised takeover bid. An adviser to Xstrata said previously that the country is less concerned about the payouts than about retaining key company executives.

With its 12 percent stake, Qatar Holding is seen as a key component to winning approval of any deal. The Qatar fund is expected to wait until Xstrata makes its announcement before making its own decision.

Judge Strikes Down Dodd-Frank Trading Rule

Wall Street notched another victory in the battle over regulation on Friday after a federal judge struck down a central piece of the Obama administration's financial overhaul.

The court decision dealt the latest blow to the Dodd-Frank Act, the regulatory crackdown passed in response to the financial crisis. The decision on Friday, aimed at the Commodity Futures Trading Commission‘s so-called position limits rule, is the second time a Dodd-Frank rule has suffered legal defeat.

The C.F.T.C. adopted the rule last year to place new restrictions on speculative trading, capping the number of derivatives contracts a trader can hold on 28 commodities. The agency aimed to rein in trading blamed for inflated prices at the gas pump and the grocery store.

The future of the rule is uncertain. Under the decision by the federal judge in Washington, the rule was vacated and sent back to the C.F.T.C. for “reconsideration.”

But in a statement on Friday, the ag ency indicated it might appeal the court decision.

“I believe it is critically important that these position limits be established as Congress required,” the agency's chairman, Gary Gensler, said in a statement on Friday. “I am disappointed by today's ruling, and we are considering ways to proceed.”

The case stems from a lawsuit that two Wall Street trade groups filed late last year. The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association complained that the C.F.T.C. erred in writing the rule, saying it would have had the unintended effect of causing wild price swings.

In a joint statement, the groups said they were “pleased with today's ruling” but are “committed to working with the commission and other regulators to promote safe, efficient markets.”

The ruling is sure to embolden Wall Street as it shifts the attack on Dodd-Frank from piecemeal lobbying to broader legal challe nges. Industry groups are currently challenging another C.F.T.C. rule, while others are weighing lawsuits against the so-called Volcker Rule, a still-uncompleted plan to stop banks from trading with their own money.

Companies have already seen some success. A federal appeals court last summer struck down the Securities and Exchange Commission's proxy access rule, a Dodd-Frank policy that would have empowered shareholders to oust company directors. The court, which also would hear an appeal to the position limits rule, is friendly turf for Wall Street, tossing out S.E.C. rules six times in seven years.

The Commodity Futures Trading Commission, fearful of legal challenges, delayed its position limits rule on multiple occasions. It also tamed parts of the plan to accommodate concerns from traders.

But the concessions failed to placate Wall Street. The two trade groups point to the fine print of Dodd-Frank, saying the law leaves it to regulators to enforce posi tion limits only “as appropriate.” The groups argue that the law, in essence, required regulators to determine whether limits are necessary and appropriate before creating them.

For its part, the C.F.T.C. argued that Congress gave it no choice but to impose position limits.

While Judge Robert L. Wilkins vacated the rule, it was unclear whether he agreed with Wall Street's position. In a ruling on Friday, the judge said that the central question in the case is whether Dodd-Frank “clearly and unambiguously” requires the agency to conclude the limits are necessary prior to imposing them. “The answer is yes.”

But the judge appeared to contradict himself elsewhere in the ruling. “Ultimately, however, this court need not choose between the competing interpretations,” he wrote, because the law “is ambiguous as to the precise question at issue.”

Public Citizen, a group that supports position limits, said on Friday that “The winners and l osers from this ruling are clear: Wall Street wins, consumers lose.”

Bart Chilton, a Democratic member of the agency who championed position limits, argued that the rule would protect consumers from speculative commodities trading. The trading, he and the rule's other supporters say, have sent energy costs and food prices soaring.

The rule would cap the number of derivatives contracts a trader can hold on 28 commodities, including energy products like oil for the first time. Until the agency adopted the plan, the limits covered only nine agricultural commodities, including corn and wheat.

“I will continue to push hard for a position limits rule, as mandated by Congress,” Mr. Chilton said in a statement on Friday. “This is clearly a setback but we can learn from it and continue this critical effort to help make our markets safe and fair.”

Tim Cook\'s Apology Is an Important Step Forward

September 28, 2012, 5:40 pm

On Friday morning, Apple's chief executive, Tim Cook, apologized for releasing the flawed Maps app on iOS 6. I don't mean a flimsy P.R.-speak apology - I mean a heartfelt one that seems fully cooked.

We strive to make world-class products that deliver the best experience possible to our customers. With the launch of our new Maps last week, we fell short on this commitment. We are extremely sorry for the frustration this has caused our customers.

Incredibly, he even recommended, as I did in my column Thursday, that while Apple gets down to the enormous task of fixing the bad data, we use map apps from Apple's competitors:

While we're improving Maps, you can try alternativ es by downloading map apps from the App Store like Bing, MapQuest and Waze, or use Google or Nokia maps by going to their Web sites and creating an icon on your home screen to their Web app.

There are even links to those free apps, and a Web page with instructions for installing Google's Maps Web site onto your phone's Home screen.

Now, Mr. Cook's note doesn't explain how such a flaky app was released in the first place; Apple surely knew that the data had problems. It doesn't really address the elephant in the room, whose name is “We Bit Off More Than We Could Chew.”

But whatever the story, the chief's note conveys a note of humility that has been missing so far. Without it, the Apple Maps fiasco felt even worse than it was.

Ex-SAC Analyst Pleads Guilty in Insider Trading Conspiracy

The billionaire investor Steven A. Cohen and his firm SAC Capital Advisors are again in the spotlight over insider trading crimes committed by onetime employees.

Jon Horvath, a former technology-industry analyst at SAC, pleaded guilty on Friday to insider trading a month before his scheduled trial. He is the fourth former SAC employee to admit to illegal trading while employed at the fund, which manages $14 billion. SAC has been a focus of federal authorities since the government began its crackdown on insider trading at hedge funds five years ago.

The admission by Mr. Horvath, who entered his guilty plea in Federal District Court in Manhattan, ratchets up pressure on the co-defendants in his case: Anthony Chiasson, who was a co-founder of Level Global Investors, and Todd Newman, a portfolio manager at Diamondback Capital Management.

Federal prosecutors say they were part of a seven-person conspiracy â€" a “circle of friends” â€" that earned about $62 million in illegal gains trading on secret tips from executives at publicly traded technology companies. Mr. Horvath, 42, is the fifth person to plead guilty and cooperate with the government. Several of the cooperators are expected to testify against Mr. Chiasson and Mr. Newman at their trial, which is set for Oct. 29.

Mr. Horvath's guilty plea also puts the focus on another SAC trader. Michael Steinberg, who supervised Mr. Horvath at SAC, emerged as an unindicted co-conspirator in the case last week.

During his court appearance on Friday, Mr. Horvath said that he obtained confidential information about the technology companies Dell and Nvidia and then “provided the information to the portfolio manager I worked for and we executed the trades based on that information.” That portfolio manager is Mr. Steinberg, according to two people with direct knowledge of the matter who requested anonymity because they were not authorized to discuss it publicly.

Mr. Steinberg, 40, is one of Mr. Cohen's longtime lieutenants, having worked at SAC since 1997. Barry H. Berke, a lawyer representing Mr. Steinberg, declined to comment.

“Until today, Mr. Horvath maintained he had not violated the law and we gave him the benefit of the presumption of innocence,” said Jonathan Gasthalter, an SAC spokesman. “We are disappointed and angered to learn Mr. Horvath admittedly violated the law and SAC's policies forbidding insider trading. We expect our employees to have integrity, play by the rules and follow the letter and spirit of the law.”

Steven R. Peikin, a lawyer for Mr. Horvath, declined to comment. John A. Nathanson, a lawyer for Mr. Newman, and Gregory Morvillo, a lawyer for Mr. Chiasson, also declined to comment.

Though he has not been charged in the case, Mr. Steinberg is now the fifth employee or former employee of SAC tied to insider trading while at the fund. Last year, two former SAC portfolio managers - Donal d Longueuil and Noah Freeman - admitted to trading on illegal tips about publicly traded technology companies. Mr. Longueuil is serving a 2 1/2-year jail term at a federal prison in Otisville, N.Y.; Mr. Freeman, who is cooperating with prosecutors, has yet to be sentenced.

Jonathan Hollander, a former SAC analyst, paid more than $220,000 to settle civil charges brought by the Securities and Exchange Commission accusing him of trading on confidential information about the takeover the Albertsons grocery-store chain.

A number of Mr. Horvath's co-conspirators also have deep SAC connections. Mr. Chiasson left SAC to co-found Level Global, which shut down last year. And Mr. Newman's fund, Diamondback, was started by SAC alumni, including Mr. Cohen's brother-in-law, Richard Shimel. Diamondback remains in business, and Mr. Shimel has not been charged.

