S.E.C. Alleges Insider Trading on $15 Billion Cnooc Deal

The Securities and Exchange Commission has moved to freeze the assets of traders accused of illegally trading in shares in advance of the announced $15 billion acquisition of a Canadian oil producer days by the state-owned Chinese oil company, China National Offshore Oil Corporation, or Cnooc.

The action comes just days after the deal was announced, as the regulator seeks to prevent the proceeds from alleged insider trading from flowing back overseas and outside of its jurisdiction.

In a complaint filed in the Federal District Court in Manhattan on Friday, the commission said that Well Advantage, a Hong Kong-based firm, stockpiled more than 830,000 shares of the Canadian company, Nexen, in the days before its acquisition based on material, non-public information. The regulator also accused other unnamed traders of making similar purchases. As a result, when the deal was announced on Monday and the share price of Nexen rose more than 60 percent, the traders ear ned a profit of nearly $13 million, the complaint alleges.

“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,” Sanjay Wadhwa, the deputy chief of the agency's market abuse unit and associate director of the New York regional office, said in a statement. “Despite the challenges of investigating misconduct in the U.S. by trading accounts located overseas, we have moved swiftly to freeze the assets of these suspicious traders and will hold them accountable for their actions.”

The agency rushed to obtain a restraining order to freeze $38 million and presented it before a federal judge, who granted the asset freeze on Friday. The $38 million includes the overall proceeds from the trading, not just the profits.

Part of the rush is related to the difficulty that arises in retriving funds once they leave the United State s. The company accused of insider trading, Well Advantage, is controlled by a well-known Hong Kong businessman, Zhang Zhi Rong, who controls another company with a “strategic cooperation agreement” with CNOOC, the government says.

The vast majority of the trading in Nexen took place several days before the deal was announced, and occurred in accounts that had little to no history of purchasing the shares in the past, the regulator said.

Week in Review: A Deal Maker\'s Doubts

The Smiths WEEK IN VERSE Sanford I. Weill isn't the first person to change his mind. In 1987, The Smiths sang “I Started Something I Couldn't Finish.”

A Japanese bank's bold run ended, the creator of Citigroup called for an end to megabanks, the New York Fed faced more questions and China made a $15 billion oil bid. A look back on our reporting of the last week's highs and lows in finance.

Chinese Oil Company Bids $15 Billion for Canadian Producer | The transaction “will be a huge test of whether regulators are now more willing to accept Chinese ownership of strategic assets,” Michael J. de la Merced and Ian Austen reported. DealBook '

NRG Energy to Buy GenOn in Move to Bolster Stocks and Cut Costs | The deal, for about $1.7 billion in stock, creates one of the biggest independent power generation companies in the country, Mr. de la Merced reported. DealBook '

JPMorga n Shakes Up Management | “The nation's largest bank by assets promoted Matthew Zames and Frank Bisignano to co-chief operating officers,” Jessica Silver-Greenberg reported. DealBook '

Chief's Fall Ends Japanese Bank's Bold Run | Nomura's appointment of Koji Nagai “may signal a retreat to Japan after the costly global ambitions of his predecessor,” Hiroko Tabuchi reported. DealBook '

Major Deals Help 2 Banks Outperform Larger Rivals | “Among [Lazard and Evercore Partners'] pitches to management teams are their independence from potentially conflicting businesses like trading and corporate lending,” Mr. de la Merced reported. DealBook '

2 Banks Dispute Value of Brokerage Firm | The “apparent inconsistency reveals how much is at stake as Morgan Stanley wrangles with Citigroup over acquiring a bigger share” of Morgan Stanley Smith Barney,” Susanne Craig and Peter Eavis reported. DealBook '

Square Looks to New Financing and Loftier Value | The mobile payments start-up “is close to raising roughly $200 million, which would give the company an implied valuation of $3.25 billion,” Evelyn M. Rusli reported. DealBook '

DealBook Column: Taking a Risk, And Hoping That Lightning Strikes Twice | Andrew Ross Sorkin says that “the career trajectory of many tremendously successful entrepreneurs in Silicon Valley often looks like a rocket ship that stops in midair.” DealBook '

“Every good entrepreneur I know ends up in the wasteland of being a venture capitalist. It's really frustrating,” Sean Parker said.

Barclays' Profit Falls As New Regulatory Problems Emerge | “The British bank disclosed that it was facing a number of lawsuits related to the rate-rigging scandal and that regulators were investigating the company's financial director on a different matter,” Mark Scott reported. DealBook '

• Ex-Barclays Official in Line for $13.6 Million Payout | The c ompensation package could add to the scrutiny. DealBook '
• House Panel Questions Geithner on His Handling of Barclays' Rate-Rigging | “It appears you treated it as almost a curiosity, or something akin to jaywalking, as opposed to highway robbery,” said Jeb Hensarling, Republican of Texas. DealBook '
• New York Fed Faces Questions Over Policing Wall St. | “The regulator is hampered by its lack of enforcement authority and dogged by concerns that it is overly cozy with the banks,” Ben Protess and Ms. Silver-Greenberg reported. DealBook '

Deal Maker Now Doubts Megabanks | Sanford I. Weill “would like to resurrect the regulation that he once fought,” Mr. de la Merced reported. DealBook '

“What we should probably do is go and split up investment banking from banking,” Mr. Weill, the former chief executive of Citigroup, told CNBC. “Have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail.”

Analyst Pleads Guilty to Insider Trading | John Kinnucan “emerged as one of the government's most vociferous critics,” Azam Ahmed reported. But “his communications began to grow increasingly outlandish.” DealBook '

Deal Professor: How Picking a Chief Executive Is More Random Than Wise | Steven M. Davidoff says that “there is little solid analysis on what makes an effective chief executive.” DealBook '

This all means that the selection of a chief seems more about group decision-making than anything else. And group decision-making can be quite random.

The Daily Show Targets a Deal Maker

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Romney Calls Dodd-Frank \'Unnecessary\'

LONDON - After a day made long by his remarks about London's readiness for the Olympic Games, found a friendlier audience here on Thursday night at fund-raisers heavily populated with American financiers, donors representing an industry that has had troubles of its own.

Mr. Romney held a fund-raising reception and a more exclusive dinner here on Thursday that included some of the top American financiers working in London. The firms they represent run the gamut from private equity funds, hedge funds and big investment banks like Goldman Sachs and J. P. Morgan - all of which have substantial business hubs in London's financial district.

In his remarks at the high-cost event at the Mandarin Oriental in Hyde Park, Mr. Romney steered clear of the scandal over interest rates, opening his comments by describing the relationship between the United States and Britain (“special”) and praising the sights of London (“inspiring”).

But at the end, Mr. Romney fielded several questions from the audience. The first asked Mr. Romney where he stood on reforming the banking system.

“There's no question but that regulations are essential to the functioning of markets,” he said, repeating a view he has mentioned on the campaign trail. “Of course, you have to have laws and regulations to make free markets able to produce and to be effective. But you have to make the regulations modern and up-to-date.”

Mr. Romney then launched into an attack on the Dodd-Frank financial regulatory law, calling it “unnecessary” and “overly burdensome.”

“With regard to regulation here in the U.K., I've got nothing to say about what goes on here, but back in the U.S., I want us to stay highly competitive, the financial capital of the world,” he concluded. “At the same time, I want to make sure that we protect the citizens in the nation and have rules that people can rely upon.”

Among those writing the biggest checks will be the chairmen of the dinner event, where the price of entry was $25,000 to $75,000 per head: Louis Bacon, a hedge fund billionaire and founder of Moore Capital Management, who splits time between New York and London; Karl Peterson, who heads European operations for the Texas Pacific Group, a private equity firm; and Dwight Poler, a managing director in Europe for Bain Capital, Mr. Romney's former private equity firm.

Co-chairmen included Steven Chasan, another executive from Moore Capital Management, and Eric Varvel, the chief executive of Credit Suisse's investment bank.

Mr. Romney picked a precarious time to visit London's financial community. British, European and American banks here are under close scrutiny from regulators on both sides of the ocean for their attempts to manipulate key interest rates.

So far Barclays, Britain's third largest bank, has been at the scandal's forefront, and the bank's former chief executive, Robert E. Diamond Jr., withdrew his name from Thursday's event after he was forced to resign from the bank. Patrick Durkin, a senior lobbyist for Barclays in Washington who has raised more than $1 million for Mr. Romney, remained a co-chairman.

The rate-rigging scandal has set off a vocal anti-banker backlash here, with everyone from the governor of the central bank to David Cameron, Britain's conservative prime minister, weighing in on how badly bankers have behaved. Eleven members of Parliament even recently signed a resolution that named Mr. Romney and called for Barclays executives to “cease fund-raising for political candidates.”

Accusations that HSBC, Europe's largest bank, which is also headquartered in London, engaged in money laundering practices and the fact that most of J. P. Morgan's derivatives trading losses originated here have not helped the city's financial reputation either.

But the malaise is broader than that. The euro zone debt crisis and a lingering in Britain have sharply curbed core banking operations like lending, trading and deal-making, and many companies with large investment-banking operations here, like Deutsche Bank, are contemplating deeper job cuts as profits sag.

Nevertheless, even though this year should see a significant bonus reduction for most in the banking world, Mr. Romney's visit has prompted many to reach for their checkbooks. Indeed, while many bankers here accept that banker conduct must improve, they worry that the push for more regulation and higher taxes - not to mention the public attacks on their profession, both here and in the United States - has gone too far.

In Mr. Romney, given his ties to the industry and his tax-cutting promises, they have found a person they can back with enthusiasm.

And for all of the news about the Libor scandal, an attendee at the reception said that the controversy was merely “background noise” for those in the ornate ballroom - replete with crystal chandeliers and gold paneling and filigree.

According to the campaign, roughly 250 people attended the event, which was expected to bring in at least $2 million.

And, in a nod to Britain, Mr. Romney's guests dined on fish and chips, passed around in paper cones.

“It was the most expensive halibut in town,” said one person who attended the more exclusive dinner, adding that Mr. Romney upheld the challenger's tradition of not criticizing the president while on foreign ground and had a positive view of getting America back to work.

This article has been revised to reflect the following correction:

Correction: July 26, 2012

An earlier version of this article misstated the amount of money the Romney reception was expected to raise. It is at least $2 million.