Mr. Cohen and SAC have not been charged with wrongdoing. The Stamford, Conn.-based fund, with about 1,000 employee s, has a 20-year track record that is one of the best investment records in the hedge fund industry. The fund is up about 8 percent year-to-date.

SAC has an unconventional structure. Unlike other hedge fund managers that make all the investment decisions, Mr. Cohen manages less than 10 percent of the fund's money, distributing the rest to about 140 small teams. It is a high-pressure culture where Mr. Cohen will reward teams that perform well with increased allocations, while underperformers can get cut back or lose their jobs. The more money a team manages, the greater its potential earnings.

His success as a stock picker has made Mr. Cohen, 56, one of the richest people in the country, with a net worth of $8.8 billion, according to Forbes magazine. He has also minted a stable of multimillionaires; in profitable years, top traders at SAC have earned tens of millions of dollars.

Mr. Horvath, who now resides in San Francisco, faces a maximum sentence of 45 ye ars in prison, though he is expected to receive a far more lenient sentence. He is a citizen of Sweden, and could face deportation after serving time.

The charges against Mr. Horvath are part of a sweeping investigation into insider trading at hedge funds by federal authorities in Manhattan. The crackdown has resulted in criminal cases against 72 people. With Friday's guilty plea, 69 of those cases have resulted in convictions.

A Big Settlement, Flexible Ethics and Special Section on the Law

WEEK IN VERSE The Clash knew what happened when you fought big law.

Bank of America agreed to a $2.43 billion settlement. | A British trade group gave up its Libor power. | Andrew Ross Sorkin questioned the flexible ethics of bankers' new lobbyist. | A special section explored the intense competitive pressures confronting law firms.

A look back on our reporting of the past week's highs and lows in finance.

As Time Wanes, Glencore-Xstrata Deal Hinges on Leadership | The $90 billion merger is on shaky ground and William MacNamara reports that “negotiating time is growing short. After getting an extension on the initial deadline, Xstrata has until Monday to decide whether to accept Glencore's sweetened bid.” DealBook '

Standard Chartered's Next Worry Is a $1 Billion Loan in Indonesia |
The British bank may be at risk of losing money on a loan to a mining company to make an investment that has sinc e soured, Peter Eavis and Mark Scott reported. DealBook '

The exposure highlights Standard Chartered's reliance on often unstable emerging markets for the majority of its income. The bank, based in London, earned around 90 percent of its $2.86 billion net profit from developing countries like China and India in the first half of the year.

DealBook Column: About-Face for Bankers' New Lobbyist | Andrew Ross Sorkin said that calling the choice of Tim Pawlenty to represent the banking industry is odd would be an understatement, but his appointment is the clearest sign yet of the flexible ethic that makes the revolving door in Washington spin faster. DealBook '

“I went to Wall Street and told them to get their snout out of the trough because they are some of the worst offenders when it comes to bailouts and carve-outs and special deals.”

That was Tim Pawlenty, the former Republican governor of Minnesota, just over a year ago while running for president, railing against big banks.

This new lobbyist gives the banks Paw-lenty of opportunity to stall regulation nyti.ms/UD0Otocc: @andrewrsorkin

- Downtown Josh Brown (@ReformedBroker) September 25, 2012

Deal Professor: A Hedge Fund's Complex Scheme May Cost It Millions | Steven M. Davidoff says that Mason Capital, a New York and London hedge fund with about $8 billion in assets under management, has made a complex bet in Telus, a large Canadian telecommunications company, that looked shrewd at first, but that may now lose tens of millions of dollars. DealBook '

Lost in all of this maneuvering are the economic merits of Telus's share collapse and the fact that nonvoting shares do appear to be getting a significant benefit that may be inappropriate.

Santander's Mexican Unit Sells U.S. Shares at $12.18 in Dual Listing | The number was within Grupo Financiero Santander México's expected price range, Michael J. de la Merced reported. “The offering was largely seen as a way to tap into Mexico's growth prospects as investors hunt for ways to gain greater exposure to international markets.” DealBook '

Bank of America to Pay $2.43 Billion to Settle Suit Over Merrill Deal | In 2009, shareholders accused Bank of America of making false and misleading statements about the health of the two companies. In part, the plaintiffs accused Bank of America of hiding a major loss at Merrill Lynch just shortly before shareholders were set to vote on the deal. DealBook '

British Authorities Unveil Changes in Libor Oversight | The Financial Services Authority aims to improve the accuracy and reliability of the benchmark, Mark Scott reported. Regulators are stripping a British banking group of its power and making rate manipulation a criminal offense. DealBook '

Goldman to Settle Pay-to-Play Charges | The Wall Street bank struck a $12 million settlement with the Securities and Exchange Commission to resolve allegations that Neil M. M. Morrison, who was a vice president at the firm, curried favor with a public official to win lucrative government contracts in Massachusetts, Susanne Craig and Ben Protess reported. DealBook '

Geithner Calls for Action on Tougher Rules for Money Market Funds | In a letter to the Financial Stability Oversight Council, the Treasury secretary said the changes to money market funds, which manage $2.6 trillion, were “essential for financial stability,” Mr. Eavis reported. DealBook '

An Electric Carmaker Struggles as Its Production Lags | Tesla Motors is turning to investors and taxpayers for extra financial help. Mr. Eavis reported that the moves raised questions about the long-term viability of the company. DealBook '

Former Programmer Demands That Goldman Cover His Legal Fees | Sergey Aleynikov, charged a second time with stealing valuable computer code from the investment bank, wants his former employer to pay for the nearly $2.4 million in costs he has racked up defending himself, Mr. de la Merced and Peter Lattman reported. DealBook '

Ex-Regulator Has Harsh Words for Bankers and Geithner | Adding to a growing collection of financial crisis histories, Sheila Bair, former head of the Federal Deposit Insurance Corporation, takes aim at some regulatory colleagues, Mr. Protess and Mr. Eavis reported. DealBook '

Insider Trading Witness Given Probation for Testifying Against Hedge Fund Titan | Rajiv Goel was one of three crucial government witnesses against Raj Rajaratnam, Mr. Lattman reported. DealBook '

DealBook Column: Big Law Steps Into Uncertain Times Mr. Sorkin says that the importance of lawyers has never been greater, yet the legal industry has come under great pressure. One result may be a change in the business model. | DealBook '

With Smartphone Deals, Patents Become a New Asset Class | Amid rapid changes in technology, several boutique law firms have emerged that are like investment banks in valuing and selling patents as well as giving strategic advice, reports Steve Lohr. DealBook '

As Wall Street Fights Regulation, It Has Backup on the Bench | When Wall Street challenges the Dodd-Frank regulatory overhaul in court, it is finding that it has an ally in the United States Court for Appeals for the District of Columbia, reports Mr. Protess. DealBook '

Graphic: White-Collar World | A small group of “big trouble” lawyers repeatedly show up on the dockets of major corporate scandals across the decades, both as government prosecutors and as defense counsel, reports Mr. Lattman. DealBook '

Wall Street Scandals Fill Lawyers' Pockets | The white-collar bar is thriving with cases like the collapse of MF Global and the manipulation of the London interbank offered rate, reports Azam Ahmed. DealBook '

Evolving Global Strategy Gives Law Firm an Edge | By focusing on global deal-making, Freshfields Bruckhaus Deringer, based in London, says it has been able to better compete with the major American firms, reports Mr. Scott. DealBook '

Graphic: Mergers and Acquisitions, Top Financial and Legal Advisers | In the third quarter of 2012, mergers and acquisition activity was $455 billion worldwide. The U.S. share was $195 billion. Goldman Sachs and Freshfields Bruckhaus Deringer were the top financial and legal advisers. DealBook '

Essay: A Law Firm Where Money Seemed Secondary | James B. Stewart says that at Cravath, Swaine & Moore, associates were paid based on seniority, with no bonuses and no resentments. DealBook '

Deal Professor: The Economics of Law School | Mr. Davidoff says that the trend away from law schools has prompted much discussion about what structural changes may be needed. DealBook '

Culture Keeps Firms Together in Trying Times | Faced with risk-taking peers and an uncertain economy, a handful of prestigious law firms like Cravath, Swaine & Moore stick with partnership-driven philosophies that emphasize teamwork, reports Mr. Lattman. DealBook '

White Collar Watch: Under Investigation, and Doing the Investigation | Peter J. Henning says that in dealing with corporate misconduct, the government may be leaning too much on the law firms hired by the companies under investigation. DealBook '

A Big Settlement, Flexible Ethics and Special Section on the Law

WEEK IN VERSE The Clash knew what happened when you fought big law.