Business Day Live: Failed Olympics Bid a Positive

Tepid economic growth at the outset of the election season. | A former JPMorgan lobbyist on banks and the financial crisis. | Why New York's failed bid to host the Olympics might be a good thing.

Adding Up Marissa Mayer\'s Pay at Yahoo

How much is Marissa Mayer's pay package really worth?

By my calculations, if Ms. Mayer, the newly appointed chief executive of Yahoo, sticks around for five years, her contract will be at least $117 million. This is the minimum amount. Ms. Mayer can earn much more depending upon Yahoo's performance - and assuming that she can avoid the fate of previous Yahoo chiefs who were quickly terminated.

Let's start by breaking down the Ms. Mayer's compensation as outlined in her employment agreement. The chart below sets forth my estimates of potential pay if Ms. Mayer stays employed as chief for five years.

The mix of various forms of compensation makes Ms. Mayer's pay state of the art in employee compensation and a good lesson in this sometime mysterious practice.

Let's examine these item by item.

Base Salary
Under her contract, Ms. Mayer will be paid a cash salary of $1 million a year.

This round, six-figure number is no coincidence.

< p>In 1993, Congress prohibited companies from taking a tax deduction for nonincentive pay for executives if it exceeded $1 million. The goal was to reduce executive compensation, but it had the opposite effect.

The pay of many chief executives who earned than $1 million rose to this number. In addition, companies began offering significantly more incentive pay to ensure that the pay would be tax deductible. Ms. Mayer is a textbook example of this development.

Incentive Compensation
Ms. Mayer is also eligible for a yearly cash bonus of up to $4 million, which is essentially guaranteed to be a minimum of $2 million if certain financial goals set by the board are met.

We haven't been told what the goals will be, but for now, let's assume that Yahoo does meet these goals and Ms. Mayer is eligible for the maximum amount, since most cash bonus targets are typically easy to reach.

One-Time Equity Award
Ms. Mayer is receiving a one-time grant of Yahoo stock worth $30 million. It vests over five years, with 20 percent of the stock sellable each year, assuming she hits the yet- to-be-determined performance criteria.

Yahoo probably paid this grant in one lump to sidestep criticism over excessive executive compensation and minimize the chance of shareholders voting against it in a “say on pay” vote. The influential proxy advisory firm Institutional Shareholder Services will assess the pay package, but only once a year. This will mean that for this year, Yahoo will be out of sync with its peers and may be criticized for excessive pay. But next year, the payout will not show up as a new award, so Yahoo will look more reserved. Voila.

Big, one-time grants are something that companies like Apple and Yahoo are increasingly doing to avoid paying higher salaries over multiple years and suffering repeated criticism.

“Make Whole” Grants
Since she left Google and lost the chance to earn bonu ses at that company, Ms. Mayer will get a one-time grant of Yahoo stock worth $14 million. She again will be able to vest, or cash out, portions of that over three years. Ms. Mayer will need to be employed by Yahoo at the time for these awards to vest, but if she is terminated without good reason, they automatically vest. But chief executives are almost never terminated for cause â€" like fraud or some other troubling deed. Therefore, Ms. Mayer is likely to receive this award even if the Yahoo board terminates her for poor performance.

A “make whole” award is common to compensate executives who have huge amounts of stock from their previous job that they will lose. The problem is that if Ms. Mayer's term is short and her performance poor, Yahoo will look like it unduly compensated Ms. Mayer by paying this amount as Ms. Mayer is almost guaranteed to receive it.

Long-Term Equity Grants
Ms. Mayer will also get $12 million in stock and options under Yahoo's general incentive compensation program â€" which will vest over a three-year span. This means that in the first year, she will earn vested incentive grants of $4 million.

However, her agreement also states that for future years the grants will be the same or more than the 2012 grant of $12 million. So you can expect next year's award to be at least as much as the previous year's. Assuming that Ms. Mayer receives the minimum $12 million grant, by Year 3, $12 million worth of options are vesting every year.

As is de rigueur in the technology industry these days, the grants are a mix of half options and half restricted stock. According to a 2011 PricewaterhouseCoopers analysis of 50 technology companies, 78 percent granted a mix of incentive options and stock.

After the Internet bubble, many tech firms moved away from awarding just stock options. Options were considered too volatile and dilutive of shareholders' stakes. In addition, options ofte n quickly inflated the executives' payouts to eye-popping levels just because shares were rebounding after hitting lows. As a result, restricted stock became more favored, but in Silicon Valley, some amount of options are still expected â€" probably as a result of custom more than anything else.

The options and restricted stock will also be subject to be determined financial performance criteria that will be the same as the one time equity award.

All in all, Ms. Mayer's package is rich. I estimate that it is about $34 million more than what the most recent chief, Scott Thompson, would have made under his agreement if he had stayed for five years.

But to really cash in, Ms. Mayer will not only have to stay at Yahoo for several years but also hit financial goals, which have yet to be defined. In other words, much of her success and money will mean hitting those targets. It remains to be seen whether they will be meaningful targets, but Daniel. S. Loeb, th e head of the activist hedge fund Third Point, which owns about 6 percent of Yahoo, has a big stake in seeing her achieve significant gains.

If Ms. Mayer hits her targets and stays for five years, the $117 million figure I estimate is really just a base. The estimated $92 million worth of equity compensation she would realize means Ms. Mayer can reap hundreds of millions or more if Yahoo's stock goes up with her success.