Bank of America agreed to a $2.43 billion settlement. | A British trade group gave up its Libor power. | Andrew Ross Sorkin questioned the flexible ethics of bankers' new lobbyist. | A special section explored the intense competitive pressures confronting law firms.

A look back on our reporting of the past week's highs and lows in finance.

As Time Wanes, Glencore-Xstrata Deal Hinges on Leadership | The $90 billion merger is on shaky ground and William MacNamara reports that “negotiating time is growing short. After getting an extension on the initial deadline, Xstrata has until Monday to decide whether to accept Glencore's sweetened bid.” DealBook '

Standard Chartered's Next Worry Is a $1 Billion Loan in Indonesia |
The British bank may be at risk of losing money on a loan to a mining company to make an investment that has sinc e soured, Peter Eavis and Mark Scott reported. DealBook '

The exposure highlights Standard Chartered's reliance on often unstable emerging markets for the majority of its income. The bank, based in London, earned around 90 percent of its $2.86 billion net profit from developing countries like China and India in the first half of the year.

DealBook Column: About-Face for Bankers' New Lobbyist | Andrew Ross Sorkin said that calling the choice of Tim Pawlenty to represent the banking industry is odd would be an understatement, but his appointment is the clearest sign yet of the flexible ethic that makes the revolving door in Washington spin faster. DealBook '

“I went to Wall Street and told them to get their snout out of the trough because they are some of the worst offenders when it comes to bailouts and carve-outs and special deals.”

That was Tim Pawlenty, the former Republican governor of Minnesota, just over a year ago while running for president, railing against big banks.

This new lobbyist gives the banks Paw-lenty of opportunity to stall regulation nyti.ms/UD0Otocc: @andrewrsorkin

- Downtown Josh Brown (@ReformedBroker) September 25, 2012

Deal Professor: A Hedge Fund's Complex Scheme May Cost It Millions | Steven M. Davidoff says that Mason Capital, a New York and London hedge fund with about $8 billion in assets under management, has made a complex bet in Telus, a large Canadian telecommunications company, that looked shrewd at first, but that may now lose tens of millions of dollars. DealBook '

Lost in all of this maneuvering are the economic merits of Telus's share collapse and the fact that nonvoting shares do appear to be getting a significant benefit that may be inappropriate.

Santander's Mexican Unit Sells U.S. Shares at $12.18 in Dual Listing | The number was within Grupo Financiero Santander México's expected price range, Michael J. de la Merced reported. “The offering was largely seen as a way to tap into Mexico's growth prospects as investors hunt for ways to gain greater exposure to international markets.” DealBook '

Bank of America to Pay $2.43 Billion to Settle Suit Over Merrill Deal | In 2009, shareholders accused Bank of America of making false and misleading statements about the health of the two companies. In part, the plaintiffs accused Bank of America of hiding a major loss at Merrill Lynch just shortly before shareholders were set to vote on the deal. DealBook '

British Authorities Unveil Changes in Libor Oversight | The Financial Services Authority aims to improve the accuracy and reliability of the benchmark, Mark Scott reported. Regulators are stripping a British banking group of its power and making rate manipulation a criminal offense. DealBook '

Goldman to Settle Pay-to-Play Charges | The Wall Street bank struck a $12 million settlement with the Securities and Exchange Commission to resolve allegations that Neil M. M. Morrison, who was a vice president at the firm, curried favor with a public official to win lucrative government contracts in Massachusetts, Susanne Craig and Ben Protess reported. DealBook '

Geithner Calls for Action on Tougher Rules for Money Market Funds | In a letter to the Financial Stability Oversight Council, the Treasury secretary said the changes to money market funds, which manage $2.6 trillion, were “essential for financial stability,” Mr. Eavis reported. DealBook '

An Electric Carmaker Struggles as Its Production Lags | Tesla Motors is turning to investors and taxpayers for extra financial help. Mr. Eavis reported that the moves raised questions about the long-term viability of the company. DealBook '

Former Programmer Demands That Goldman Cover His Legal Fees | Sergey Aleynikov, charged a second time with stealing valuable computer code from the investment bank, wants his former employer to pay for the nearly $2.4 million in costs he has racked up defending himself, Mr. de la Merced and Peter Lattman reported. DealBook '

Ex-Regulator Has Harsh Words for Bankers and Geithner | Adding to a growing collection of financial crisis histories, Sheila Bair, former head of the Federal Deposit Insurance Corporation, takes aim at some regulatory colleagues, Mr. Protess and Mr. Eavis reported. DealBook '

Insider Trading Witness Given Probation for Testifying Against Hedge Fund Titan | Rajiv Goel was one of three crucial government witnesses against Raj Rajaratnam, Mr. Lattman reported. DealBook '

DealBook Column: Big Law Steps Into Uncertain Times Mr. Sorkin says that the importance of lawyers has never been greater, yet the legal industry has come under great pressure. One result may be a change in the business model. | DealBook '

With Smartphone Deals, Patents Become a New Asset Class | Amid rapid changes in technology, several boutique law firms have emerged that are like investment banks in valuing and selling patents as well as giving strategic advice, reports Steve Lohr. DealBook '

As Wall Street Fights Regulation, It Has Backup on the Bench | When Wall Street challenges the Dodd-Frank regulatory overhaul in court, it is finding that it has an ally in the United States Court for Appeals for the District of Columbia, reports Mr. Protess. DealBook '

Graphic: White-Collar World | A small group of “big trouble” lawyers repeatedly show up on the dockets of major corporate scandals across the decades, both as government prosecutors and as defense counsel, reports Mr. Lattman. DealBook '

Wall Street Scandals Fill Lawyers' Pockets | The white-collar bar is thriving with cases like the collapse of MF Global and the manipulation of the London interbank offered rate, reports Azam Ahmed. DealBook '

Evolving Global Strategy Gives Law Firm an Edge | By focusing on global deal-making, Freshfields Bruckhaus Deringer, based in London, says it has been able to better compete with the major American firms, reports Mr. Scott. DealBook '

Graphic: Mergers and Acquisitions, Top Financial and Legal Advisers | In the third quarter of 2012, mergers and acquisition activity was $455 billion worldwide. The U.S. share was $195 billion. Goldman Sachs and Freshfields Bruckhaus Deringer were the top financial and legal advisers. DealBook '

Essay: A Law Firm Where Money Seemed Secondary | James B. Stewart says that at Cravath, Swaine & Moore, associates were paid based on seniority, with no bonuses and no resentments. DealBook '

Deal Professor: The Economics of Law School | Mr. Davidoff says that the trend away from law schools has prompted much discussion about what structural changes may be needed. DealBook '

Culture Keeps Firms Together in Trying Times | Faced with risk-taking peers and an uncertain economy, a handful of prestigious law firms like Cravath, Swaine & Moore stick with partnership-driven philosophies that emphasize teamwork, reports Mr. Lattman. DealBook '

White Collar Watch: Under Investigation, and Doing the Investigation | Peter J. Henning says that in dealing with corporate misconduct, the government may be leaning too much on the law firms hired by the companies under investigation. DealBook '

The Cost of Putting the Merrill Lynch Merger Behind It

Bank of America has resolved one of the largest and most embarrassing pieces of litigation related to its merger with Merrill Lynch in 2008. But the settlement comes with a pretty hefty price tag, since the bank has agreed to pay $2.43 billion to end the lawsuit. That monetary award ranks it as one of the largest settlements in a securities class-action case, behind the settlement over the disastrous AOL-Time Warner merger.

The acquisition of Merrill caused Bank of America plenty of headaches by adding toxic mortgage assets to its balance sheet on top of what the bank took on when it bought Countrywide Financial. The bank has also been fighting with Fannie Mae and Freddie Mac over whether it will have to take back bad mortgages packaged into mortgage-backed securities.

The lawsuit that was settled on Friday accused Bank of America of misleading its shareholders in soliciting their votes for the merger by not disclosing the deterioration in Merrill's financial position. It also faults the bank for approving $5.8 million in bonuses to its executives despite the problems.

The net result was that Bank of America's shareholders approved the acquisition of Merrill at a higher price than should have been paid. And because damages are calculated in a securities fraud claim based on this measure, the claims had the potential to reach $50 billion - the difference between what Bank of America paid for Merrill and what it was worth at the time of the acquisition.

The $2.43 billion payment comes on top of the $20 million settlement resolving a shareholder derivative action in May, and the $150 million penalty imposed in 2010 in a case filed by the Securities and Exchange Commission over the proxy disclosure.
The S.E.C. settlement originally called for the bank to pay only $33 million, but United States District Court Judge Jed S. Rakoff rejected it because it would have been unfair for shareholders to foot the bill when th ey were on the receiving end of the faulty disclosures in the proxy solicitation.