At the same time, at least one study has found the average chief executive tenure to be only six years. Yahoo has run through seven chief executives in less than five years (including two interim ones), and Mr. Loeb, who has been advocating for change at Yahoo, is unlikely to wait long for results.

Ms. Mayer is therefore taking real risk. If she leaves in Year 2, she would receive substantially less. Even if she stays, most of her incentive pay is worthless if the company does not meet financial goals and its stock does not increase.< br />Marissa Mayer may win big, but she's going to have to stay with Yahoo for the long haul to do so, which may not be so easy.

YAHOO CHIEFS' PAY
Comparing compensation packages

YEAR ONEYEAR TWOYEAR THREEYEAR FOURYEAR FIVEBase Salary$1 million$1 million$1 million$1 million$1 millionIncentive Compensation44444Long Term Equity Grants48121212Make Whole Grants473--One-Time Retention Equity66666TOTAL ESTIMATED PAY19 million26 million26 million23 million23 millionBase Salary$1 million$1 million$1 million$1 million$1 millionIncentive Compensation22222Long Term Equity Grants1111111111Make Whole Grants13----One-Time Retention Equity-----TOTAL ESTIMATED PAY27 million14 million14 million14 million14 million

Marissa Mayer's Pay, in Millions

Incentive Compensation is targeted at $2 million and is a maximum of $4 million. Long Term Equity Grants assume that future grants are equivalent to current grant of $12 million in incentive grants and vest over three years.

Scott Thompson's Pay, in Millions

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

British Court Sentences Six Men for Insider Trading

A British court has sentenced six men for their role in a multi-year insider trading scheme.

The case, which involved trades made between 2006 and 2008, was described by the Financial Services Authority on Friday as the “longest and most complex prosecution” the regulator has ever brought. In order to untangle this insider trading scheme, the F.S.A. said it spent thousands of hours pursuing the case, parsing through hundreds of trades and telephone records.

According to the F.S.A., the men designed an elaborate insider trading ring that allowed them to profit on potential or upcoming takeover offers. 

Ali Mustafa, a former UBS employee who worked in a printing room, obtained confidential information, which he then passed along to a group of traders. Between May of 2006 and 2008, the group made £732,044.59 in profits from bets on companies like Reuters, Vega, Premier Oil and Enodis.

Mr. Mustafa, along with two traders, Pardip Saini and Paresh Shah were sentenced to 3 years and 6 months. The rest of the traders, Bijal Shah, Truptesh Patel and Neten Shah, received two years or less.

“This is another significant milestone in our fight against insider dealing,” Tracey McDermott, the acting director of the F.S.A.'s enforcement and financial crime division, said in a statement. Financial Crime Division. “This lengthy and complex trial followed many thousands of hours of work by a dedicated team of investigators across our enforcement, markets and intelligence teams to unravel a sophisticated scheme which was designed to enable the defendants to profit from exploiting confidential price sensitive information.”

Since the financial crisis, the British regulator has been trying to step up its effort to police securities violations. Earlier this year, it fined Ian Hannam, JPMorgan Chase's former global chairman of equity capital markets, for disclosing insider information.

Even so, the regulator has faced scrutiny for its role in the recent interest rate manipulation scandal. Lawmakers have raised questions about why the F.S.A. didn't move more swiftly to rein in banks activities.

JPMorgan Shakes Up Management

JPMorgan Chase has promoted Matthew Zames and Frank Bisignano to co-chief operating officers, in a broad management reshuffling the bank announced on Friday.

Mr. Zames took over as head of the bank's chief investment office in May, succeeding Ina Drew, who left following trading losses at the unit that now total $5.8 billion. Mr. Bisignano had been running mortgage banking in addition to being the chief administrative officer of the company.

Jes Staley, the chief executive of the investment banking business, will become chairman of the corporate and investment bank, a new position. “In this role, he will head a group of senior executives who will work together to develop a view of what global banking will look like in the years ahead,” the bank said in a statement. He will continue to serve on the bank's operating committee.

Michael Cavanagh, the head of treasury and securities services, and Daniel Pinto, head of the European, Middle East and Afric a business and global fixed income, will become co-chief executives of the corporate and investment bank

“Today's appointments are a natural step in aligning our businesses more closely to make our company even stronger,” Jamie Dimon, the chairman and chief executive of JPMorgan, said in a statement.

Apple to Acquire AuthenTec for $356 Million

Apple has found one way to shrink its huge pile of cash.

The iPhone maker has agreed to acquire AuthenTec, a mobile security company, for $356 million in cash, according to a filing. Apple will pay AuthenTec's shareholders $8 per share, a 60 percent premium above Thursday's closing price.

The deal will put a small dent in Apple's cash supply, which stood at more than $117 billion at last count. But the company, which designs security products for mobile devices such as fingerprint sensors, could help Apple bolster the security of its products, which have been been major targets for malicious software attacks. Years ago, Apple computers were once known for their lack of viruses but the incredible popularity of its devices has become a siren for bad agents, seeking to extract private financial information or merely wreak havoc on the digital lives of consumers.

According to Friday's filling, if AuthenTec opts for a superior bid from a rival company, it will pay Apple $10.95 million. However, if the deal does not close because of antitrust issues, Apple will pay AuthenTec $20 million.

AuthenTec hired Piper Jaffray to serve as its financial adviser and Alston & Bird to be its legal adviser.

Greenwich to Assess Economic Impact of Hedge Funds

Does a certain hedge fund capital have a going problem?

Greenwich officials have commissioned a study on the role that the sophisticated investment pools, private equity firms and the financial services industry in general has on the local economy.

The town's hedge fund universe lost a major star last month when ESL Investments, the $9 billion private investment fund of Edward Lampert, packed its bags for Miami, a destination with no state income tax and a lower corporate tax than Connecticut.

"We're not taking these people for granted," First Selectman Peter Tesei said Thursday. "It's easy to vilify (them) based upon an image."

Tesei's comments came during the biweekly meeting of the Board of Selectmen, where he announced that a volunteer economic advisory committee that reports to his office will conduct a broad analysis of the impact financial services companies have on Greenwich and report its findings by the fall.

Among the committee's 10 members is Greenwich Chamber of Commerce Executive Director Marcia O'Kane and Paul Settelmeyer, who represents the town on the South Western Regional Planning Agency.

"We feel that it is an important undertaking because the town is dependent on it," Tesei, the town's chief elected official, said of the financial services industry.

Hedge funds, which invest in stocks, commodity futures, options and emerging market debt, are complex investment pools that cater to high-net-worth individuals.

Lampert, the force behind the Sears and Kmart merger, is currently the 367th richest person in the world, with a net worth of $3.1 billion, according to Forbes.com.

Representatives of is hedge fund declined to say what precipitated the firm's exodus from Connecticut or how many people it employed at its 200 Greenwich Ave. headquarters when it revealed it was relocating.

Tesei acknowledged that the loss of ESL Investments set the wheels in motion for the town conduct an analysis of its own.

"What does that mean for Greenwich?" Tesei said. "What does that mean for the state?"

In other business, the selectmen voted unanimously to go back to two-way traffic on New Lebanon Avenue in Byram after experimenting with a one-way traffic pattern for 90 days that was widely panned by residents of the neighborhood.

Byram Neighborhood Association Chairman Michael Bocchino criticized the town's conduct of the trial and what he characterized as a lack of communication by the Department of Public Works about changes to the street and signage.

"With all that, the community is completely and utterly frustrated that the town's Department of Public Works missed the boat on all these items," Bocchino said. "We the people of Byram deserve a little bit more, as does the town of Greenwich."

Jim Michael, the town's chief engineer, agreed that the road should be returned to two-way traffic in what he called a "compromise."

Michael noted that New Lebanon Avenue is being repaved and will get new sidewalks and granite curbing. There will be eight on-street parking spaces on New Lebanon Avenue, in addition to 21 on William Street, which intersects it.

The Board of Selectmen also received an update from Ian MacMillan, the town's harbor master, who said it would cost $2 million to $2.5 million to dredge the mouth of the Mianus River and $8 million to $10 million to dredge Greenwich Harbor, based on new figures from the U.S. Army Corps of Engineers.

"If we're able to recover our harbors, that would be stunning, just stunning," MacMillan said.

The selectmen also discussed the framework of a 10-year lease extension with Abilis, which was formerly known as ARC of Greenwich, to maintain a group home on the Pomerance property in Cos Cob.

There is a ongoing debate on whether the renewal of the $1-per-year lease requires the approval of the Representative Town Meeting.

Town Attorney John Wayne Fox told that selectmen that any time town property is conveyed, final authority rests with the RTM.

But Town Administrator John Crary suggested that the renewal is automatic so long as there are no changes to the terms of the lease and Abilis wants to remain on the property, which it does.

"Personally speaking, I think it's an excellent use of the facility," Tesei said. "I think it's a wonderful organization."

The selectmen, who are expected to take up formal language of the lease renewal at their Aug. 9 meeting, voted 2-1 to refer the item to the Planning and Zoning Commission for municipal improvement review.

Selectman Drew Marzullo cast the lone dissenting vote, saying that Abilis serves a valuable purpose for the community and shouldn't have to go through a protracted renewal process and red tape.

"This is a waste of time, in my opinion," Marzullo said. "I don't think they should have to go through this process."

neil.vigdor@scni.com; 203-625-4436; http://twitter.com/gettinviggy

K.K.R.\'s Quarterly Profits Surge

While some of its peers in the private equity industry struggled with the global market turmoil, Kohlberg Kravis Roberts sailed through its second quarter much more smoothly.

The investment firm said on Friday that its profit more than doubled in the quarter, to $520.3 million, as the value of its holdings - and one in particular, Alliance Boots - rose significantly. But the firm's fee-related earnings fell by $6.3 million, to $69.8 million.

K.K.R.'s profit amounts to 74 cents a share, handily outstripping the average analyst estimate of 16 cents, according to Standard & Poor's Capital IQ.

The firm's profit was reported as economic net income after taxes, which includes unrealized gains from investments and is a widely used measurement in the private equity industry. Using generally accepted accounting principles, it earned $146.3 million, more than triple the year-ago period.