Bank of America disclosed that the payment for the latest settlement would come from its litigation reserves, including an additional $1.6 billion it is adding this quarter to cover the costs of its litigation. That is a pretty significant hit to its bottom line.

But like all such settlements, it does not come with any admission of liability, and the bank asserted in a statement that it was done “to eliminate the uncertainties, burden and expense of further protracted litigation.” Ultimately, as much as the payment hurts, Bank of America is probably quite happy with the settlement given that it could have potentially faced billions of dollars more in liability in the case.

Investors, however, won't be the ones to get rich from this payment. Bank of America will be using its own money to pay those who were shareholders at the time of the Merrill merger. In other words, as Judge Rakoff complained about the S.E.C. settlement, the current shareholders will be paying previous ones.

Moreover, up to a third of the settlement amount could go to the plaintiffs' lawyers. The people who led Bank of America at the time - including the former chief executive Kenneth D. Lewis - will not pay a dime because the company is required to pick up their legal expenses as part of their executive contracts.

Also as part of the latest settlement, the bank agreed to continue until 2015 a number of corporate governance measures that it first put in place as part of its agreement with the S.E.C. in 2010. The cost of these measures will be minimal and not require the commitment any significant resources.

That leaves one last piece of litigation outstanding from the Merrill acquisition: a lawsuit by then New York Attorney General Andrew M. Cuomo for a violation of the Martin Act, the state's broad securities fraud law. Filed on the same day that the S.E.C. settled its case, it accuses the bank, Mr. Lewis, and the former chief financial officer Joseph L. Price of misleading shareholders about Merrill's financial condition.

If the New York case goes to trial, it will dredge up a host of issues about what the executives knew about the extent of the problems at Merrill. To defend themselves, Mr. Lewis and Bank of America could try to offer evidence about the role of the federal government in pushing him to complete the deal during the throes of the financial crisis.

Having paid out a total of $2.6 billion so far to settle lawsuits over the Merrill acquisition, Bank of America no doubt wants to put this issue as far behind it as possible. Whether it can reach an agreement with New York Attorney General Eric Schneiderman, who is now in charge of the case, remains to be seen. So far, the state has not shown any interest in backing away from its accusations .
In the meantime, the real losers are Bank of America shareholders who have been asked to pay much more for Merrill than seems justified.

Peter J. Henning, who writes White Collar Watch for DealBook, is a professor at Wayne State University Law School.

Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

A New and Improved Libor, Maybe

A New and Improved Libor, Maybe  |  British regulators finally have a plan for fixing Libor, but it remains to be seen whether it will work.

On Friday, Martin Wheatley, a top regulator in Britain, laid out a proposal for revamping the crucial interest rate at the center of a manipulation scandal. Not too many surprises. The British government plans to be more involved and make rate-rigging a criminal offense. Regulators may also cut the number of rates to 20 from 150, in an effort to make it more accurate.

Mr. Wheatley said in a statement: “Although the current system is broken, it is not beyond repair, and it is up to regulators and market participants to work together towards a lasting and sustainable solution.”

But is the benchmark too broken to fix? The New York Times's Floyd Norris says the plan sounds overly optimistic: “Libor is, and is likely to remain, a fiction.”

The editors of Bloomberg View, who call the proposals “respectable,” lament that “Wheatley stopped short of one measure that would have greatly improved transparency: requiring banks to report actual borrowing transactions, against which the public could check the veracity of the estimates that banks submit.”

That could be tough with Libor. A Wall Street Journal analysis found that “18 banks on the main U.S.-dollar Libor panel left their daily estimated rates unchanged on average 87% of the time.”

Even Mr. Wheatley admitted on Friday that there could still be problems. “There's always a possibility for collusion,” he told an audience at Mansion House. “But under the new regulatory structure, people would be taking a high risk.”

Greece Hunts for Cash  |  The Greek government is on an overseas tr easure hunt. The country's officials are poring over a secret list of about 400 Greeks who have done real estate deals in London since 2009 to determine whether the businessmen, bankers, shipping tycoons and others have dodged taxes by understating their wealth. Landon Thomas Jr. of The New York Times writes: “There is an air of desperation to this Athens fund-raising drive, which includes leasing out empty Greek islands and even putting up for sale the former residence of the Greek consul general in the tony London neighborhood of Holland Park.”

But such strategies won't fill the coffers. Against the backdrop of violent protests in Athens, the government hammered out a proposal on Thursday to offer to foreign lenders on Monday. The plan includes $15 billion in cuts and at least $2.6 billion in new taxes, The New York Times reports. There's more austerity for Spain, too. A new budget proposal calls for the government to cut spending by almost 9 percent.

Heineken Nabs Tiger  |  The Dutch brewer Heineken finally claimed victory in its effort to buy Asia Pacific Breweries for $4.6 billion, following a two-month battle with a Thai billionaire. Shareholders of Fraser & Neave, the Singaporean conglomerate that owns Asia Pacific Breweries, voted Friday to approve the sale.

Geithner Pushes for New Rules on Money Funds  |  Treasury Secretary Timothy F. Geithner called for the Financial Stability Oversight Council to push ahead on new rules for the $2.6 trillion market, calling them “essential for financial stability,” reports DealBook's Peter Eavis. Mr. Geithner is also drawing up his own recommendations, including a proposal to have money market funds hold capital for potential losses. “You can be sure that the firms on the receiving end won't take this pa ssively,” said Jay G. Baris, a lawyer at Morrison & Foerster, which represents money market funds.

On the Agenda  |  The chief executive of Research in Motion, Thorsten Heins, is appearing on CNBC at 8 a.m., after the company reported a quarterly loss that was smaller than expected. Investors, who are starved for any shred of good news, sent the stock price higher in trading after hours, but analysts said the future remains grim for the BlackBerry maker. The prime minister of Qatar, Sheikh Hamad bin Jassim bin Jaber al-Thani, is on CNBC at 3:40. Qatar's sovereign wealth fund has been a vocal player in the wrangling over Glencore's takeover of Xstrata, which faces a Monday deadline to decide on a sweetened offer.

Walgreen's quarterly earnings are due at 7:30 a.m. The pharmacy chain's fight with Express Scripts is expected to weigh on the results.

Soros Backs Pro-Obama Super PAC  |  George Soros is departing from an earlier strategy by commiting $1 million to Priorities USA Action, the super PAC supporting President Obama, two people with knowledge of the matter told The New York Times's Nicholas Confessore. The billionaire's donations had previously been focused more on research and grass-roots organizing. But Mr. Soros now seems to have gotten over his aversion to the powerful groups focused on advertising, with an additional donation of $500,000 to two super PACs backing Congressional Democrats, Mr. Confessore says.

Gundlach Gets His Art Back  |  “It's a great day for the art world,” said the bond investor Jeffrey Gundlach, after the police, acting on a tip, recovered the art collection that was stolen from his Santa Monica home. All but one of th e stolen paintings were found in an automobile stereo shop, and the final piece was recovered from someone's home, according to The Los Angeles Times. Mr. Gundlach's Porsche, though, is still missing.

Ex-Goldman Partner Finds New Digs

Can you imagine if Charles Gwathmey had been able to get his hands on this room?

Earlier this year, former Goldman Sachs partner Jonathan Sobel reluctantly agreed to sell his stunning Charles Gwathmey penthouse at the Verona for $21 million. And no wonder! It appears that Mr. Sobel and his wife Marcia Dunn had their eye on a 15-room duplex at that most glorious of all the glorious Upper East Side buildings: 740 Park Avenue.

Mr.  Sobel and Ms. Dunn have filed documents with the city indicating that they are purchasing the shares for the sprawling four-bedroom C-line spread that spans the fourth and fifth floors. The apartment was most recently listed for $23 million with Sotheby's brokers Meredyth Smith and Serena Boardman.

It's a duplex!

Slideshow: Inside the Sobel spread >>

Well, they did need someplace to live after Sotheby's broker Roger Erikson slipped a note under their Verona door persuading them to sell.

“Gwathmey was a genius, and if you had asked me six months ago if I was going to sell my apartment, I would have said, ‘No way,' ” Mr. Sobel told The New York Times about his decision to sell his beloved penthouse. “The renovations he did were breathtaking.”

Trading in a masterpiece of modern architecture for the decidedly old world flavor of 740 Park (their new living room is described in the listing as “baronial”) is certainly an interesting choice. Perhaps a financial heavyweight like Mr. Sobel wanted to be in like company, and he will no doubt fit right in at 740 Park.