Also on Friday, K.K.R. said that it had formed a joint venture with ano ther investment firm, Stone Point Capital, that will focus on offering capital markets services to midmarket and private-equity owned companies. The firm said that the new business would be separate from its existing capital markets business. K.K.R. and Stone Point are each committing $150 million of equity to the venture.

K.K.R.'s second-quarter results contrast sharply with those of a major rival, the Blackstone Group, which reported a 74 percent drop in profit for the quarter. And in general, private equity firms have been wounded by the sharp swings in the global markets, which have both hampered deal-making, hurt the value of their existing investments and made it difficult to sell companies they already own.

Morning Take-Out

TOP STORIES

A Deeper Look at Facebook's Earnings Report  |  So. Facebook has reported its first earnings report as a public company. And investors apparently didn't like what they saw.

Even though the company essentially met analyst estimates for revenue and adjusted earnings per share, the social network's shares tumbled more than 10 percent in after-hours trading, falling at one point below $24 a share. That's an all-time low in Facebook's two-month existence as a publicly traded corporation.

What gives? There are a couple of interesting items from the earnings announcement, but one pattern that emerges is that Facebook's once-vaunted growth is slowing down.
DealBook '

Barclays' Profit F alls Amid Rate-Rigging Scandal  |  Barclays reported on Friday a 76 percent drop in its net profit during the first six months of the year after the British bank took an accounting charge on its own debt and other one-off costs.

The results come a month after Barclays announced a $450 million settlement with American and British authorities in connection to the manipulation of the London interbank offered rate, or Libor. A number of the bank's top executives, including its former chief executive, Robert E. Diamond Jr., resigned in the wake of the scandal, which involved some of the firm's traders and senior executives altering Libor submissions for financial gain.

Barclays disclosed on Friday that it was facing a number of class action lawsuits in the United States related to the manipulation of both Libor and the Euro interbank offered rate, or Euribor. The most recent lawsuit was filed at the beginning of July.
DealBook '

DEAL NOTES

Romney Addresses a Financial Crowd in London  |  In remarks at a fund-raiser at the Mandarin Oriental in Hyde Park, Mitt Romney avoided mentioning the scandal over the rigging of interest rates and called the Dodd-Frank law “unnecessary” and “overly burdensome,” The New York Times reports.
NEW YORK TIMES

Greenwich to Assess Economic Impact of Hedge Funds  |  Officials in Greenwich, Conn., have called for a study of the impact that the financial industry has on the local economy, after the departure of a prominent hedge fund for Miami, The Stamford Advocate reports. “We're not taking these people for granted,” said Peter Tesei, Greenwich's top elected official. “It's easy to vilify (them) based upon an image.”
STAMFORD ADVOCATE

Europe's Central Banker Offers Assurances on the Euro  |  A comment by Mario Draghi, head of the European Central Bank, buoyed markets, but analysts warned the lift could be short-lived. Mr. Draghi said: “Within our mandate, the E.C.B. is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
NEW YORK TIMES

Mergers & Acquisitions '

Universal Considers Selling Prized Division  |  To help secure approval for its $1.9 billion takeover of EMI, the Universal Music Group may sell Parlophone Records, a move once considered unthinkable, the Med ia Decoder blog reports.
NEW YORK TIMES MEDIA DECODER

Korea Says It Received No Bids for Woori Stake  |  South Korea is encountering challenges in trying to sell a 57 percent stake in Woori Finance Holdings valued at $4.3 billion, Bloomberg News reports.
BLOOMBERG NEWS

Icahn Posts Win as CVR Energy Says It Had No Offers  |  Carl C. Icahn will get to keep - and run - CVR Energy, an oil refining company based in Texas, after a 60-day sale process failed to yield any credible bids.
DealBook '

United Technologies Closes $16.5 Billion Takeover  |  After agreeing to sell certain noncore assets, Unite d Technologies closed its acquisition of the Goodrich Corporation on Thursday, Reuters reports.
REUTERS

Airline Integration Weighs on United's Profit  |  United Continental Holdings said the combination with Continental Airlines contributed to a fall in second-quarter profit, as the chief executive conceded that the company “added new stress to the system” by implementing various changes at once, The Associated Press reports.
ASSOCIATED PRESS

Senator Raises Concerns Over Cnooc Deal  |  Senator Charles Schumer plans to tell Timothy F. Geithner, the Treasury secretary, that the United States should challenge Cnooc's deal to acquire the Canadian firm Nexen, Reuters reports.
REUTERS

Boston's WGBH Acquires Public Radio International  |  The deal unites two of the country's largest public broadcasters, The New York Times writes. Financial terms were not disclosed.
NEW YORK TIMES

INVESTMENT BANKING '

Sanford Weill Flips the Script  |  The New York Times editorial board writes: “Sometimes, in a great national debate, the most powerful voices can be those of the converted. Think of Nixon to China or, more recently, President Obama's declaration of support for same-sex marriage. Now add to the list Sanford Weill, the financier who led the charge for the repeal of the 1933 law that separated commercial banks from investment banks.”
NEW YORK TIMES

Wall Streeters Challenge Comments by Weill  |  “I don't buy it,” said William Harrison, the former head of JPMorgan Chase. “It gets back to management and risk-taking, and you can screw that up at a small bank or a large bank.”
REUTERS

Major Deals Help 2 Banks Outperform Larger Rivals  |  Lazard and Evercore Partners reported Thursday that their core mergers advisory businesses had held up well on the strength of several major transactions.
DealBook '

Evercore Profit Rises 19% on Advisory Gains  |  Evercore Partners' profit rose 19 percent in the second quarter, as the investment bank's core advisory business posted s trong results.
DealBook '

Nomura Chief Quits Amid Insider Trading Scandal  |  The Japanese bank's chief executive, Kenichi Watanabe, and one of his top lieutenants resigned on Thursday in response to recent revelations that their employees abetted insider trading.
DealBook '

Nomura's Rank Among Deal Makers  |  Despite the distraction of an insider trading scandal that has resulted in the resignation of Nomura's chief executive, the investment bank has risen three places this year in the worldwide merger league tables.
DealBook '

Jefferies and Goldman Have Highest Pay on Wall Street  |  Jefferies set aside money in the first half of the year to pay employees an average of $228,407, and Goldman set aside an average of $225,789 for its workers, Bloomberg News reports.
BLOOMBERG NEWS

Fidelity Expands Into Securities Lending  |  The Wall Street Journal reports: “Mutual fund company Fidelity Investments is setting itself on a collision course with rivals by rolling out a pricing service designed to make the roughly $800 billion market for securities lending more transparent, according to people familiar with the firm's plans.”
WALL STREET JOURNAL

Wells Fa rgo Plans to Expand Headcount in Asia  |  The bank said it would increase its workforce in Asia by at least 10 percent over the next three years, Bloomberg News reports.
BLOOMBERG NEWS

Greek Banks Hope Time Heals  |  Bloomberg News notes that a strategy by Greek banks brings to mind the ancient playwright Euripides.
BLOOMBERG NEWS

PRIVATE EQUITY '

Chinese Funds Said to Be Near Deal for Dexia Unit  |  Two Chinese private equity funds, Hony Capital and GCS Capital, are approaching a deal to buy the asset management arm of Dexia for about 500 million euros ($613.7 million), The Financial Times reports.
FINANCIAL TIMES

China Invests $500 Million With Blackstone  |  An arm of China's central bank that oversees currency reserves has committed $500 million to a real estate private equity fund managed by the Blackstone Group, The Wall Street Journal reports, citing unidentified people familiar with the matter.
WALL STREET JOURNAL

Formula One's Uncertain Future  |  A legal scuffle surrounding the chairman of the Formula One Group has created a risk for the private equity firm CVC Capital, which sold a stake in the business in May, The Economist writes.
economist

Owner of Friendly's Plays Two Roles  |  The private equity firm Sun Capital Partners kept ownership of Friendly's parent company even after it filed for bankruptcy - because the firm was also the chain's biggest lender, The Wall Street Journal reports.
WALL STREET JOURNAL

British Buyout Firm Says It Is Cutting Costs  |  In a quarterly announcement on Friday, 3i said it was making progress with a cost-cutting initiative, as it tries to win back dissatisfied investors, Reuters reports.
REUTERS

HEDGE FUNDS '

Investors Press Hedge Funds Over Libor  |  Some of the world's biggest hedge funds are responding to concerns from investors by conducting internal investigations to show they were not involved in an effort to rig majo r interest rates, Reuters reports.
REUTERS

A Paulson Holding Suffers  |  NovaGold Resources, which is 13 percent owned by John A. Paulson's firm, fell 25 percent on Thursday after comments by the Barrick Gold Corporation, Bloomberg News reports. The decline may have translated into a $48.9 million loss for Mr. Paulson's firm.
BLOOMBERG NEWS

Hedge Funds Can't Figure Out Europe's Crisis  |  The Economist asks why the crisis in the euro zone has “not produced a Monsieur Paulson of its own? Despite more than two years of disarray, funds with double-digit returns are rare; those with triple-digit returns are unheard of.”
ECONOMIST

Church of England's Pension Commits to Hedge Funds  |  The $1.7 billion pension fund of the Church of England has tapped Winton Capital, Bridgewater Associates and BlackRock Advisors to manage assets, Reuters reports.
REUTERS

Japanese Firm Pitches Pensions on Hedge Funds  |  Mizuho Global Alternative Investments, which offers clients access to overseas hedge funds, is trying to encourage Japanese pension funds to invest, at a time when pensions are cautious in the wake of a scandal at AIJ Investment Advisors, Bloomberg News reports.
BLOOMBERG NEWS

I.P.O./OFFERINGS '

Not Quite an I.P.O. Comeback  |  The Wall Street Journal w rites: “A trio of firms put in largely lackluster showings Thursday as they hit the exchanges, demonstrating that the market can still be fickle.”
WALL STREET JOURNAL

Singaporean Trust Moves Little on Debut  |  The Ascendas Hospitality Trust of Singapore traded at roughly the same value as its initial offering price, despite strong demand for the I.P.O., Reuters reports.
REUTERS

Steakhouse Company Reduces Size of I.P.O.  |  The Del Frisco's Restaurant Group reduced the number of shares it sold in its I.P.O. and priced them below its expected range, Reuters reports.
REUTERS

VENTURE CAPITAL '

Twitter Experiences Another Outage  |  The Bits blog writes: “A few short weeks after a software bug knocked Twitter offline, the service was unavailable to the majority, if not all, of its 140 million users for several hours on Thursday.”
NEW YORK TIMES BITS