Even if he does have the misfortune of being one of the 130 executives named in a mortgage crisis suit filed by the Federal Housing Finance Administration (Mr. Sobel headed the mortgage unit until he retired in 2006 to work as a private investor), we're sure he and Howard Marks will soon be exchanging pleasantries about markets as they pass each other in the lobby. The now notorious Ezra Merkin is also a neighbor, and fallen man John Thain, as well as reigning titans Steve Schwartzman, David Koch and Charles Stevenson.

What's more, even without the sale of his Gwathmey penthouse, Mr. Sobel has more than enough cash to burn, being among the 221 executives who became filthy rich when the firm went public in 1999. Neither Mr. Sobel nor any of the brokers could be reached for comment.

The four-bedroom apartment is being sold by the estate of Randolph and June Speight-the feared and ferociously respected late co-op board president and his wife, who owned an apartment that was unabashedly upper crust: marble entrance gallery, walnut paneling in the library, fireplaces topped by massive gilded mirrors. For those inclined to swoon over oil paintings and chandeliers and all the accoutrements of blue blooded old New York splendor, have a look, will you?

It's been a busy summer for the Sobels. Not only did they sell their Verona penthouse, but they also purchased a historic museum building in Southhampton from the Parish Art Museum, to mild outcry-other well-to-do locals complained it was too cheap. This time, it is hard to say. These days, $23 million feels like not much, especially for (what was) such a notable building.

Shouldn't Mr. Sobel be joining the rest of the Goldman gang in 15 Central Park West, or even showing them all up and buying into One57? Some buildings, 740 Park chief among them, will never lose their allure, no matter what gets built in this town.

kvelsey@observer.com

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See also
Goldman Shrinks an Adage; Long-Term Greedy Can't Wait Ex-Goldman Trader Stung in Arms Plot, Shocks Colleagues Goldman Goldmine Goldman Rising A Tribeca Break-Up: Goldman, Sachs and Hot-Shot Developer topics: Jonathan Sobel, June Speight, Manhattan Transfers, Marcia Dunn, Meredyth Smith, Randolph Speight, Serena Boardman

T-Mobile Sells Rights to Towers for $2.4 Billion

Crown Castle, a major wireless tower operator, has agreed to pay T-Mobile $2.4 billion in cash for rights to 7,200 cell phone towers.

Under the transaction, Crown Castle will lease the towers for 28 years, after which time it will have the option to purchase the assets from T-Mobile.

The deal comes as T-Mobile, a unit of Deutsche Telekom, tries to find its way, in the aftermath of AT&T‘s failed $39 billion bid for the American subsidiary, which crumbled last year amid regulatory opposition. Since the deal collapsed, Deutsche Telekom's management team has reiterated the need for new investment and increased network capacity. On Friday, the company said it would use the proceeds to pay down debt and improve its network service.

“We are pleased to reach this mutually beneficial agreement with Crown Castle,” John Legere, the head of T-Mobile USA, said in a statement on Friday. “T-Mobile USA is working aggressively to make our 4G network stronger, fast er and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort.”The deal is expected to close in the fourth quarter of this year.

For Crown Castle, the deal will allow the company to significantly expand its network of towers in the top markets of United States and improve service in densely populated cities. The transaction, which will increase its tower count by a third, will be funded by a mix of cash and debt. It is expected to close in the fourth quarter of this year.

Bank of America to Pay $2.43 Billion to Settle Class Action Over Merrill Deal

Bank of America announced on Friday that it would pay $2.43 billion to settle a class-action lawsuit related to its acquisition of Merrill Lynch.

In 2009, shareholders accused Bank of America of making false and misleading statements about the health of the two companies. In part, the plaintiffs accused Bank of America of hiding a major loss at Merrill Lynch, a disclosure that may have influenced the shareholders' vote on the deal.

While Bank of America denied the allegation, the institution said it decided to settle to put the litigation to rest. As part of the proposed settlement, Bank of America also agreed to institute new corporate governance policies.

“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” said Brian Moynihan chief executive said in a statement. “As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”

British Regulators Unveil Overhaul to Libor

LONDON â€" A leading British regulator officially unveiled the government's plan to overhaul the rate at the center of the manipulation scandal, but conceded that problems could still persist.

On Friday, Martin Wheatley, the managing director of the Britain's Financial Services Authority, the British regulator, acknowledged that regulators should have stepped in sooner to fix the problems with the London interbank offered rate, or Libor. He also confirmed the broad strokes of the proposal, which came after a three-month review.

British authorities, which will provide more oversight, want to make it a criminal offense to alter the rate for financial gain. They also plan to implement new auditing systems to ensure traders cannot unfairly profit from small changes to Libor.

“There's always a possibility for collusion,” Mr. Wheatley told an audience at Mansion House, the 260-year-old home to the Lord Mayor of London that is adorned with gilded statues and chandeliers. “But under the new regulatory structure, people would be taking a high risk.”

The proposed changes come amid an ongoing investigation into potential rate-rigging at big global banks like HSBC, UBS and JPMorgan Chase. In June, the British bank Barclays agreed to pay $450 million to settle allegations that some of its traders attempted to manipulate Libor for financial gain. The firm was also accused of lowballing its rates submissions to make the bank appear healthier during the financial crisis.

Mr. Wheatley, who will lead the Financial Conduct Authority, a new British regulator that will become part of the Bank of England next year, said London's reputation as a global center for financial services had been tarnished by the recent scandal.

In response, the country's authorities have stripped the British Bankers' Association, the London-based trade body that currently oversees Libor, from its powers to control the rate. A new administrator will be appointed over the next 12 months.

Organizations will be able to start pitching for the position next week. The data providers Bloomberg and Thomson Reuters, which currently collects the daily Libor submissions on behalf of the British Bankers' Association, as well as NYSE Euronext have expressed interest in taking on the role. Users of Libor will still pay for the financial information, Mr. Wheatley said on Friday.

Regulators are aiming to improve the accuracy and reliability of Libor, which measures the rate at which banks lend to each other. To do so, they want banks to base the rate submission on actual market transactions whenever possible.

As part of that effort, authorities are planning to focus on fewer markets that are the most liquid. Five of the current 10 currencies, including the Swedish krona and Canadian dollar, will be removed over the next 12 months. The number of rates also will be reduced to 20, from 150.

British regulators will take a more hands-on approach with the rate. They plan to audit banks' daily Libor submissions to avoid rate manipulation.

Even so, Libor will not be immune to manipulation. Due to limited interbank lending activity, Mr. Wheatley said sometimes the rates would have to be based on a level of judgment from banks on what interest rates they would be able to secure from other firms.

“There's still a risk,” he said.

The Trouble With Fixing Libor

Peter W. Stevenson for The New York Times

Gary Gensler told the European Parliament this week that Libor deception had not stopped.

Sometimes modern finance has a great need for something, and so bankers invent products that appear to fill that need. When it turns out that the invention was actually something else entirely, people are shocked.

So it was a few years ago with senior tranches of asset-backed securities. Investors perceived a need for risk-free assets with floating rates, and Wall Street banks served up trillions of dollars worth of such paper - or at least they said they did.

So it is now with - the London interbank offered rate - which not coincidentally was an important component of that other folly. That there was fraud based on made-up numbers is clear. That the system can be fixed is not.

But Martin Wheatley, Britain's top financial regulator, has concluded Libor can be saved. “Although the current system is broken, it is not beyond repair,” he said in remarks prepared for delivery on Friday.

He may turn out to be overly optimistic. Libor is, and is likely to remain, a fiction. You can maintain the fiction, or you can embrace a much less palatable reality.

The Libor fiction began in the 1980s, when finance felt a need for a private sector, virtually risk-free interest rate to serve as a benchmark. Banks had learned that there was a big risk to making a long-term fixed-rate loan - the risk that market interest rates would rise and leave them with loans that were paying less than it was costing the bank to pay for the loan. Short-term loans could solve that problem, but at the risk that the borrower might be forced to repay at any time a loan that was taken out for a long-term project.

Enter Libor. A loan could be long term, but with a rate that periodically reset based on the cost of funds to banks. If a loan were priced at, say, three percentage points above the three-month Libor, the bank would be getting a reasonable risk premium, and would face no risk from changing market rates, since the interest rate would be reset every three months. The borrower would get long-term money.

There were two implicit assumptions in Libor. One was that banks were virtually risk-free, or at least that their risk was small and would not vary much over time. The other was that there was a way to actually calculate what the rate was. Both assumptions turned out to be wrong.

Libor rates are calculated each day by the British Bankers' Association, a trade group that makes good money from licensing the use of Libor rates. Each day panels of banks tell the association the rate they will have to pay for unsecured loans at maturities ranging from overnight to 12 months. They do that for each of 10 currencies, including the United States dollar, the euro, the Swedish krona and the New Zealand dollar.