Forerunner Ventures Raises a $40 Million Fund  |  Forerunner, a venture capital firm whose employees are all female, said it attracted $40 million for its first institutional fund, The Wall Street Journal reports.
WALL STREET JOURNAL

Online Learning Platform Raises $43 Million  |  Open English, which teaches English to non-native speakers, raised a financing round led by Insight Venture Partners, Tec hCrunch reports.
TECHCRUNCH

LEGAL/REGULATORY '

Scandals May Cost Banks Their Clout  |  Banks recovered their self-confidence and influence quickly after the financial crisis. But Floyd Norris of The New York Times says that they may fare worse after JPMorgan Chase's hedging losses and the Libor scandal.
DealBook '

Geithner Faces Senate on Rate-Rigging Scandal  |  Timothy F. Geithner, the United States Treasury secretary, vowed that authorities would forcefully pursue crimin al investigations into some of the world's biggest banks.
DealBook '

Lloyds Receives Subpoenas Over Interest Rates  |  The British bank Lloyds became a focus of the investigation into the rate-rigging scandal, Reuters reports.
REUTERS

Proposed Settlement Asks Dewey's Former Partners for Cash  |  The Wall Street Journal reports: “On Thursday the team shutting down the firm briefed hundreds of former partners on a new, $90.4 million settlement plan intended to get ex-partners to fork over some of the cash they were paid in 2011 and 2012 as Dewey headed toward bankruptcy.”
WALL STREET JOURNAL

Capital One Penalized Over Lending to Military Families  |  Capital One agreed to pay $12 million to resolve claims of violations in lending to military borrowers, Bloomberg News reports. The bank was also fined recently over claims it misled credit card customers.
BLOOMBERG NEWS

Trustee Disputes Fees in Lehman Bankruptcy  |  The Wall Street Journal reports: “Some Wall Street banks and hedge funds asking Lehman Brothers Holdings Inc. to chip in for their legal fees aren't entitled to make such claims in the biggest Chapter 11 case of all time, a government bankruptcy watchdog is arguing.”
WALL STREET JOURNAL

Madoff Trustee Looks to Distribute More Money  |  Irving H. Picard is requesting permission from a New York c ourt to distribute an additional $1.5 billion to $2.4 billion to investors who lost money in Bernard L. Madoff's Ponzi scheme, The Associated Press reports.
ASSOCIATED PRESS

Barclays\' Profit Falls Amid Rate-Rigging Scandal

LONDON - Barclays on Friday reported a 76 percent drop in its net profit during the first six months of the year after the British bank took an accounting charge on its own debt and other one-off costs.

The results come a month after Barclays announced a $450 million settlement with American and British authorities in connection to the manipulation of the London interbank offered rate, or Libor.

A number of the bank's top executives, including its former chief executive, Robert E. Diamond Jr., resigned in the wake of the scandal, which involved some of the firm's traders and senior executives altering Libor submissions for financial gain.

“We are sorry for the issues that have emerged over recent weeks and recognize that we have disappointed our customers and shareholders,” Barclays' chairman, Marcus Agius, who also is to step down, said in a statement.

Barclays disclosed on Friday that it was facing a number of class action lawsuits in the Unit ed States related to the manipulation of both Libor and the Euro interbank offered rate, or Euribor. The most recent lawsuit was filed at the beginning of July.

The bank has appointed Anthony Salz, vice-chairman of the advisory firm Rothschild, to conduct a review into the British bank's business practices. A number of current and former Barclays employees may still face criminal charges related to the rate-rigging scandal.

Barclays also said that the Financial Services Authority, the U.K. regulator, is investigating a number of current and former employees, including Barclays' finance director, Chris Lucas, for activities connected to Barclays' fundraising efforts in 2008.

In the aftermath of the collapse of Lehman Brothers in 2008, the British bank tapped Middle Eastern investors for new capital, though existing shareholders voiced criticism that their rights were overlooked as Barclays turned to outside investors for the fresh injection of capital.

< p>The bank's net income for the first six months of the year dropped 76 percent, to £480 million, or $752 million, compared to £1.98 billion in the similar period in 2011.

Barclays took a one-time charge against its own debt and other costs, such as the inappropriate selling of insurance to customers and the mis-selling of rate hedging products to small businesses.

Without the accounting charge and other one-time costs, Barclays' net profit in the first half of the year rose 9 percent, to £3.07 billion, compared to £2.8 billion a year earlier.

The rise, which beat analysts' estimates, was driven by an improved performance in the bank's retail and corporate banking divisions. Barclays' investment banking unit, however, continued to be weighed down by the ongoing volatility in financial markets caused by the European debt crisis.

Barclays' shares rose 5 percent in early morning trading in London.

The British bank said it ha d reduced its exposure to the debt of southern European countries by 22 percent, to £5.6 billion, during the first six months of the year.

The bank's core Tier 1 ratio, a measure of ability to weather financial shocks, fell slightly to 10.9 percent, while Barclays' return on equity, including the one-time costs, fell to 0.3 percent.

“We continue to be cautious about the environment in which we operate and will maintain the group's strong capital, leverage and liquidity positions,” Mr. Lucas of Barclays said in a statement.