The scandal made clear that those reports were faked before and during the financial crisis by at least some of the banks. But what is not as widely appreciated is that there is substantial evidence that the deception goes on. Banks continue to report figures that strain credulity, both in their level and in their lack of volatility from day to day or week to week. The scandal might never have surfaced, or might have done so in a sanitized fashion, had bank regulators had their way. But the banks had the bad fortune that the investigation of it was spearheaded by the United States Commodity Futures Trading Commission, a market regulator that under Gary S. Gensler, the chairman appointed by President Obama, has changed from lap dog to bulldog. It had no institutional need to protect the banks, and it did not.

This week Mr. Gensler, testifying before a European Parliament committee, laid out the evidence that the deception continues, although he was nice enough not to put it in such stark terms. He noted the wide swings in the cost of on debts issued by major banks, while those same banks were reporting that their costs of unsecured borrowing were varying hardly at all.

“It is critical that markets be able to rely on something that is credible and honest. The data in the market now strains that credibility,” Mr. Gensler said in an interview before Mr. Wheatley's conclusions were announced. “History shows that something that is prone to abuse will be abused, and that even people of good faith can have a difficult time estimating when there are no observable transactions.”

The Trouble With Fixing Libor

Peter W. Stevenson for The New York Times

Gary Gensler told the European Parliament this week that Libor deception had not stopped.

Sometimes modern finance has a great need for something, and so bankers invent products that appear to fill that need. When it turns out that the invention was actually something else entirely, people are shocked.

So it was a few years ago with senior tranches of asset-backed securities. Investors perceived a need for risk-free assets with floating rates, and Wall Street banks served up trillions of dollars worth of such paper - or at least they said they did.

So it is now with - the London interbank offered rate - which not coincidentally was an important component of that other folly. That there was fraud based on made-up numbers is clear. That the system can be fixed is not.

But Martin Wheatley, Britain's top financial regulator, has concluded Libor can be saved. “Although the current system is broken, it is not beyond repair,” he said in remarks prepared for delivery on Friday.

He may turn out to be overly optimistic. Libor is, and is likely to remain, a fiction. You can maintain the fiction, or you can embrace a much less palatable reality.

The Libor fiction began in the 1980s, when finance felt a need for a private sector, virtually risk-free interest rate to serve as a benchmark. Banks had learned that there was a big risk to making a long-term fixed-rate loan - the risk that market interest rates would rise and leave them with loans that were paying less than it was costing the bank to pay for the loan. Short-term loans could solve that problem, but at the risk that the borrower might be forced to repay at any time a loan that was taken out for a long-term project.

Enter Libor. A loan could be long term, but with a rate that periodically reset based on the cost of funds to banks. If a loan were priced at, say, three percentage points above the three-month Libor, the bank would be getting a reasonable risk premium, and would face no risk from changing market rates, since the interest rate would be reset every three months. The borrower would get long-term money.

There were two implicit assumptions in Libor. One was that banks were virtually risk-free, or at least that their risk was small and would not vary much over time. The other was that there was a way to actually calculate what the rate was. Both assumptions turned out to be wrong.

Libor rates are calculated each day by the British Bankers' Association, a trade group that makes good money from licensing the use of Libor rates. Each day panels of banks tell the association the rate they will have to pay for unsecured loans at maturities ranging from overnight to 12 months. They do that for each of 10 currencies, including the United States dollar, the euro, the Swedish krona and the New Zealand dollar.

The scandal made clear that those reports were faked before and during the financial crisis by at least some of the banks. But what is not as widely appreciated is that there is substantial evidence that the deception goes on. Banks continue to report figures that strain credulity, both in their level and in their lack of volatility from day to day or week to week. The scandal might never have surfaced, or might have done so in a sanitized fashion, had bank regulators had their way. But the banks had the bad fortune that the investigation of it was spearheaded by the United States Commodity Futures Trading Commission, a market regulator that under Gary S. Gensler, the chairman appointed by President Obama, has changed from lap dog to bulldog. It had no institutional need to protect the banks, and it did not.

This week Mr. Gensler, testifying before a European Parliament committee, laid out the evidence that the deception continues, although he was nice enough not to put it in such stark terms. He noted the wide swings in the cost of on debts issued by major banks, while those same banks were reporting that their costs of unsecured borrowing were varying hardly at all.

“It is critical that markets be able to rely on something that is credible and honest. The data in the market now strains that credibility,” Mr. Gensler said in an interview before Mr. Wheatley's conclusions were announced. “History shows that something that is prone to abuse will be abused, and that even people of good faith can have a difficult time estimating when there are no observable transactions.”

Sony Agrees to Acquire Stake in Olympus

TOKYOâ€"Sony is set to become the biggest shareholder in Olympus with a Â¥50 billion, or $645 million, investment in the scandal-tainted endoscope and digital camera maker, the two companies announced Friday.

The deal could give struggling Sony a jump-start in the lucrative medical equipment business, while helping to bolster Olympus's balance sheet following its $1.5 billion accounting scandal.

Sony and Olympus will form a joint venture to develop and manufacture endoscopes and other medical devices, the companies said in a statement. Olympus controls about 70 percent of the world's market for medical endoscopes.

The two companies will also consider cooperating in digital cameras, they said.

Sony, struggling after four years of losses due to its slumping TV business, has been looking for new sources of revenue. It entered the medical device field last year by acquiring the U.S. medical diagnostics firm, Micronics, for an undisclosed sum. Sony President Kazuo Hirai has said medical businesses could one day be a major profit driver.

Meanwhile, Olympus, which admitted last year to hiding losses for over a decade, is desperate to shore up its capital.

It replaced its entire board, restated five years of earnings and took a $1.3 billion write-down after acknowledging that it obscured what it said were past investment losses in inflated mergers and acquisition payments.

The deal announced Friday calls for Sony to take a 11.5 percent stake in Olympus by buying new Olympus shares for 1,454 yen a share - a 4 percent discount to Friday's closing price.

The two companies will set up a joint company by the end of the year, of which Sony will hold 51 percent and Olympus will hold 49 percent, the companies said. Sony will also select a director to serve on Olympus's board.

In statements, Hiroyuki Sasa, the Olympus president, and Sony's Mr.
Hirai both stressed that the deal would bring to gether Sony's technological edge in digital imaging with Olympus's already-dominant position in the medical field.

‘‘By accepting an investment from Sony, we will not only strengthen our financial base, but also combine our strengths and develop the kind of medical devices that we may not have been able to develop on our own,‘‘ Mr. Sasa said.

Sony will position the medical field ‘‘as one of Sony's future core businesses,'' Mr. Hirai said.

Olympus shares gained 1.7 percent to 1,520 yen in Tokyo Friday, after the Nikkei business daily carried a report on the deal in its morning edition. Shares in the company, which lost nine-tenths of their value after the scandal erupted last October, have recovered to almost half their pre-scandal levels.

Shares in Sony fell 1.1 percent to 919 yen. Its shares have already slumped 34 percent this year.

On Tuesday, Standard & Poor's cut Sony's long-term debt rating a notch to BBB, the second-lowest investment grade, and warned of further downgrades unless Sony turns its business around.

Medtronic To Buy Chinese Medical Supplier

Medtronic, a medical technology company based in Minneapolis and listed in New York, said on Thursday it will pay $816 million in cash to acquire China Kanghui, a manufacturer of orthopedic devices based in the eastern Chinese city of Changzhou and also listed in New York.

“China is one of the fastest growing medical device markets with significant scale opportunities,” Medtronic executive vice president Chris O'Connell said in a news release. “Kanghui brings Medtronic a broad product portfolio, a strong local R&D and manufacturing operation, a vast China distribution network and an exceptional management team.”

The deal will give Medtronic a strong presence in China's growing market for medical devices and products used in orthopedic surgery. Revenue from emerging markets including developing countries in Asia, Europe, Latin America and the Middle East accounted for $438 million of Medtronic's total sales of $4 billion during the fiscal quarter ended J uly 27.

Medtronic said the acquisition of Kanghui would not impact its earnings during the 2013-2014 financial years. Profit at Kanghui rose 25 percent to 35 million renminbi, or $5.6 million, in the April to June quarter.

Heineken Wins Asian Brewer for $4.6 Billion

HONG KONGâ€"The Dutch brewer Heineken finally succeeded Friday in its $4.6 billion bid to acquire Asia Pacific Breweries, the Singapore-listed maker of Tiger beer, following a two-month battle with a Thai billionaire.

Shareholders of Fraser & Neave, the Singaporean conglomerate that owns Asia Pacific Breweries, voted Friday to approve the sale of the brewing unit to Heineken for a sweetened price of 53 Singapore dollars, or $43.24, for each share of Asia Pacific Breweries the Dutch company did not already own. The total to be paid by Heineken is 5.6 billion Singapore dollars, or $4.6 billion, and the deal values Asia Pacific Breweries at around $11 billion.

Winning control of Asia Pacific Breweries will boost Heineken's presence in key growth markets in developing Asia. The Singapore-listed brewer operates 30 breweries across Asia, including in far-flung counties like Mongolia, Papua New Guinea and the Solomon Islands. Its brand portfolio includes Tiger beer a nd Bintang lager, which enjoy their strongest positioning in lucrative Southeast Asian markets.

Approval from shareholders of Fraser & Neave, which has businesses ranging from real estate to food and beverage, was seen as all but certain after Heineken last week struck an agreement securing backing for the sale of the brewing unit from the Thai billionaire, Charoen Sirivadhanabhakdi, whose Thai Beverage owns 30 percent of Fraser & Neave and who is currently bidding for full control of the Singapore conglomerate.

The Japanese brewer Kirin also owns a 15 percent stake in Fraser & Neave, but has not stated whether it will sell to Mr. Charoen.

A separate vote on Friday shot down a proposal by Fraser & Neave to pay out 4 billion Singapore dollars, or $3.3 billion, to its shareholders following the disposal of Asia Pacific Breweries to Heineken. The cash distribution, part of a capital reduction plan, had been opposed by Mr. Charoen.

Shareholders of F raser & Neave will still have to vote on whether to accept the offer from Mr. Charoen of 8.8 billion Singapore dollars, or $7.2 billion, for the 70 percent of the conglomerate he does not already control. Mr. Charoen's TCC Assets has set a deadline of October 29 for shareholders to decide on his offer.

British Authorities to Announce Changes in Libor Oversight

LONDON - British authorities are set to announce significant changes to the interest rate at the heart of a recent manipulation scandal as they aim to improve the accuracy and reliability of the benchmark.

On Friday, Martin Wheatley, the managing director of Britain's Financial Services Authority, will outline plans to increase oversight of the rate-setting process, which underpins more than $350 trillion of financial products like mortgages and student loans.

As part of that effort, regulators are stripping the British banking group that currently oversees the interest rate - the London interbank offered rate, or Libor - of its power. The British government, in turn, will take a more hands-on role, including making rate manipulation a criminal offense.

The benchmark itself will also be retooled to address some of its inherent weaknesses. The goal is to base Libor, which measures the rate at which banks lend to each other, on actual market transactions, r ather than estimates.

“The disturbing events we have uncovered in the manipulation of Libor have severely damaged our confidence and our trust,” Mr. Wheatley says in an advance text of the remarks he is to deliver in London. “It has torn the very fabric that our financial system is built on.”

The scrutiny of Libor has intensified this year as authorities around the globe have ramped up their investigation into rate-rigging at more than a dozen big banks. Regulators are concerned that the institutions, including HSBC, Deutsche Bank and JPMorgan Chase, submitted false rates.

In June, the British bank Barclays agreed to pay $450 million to settle charges that employees manipulated the rate to increase profits and make the institution appear healthier. Several top officials, including the chief executive, Robert E. Diamond Jr., resigned as a result of the scandal.

“Libor needs to reflect the values of the market,” said David E. Kovel, a partne r at the law firm Kirby McInerney who is representing clients in a potential class-action suit related to Libor. “There's no doubt the way that the rate is set up now makes it susceptible to abuse.”

The changes to Libor, some of which may require changes to British law, are expected to be introduced over the next 12 months.

The Financial Conduct Authority, a new British regulator that will become part of the Bank of England, the country's central bank, will have primary responsibility for regulating Libor. Mr. Wheatley of the Financial Services Authority will lead the new agency when it is created next year.

“We can't allow the unfettered latitude that banks previously enjoyed,” Mr. Wheatley's advance text says. “Much greater rigor and transparency must be introduced.”

Under the proposal, regulators will pare back the number of currencies and maturities included in the Libor system. Critics have questioned the accuracy of Libor, given the lack of actual bank lending transactions, particularly in smaller currencies like the Swedish krona.

To improve the system, five of the current 10 currencies, including the Canadian dollar, will be phased out over the next year. Instead, Libor will focus mainly on major currencies like the United States dollar and the euro. In all, regulators are looking to cut the number of Libor rates to 20, from 150.

Individual banks' rate submissions will be delayed by three months, rather than released in real time. This change means Libor will not readily reflect a bank's health, potentially eliminating a motivation to submit false rates.

If a bank reports a high rate, it can be a sign of underlying troubles at the firm. During the financial crisis, Barclays submitted artificially low rates to deflect concerns about its financial position, according to regulatory documents.

Despite the changes, analysts worry that Libor may still be easy to manipulate. Since the financial crisis, banks have not been willing to take the risk of lending to other institutions. In their proposal, regulators indicate that the process will still rely on some “level of judgment” when hard data are not available.

“There are few markets where there's a significant amount of liquidity,” said Darrell Duffie, a finance professor at Stanford University. “It makes sense to prune down the number of maturities.”

The British government will also replace the British Bankers' Association, the London-based trade group, as Libor's overseer. The organization, which established the benchmark rate in 1986, has come under mounting criticism for failing to catch the manipulation, which dated back to at least 2007, according to regulatory filings.

Under the proposed changes, a new administrator will be selected in the next 12 months. The future role of the data provider Thomson Reuters, which currently collects the daily rate submissions on beha lf of the trade association, is uncertain.

“British Bankers' Association clearly failed to properly oversee the Libor setting process and should take no further role in the administration and governance of Libor,” Mr. Wheatley's advance text says.

He will also take aim at the excesses within the financial services sector that led to the manipulation of Libor, arguing that traders at many of the world's largest banks were too focused on securing large bonuses. “Libor needs to get back to doing what it is supposed to do,” the text says, “rather than what unscrupulous traders and individuals in banks wanted it to do.”

Prudential to Acquire Life Business from Hartford

Prudential Financial has agreed to acquire the individual life insurance business of the Hartford Financial Services Group for $615 million in cash.

The deal follows pressure on Hartford earlier this year from the hedge fund manager John A. Paulson. Mr. Paulson had argued that spinning off Hartford's property and casualty business would increase shareholder value by 60 percent. Paulson & Company owns 7.19 percent of the company as of the end of June.

The insurer announced in March that it would sell its life insurance business and focus on its core operations in property and casualty, group benefits and mutual funds. The company said at the time that its decision came after a business review over several quarters.

The deal announced on Thursday is structured as a reinsurance transaction. Prudential will get some $7 billion of general account investment assets and corresponding reserves, and rights and obligations with respect to about $5 billion in s eparate account assets and corresponding liabilities. The cash component consists largely of Prudential giving up commissions to provide reinsurance for some 700,000 Hartford policies.

In a statement, Hartford said that it expected that the deal would benefit its net statutory capital by $1.5 billion.

“Today's announcement represents a significant milestone in the execution of The Hartford's strategy to deliver greater value to shareholders,” Liam E. McGee, the chief executive of Hartford, said in the statement.

John Strangfeld, the chief executive of Prudential Financial, said, “The integration of Prudential's Individual Life Insurance business and that of The Hartford will create an organization with greater scale, enhanced product offerings and expanded distribution expertise to meet the life insurance needs of Americans and their families,”

Hartford was advised by Goldman Sachs, Greenhill and the law firm of Sutherland Asbill & Brennan.< /p>

Geithner Urges Changes to Strengthen Mutual Funds

Treasury Secretary Timothy F. Geithner on Thursday urged the regulatory team that he leads to push ahead with rules aimed at strengthening America's $2.6 trillion of money market funds.

In a letter to the Financial Stability Oversight Council, a special committee of senior regulators set up after the 2008 financial crisis, Mr. Geithner said the changes are “essential for financial stability.”

The Securities and Exchange Commission, which is the primary regulator for money market funds, had proposed the main changes favored by Mr. Geithner in his letter.

But the commission dropped its attempt at a money market fund overhaul last month after it become clear that the majority of its commissioners weren't going to vote for the measures. Large mutual fund companies fiercely opposed the reforms, saying they are unnecessary and could harm a type of investment fund that has proven to be popular.

During the 2008 crisis, investors fled money market funds in droves, which worsened the credit freeze that gripped the banking system. Money funds then received a big bailout from the Treasury and the Federal Reserve.

Before the passage of Dodd-Frank Act, attempts to make changes to the money market fund industry would likely have died after the commission dropped them. But the Financial Stability Oversight Council, set up by the Dodd-Frank financial overhaul legislation, can choose to take over from the commission.

Mr. Geithner lays out a number of ways in which the council, which meets Friday, can act.

In his letter, he urges the council to gather public comments on a range of reforms and then make a final overhaul recommendation to the Securities and Exchange Commission. The commission would be required to adopt those changes, or explain why it does not. Mr. Geithner said the council's staff was already working on recommendations and he hoped they would be considered at the council's November meeting.

Th e recommendation would include two changes supported by the commission. One would require money market funds to hold loss buffers. The other would end the money market funds' practice of valuing investors' shares at $1 even when the funds' assets should reflect a value slightly below $1.

Mr. Geithner said in his letter that, while the S.E.C. is best positioned to regulate money market funds, the Financial Stability Oversight Council could move forward without waiting for the commission. The council, he wrote, could designate certain money market fund entities as systemically important and subject those firms to regulation by the Federal Reserve, which could then impose an overhaul.

In addition, the council could designate money market fund activities as critical to the working of the financial system's plumbing. That would allow regulators to impose heightened risk management standards on money market funds.

Mr. Geithner wrote that without the changes, “o ur financial system will remain vulnerable to runs and instability.”

If council acts, the mutual fund industry will almost certainly fight back. The industry's lawyers will likely contest the council's interpretation of Dodd-Frank and perhaps even the council's authority to act.

Judge Dismisses Forgery Lawsuit Against Herb Allen

A federal judge has dismissed a fraud lawsuit filed earlier this year against the billionaire chief executive of the investment bank Allen & Company.

Judge Colleen McMahon of Federal District Court in Manhattan threw out a claim that Herbert A. Allen Jr., the bank's chief executive, and his cousin Terry Allen Kramer, a well-known Broadway producer, had forged the signature of a dying cousin to protect a family ranch in Arizona from a creditor.

In a 24-page decision issued late Wednesday, Judge McMahon ruled that the plaintiff failed to state a proper claim under applicable Arizona law. She was highly dismissive of the lawsuit, calling aspects of it “implausible” and specifically describing the forgery claim as based on “sheer speculation.”

“It is highly questionable whether plaintiff even has, or ever had, standing to pursue this action,” wrote Judge McMahon.

The plaintiff, Excelsior Capital, is a commercial lender controlled by Richard Davis, a Long Island businessman who had had a dispute with C. Robert Allen III, who was Mr. Kramer's brother and the first cousin of Herb Allen Jr. Excelsior said it had a $25 million judgment against Robert Allen, who died in March 2011.

The lawsuit accused Herb Allen and Terry Allen Kramer of forging Robert Allen's signature just weeks before his death, transferring his 18 percent interest in the ranch to a corporate entity to protect it from Excelsior's reach.

Judge McMahon's ruling highlighted Herb Allen's tenuous connection to his late cousin. It pointed out that before the lawsuit was filed, Herb Allen had informed Excelsior's lawyer that he had had no direct business dealings with Robert Allen for 25 years and did not recall seeing or speaking with Robert Allen in more than 30 years. He also said lawyers had been recommending changing the ownership structure of the Allen ranch for several years.

“This lawsuit was a crude attempt to collect money f rom my late cousin by making ungrounded accusations against me,” Herb Allen, 72, said in a statement. “The lawyer who brought this case has once again discredited the legal profession, this time at continuing expense to both himself and his client. We intend to hold them responsible for their actions.”

Allen & Company is a New York-based investment firm that - other than its annual conference in Sun Valley, Idaho - maintains a decidedly low profile. The firm has enduring relationships with many of the media industry's and Silicon Valley's most powerful players, earning coveted roles in deals like Facebook‘s initial public offering. The Allen family is worth $2 billion, according to the recently published Forbes magazine list of the 400 wealthiest Americans.

Judd Burstein, a lawyer for Excelsior, said he fully expected to prevail on appeal. As far as Herb Allen's threat to hold him responsible for his actions, Mr. Burstein said, “Good luck with that.”< /p>

Herb Allen was represented in the lawsuit by Paul Vizcarrondo of Wachtell, Lipton, Rosen & Katz.

Allen Dismissal

Allen Power of Attorney

What Makes Google\'s Maps So Good

September 27, 2012, 2:50 pm

Wow. Nothing makes you appreciate something like losing it.

Nobody ever raved about Google's mapping app for phones until they saw how hard it was for Apple to come up with a rival. In my Times column today, I wrote about the challenges Apple has faced in replacing its iPhone GPS/mapping app, substituting its own data sources for Google's. I noted that the new app is beautiful and will be really terrific someday - once it does a better job of incorporating all of its various data sources.

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In researching the story, I interviewed representatives from Apple and Google. At Google, I spoke with Manik Gupta, senior product manager for Google Maps, and Daniel Graf, director of Google Maps for Mobile.

What I realized is that mapping the world is a staggering, gigantic, vast, inconceivably huge and ambitious project. It represents years and years of hand-tuning and manual effort.

I was surprised to learn that, like Apple, Google began its efforts by licensing petabytes of data from outside geodata companies.

They include TomTom, the same company that Apple's using. (The other big map vendor is NavTeq, which Nokia bought a few years ago; I guess that explains why Apple and Google aren't using NavTeq's data. Too bad - by all accounts, the map app on Nokia's Windows Phone is pretty great; I'll be trying it out shortly.)

But that's just the basic data. “ We start with licensed stuff, then expand and enhance it,” Mr. Gupta said. Google has supplemented it with years of additional data gathering, involving its Street View cars, satellite data and human labor.

And it shows. As of 2008, for example, onto those digital maps of the world Google had overlaid 13 million miles of turn-by-turn directions in 22 countries; today, it has 26 million miles of guidance in 187 countries.

“It's fair to say that in the mapping world, you can't just throw money at it and then you have it the next day. This takes time,” Mr. Gupta said. “It took a lot of time to get where we're at.” He said that even now, Google is far from done; error reports still flow in by the thousands.

Many of them come from Google Map Maker, a Web site that is live in 200 countries (and just started in the United States) that lets average citizens make corrections to Google's maps as they find them. You can, for example, draw a line to represent a new road.

Like Apple, Google also collects location and movement data (anonymously) from millions of smartphones as they're driven around; from this information, Apple and Google can determine when, for example, a one-way street has been mislabeled in its data.

You may be familiar with Street View, a Google exclusive that lets you stand at a certain spot on the map and “look around.” You can see a photo of the address you seek, and use your mouse to turn right or left and actually move through the still photos. It's an amazing way to see what it's like to be at that spot.

Street View isn't available for the entire world, but you'd be surprised at how many inhabited areas are covered: Google's GPS- and camera-equipped Street View cars have, so far, driven five million miles through 3,000 cities in 40 countries.

What you may not realize, however, is that those photos are far more than just helpful references for you, the viewer. Google's software analyzes what's in those photos. Its image-recognition software can read the text on street signs, storefront signs, hotel names and so on. It can tell a major road from a minor one, a single-lane road from multilane and one-way streets from two-way streets. Street View, in other words, generates still more useful data for Google's maps.

I asked Google why its satellite photos don't seem to display the same jarring seams that are showing up on Apple's - obvious borders between side-by-side tiles that were taken at different times of the year or in different weather.

“When you look at Google Earth,” I was told, “you can see that the globe is made from a mosaic of aerial and satellite photos, often taken in different lighting and weather. We license these photos from multiple providers, possibly the same ones that Apple uses; but we've had the time to come up with a smoothing algorithm. In January, we introduced a new way to render them, smooth them out, mak e them seamless. But by no means have we perfected this.”

On this call, Google pointed out a new feature that I hadn't seen before: compass mode. On an Android phone, you can call up a location like Trafalgar Square in London. You hold the phone in front of you to see a Street View-like photo of the scene - and as you look left, right, up, down, or behind you, the view changes, as though you're looking through a magic window at another place in the world. You can even use Compass mode to look around inside places - I tried Delfina, the San Francisco restaurant - to get a feel of the décor before you go there.

Can you imagine how powerful Compass mode will be once it covers most of the earth's developed areas? It will give you a sort of instant teleportation, a way to travel without travel, a sense of a place without having to go there.

What I've learned from this deep dive into the making of map apps is that you can't just license a bunch of data, bake a t 350 degrees and come up with a useful tool. Gethering the data is only the starting point; from there, it takes years to reconcile it, correct it and make it useful. (This Atlantic article offers a good look at the kind of hand-tuning that Google's minions do constantly.)

By the way, let me be clear: I have no doubt that Apple's Maps app will get there. We've seen this movie before - remember MobileMe? It, too, was very rough when it made its debut. Today, its successor, iCloud, is smooth and sensationally useful. Maps will be, too.

But I suspect that Apple has just realized the same thing I have: that we may live on a small blue planet, but digitally representing every road, building and point of interest is a task of almost unimaginable difficulty. Let's be grateful that another major player has just joined the attempt.