UBS\'s Record Settlement Over Rate Rigging

UBS PAYS $1.5 BILLION FINE OVER RATE RIGGING AS UNIT PLEADS GUILTY  |  The Swiss bank UBS announced a record settlement with global authorities on Wednesday over its role in a scheme to manipulate interest rates. The bank is paying a combined $1.5 billion in fines, and its Japanese subsidiary is pleading guilty. “The UBS subsidiary, which agreed to plead to a single count of wire fraud, is the first unit of a big bank to agree to criminal charges in more than a decade,” DealBook reports.

The complaints describe a scheme spanning from 2005 to 2010 in which UBS reported false rates to make more profit and allay concerns about its health. “The findings we have set out in our notice today do not make for pretty reading,” Tracey McDermott, the enforcement director for the Financial Services Authority of Britain, said in a statement.

The Financial Services Authority published colorful e-mails between UBS traders and brokers outside the firm. For one trader, trying to manipulate rates was somehow heroic. “Be a hero today,” this trader asked in 2009, in all caps. Another wrote in September 2008, “I need you to keep it as low as possible,” promising to pay “whatever you want. I'm a man of my word.”

The British regulator says UBS's misconduct was more serious than that of Barclays, which paid $450 million over similar accusations this summer. Reuters' Felix Salmon writes: “After the Barclays revelations, I actually thought that I couldn't be shocked about the extent of Libo r manipulation. Boy, was I wrong.”

CERBERUS'S CHANGE OF HEART  |  The decision by Cerberus Capital Management to sell its stake in the gun maker Freedom Group “is a rare instance of a Wall Street firm bending to concerns about an investment's societal impact rather than a profit-at-all-costs ethos,” DealBook's Peter Lattman writes. It came after an influential investor raised concerns about Cerberus's ownership of the company that made the rifle used in the Connecticut school shooting.

An official from that investor, the California State Teachers' Retirement System, called Cerberus on Monday, Mr. Lattman reports. “While concern from Cerberus's investors - as well as a swirl of media attention - had an impact on the decision to sell, the leadership of the private equity firm debated through the weekend how to respond to the tragedy and its potential fallout, according to a person familiar with the firm's discussions. On Monday evening, a small group of Cerberus's top executives sat around a conference room table and weighed a range of options to respond to the tragedy, including making a large donation to the Newtown community or promoting mental health research and education. Ultimately, Cerberus decided to make a clean break and sell the gun company.”

With shares of gun makers falling, it's not clear whether the private equity firm will find a buyer for the Freedom Group. “Several foreign gun manufacturers, including Forjas Taurus of Brazil and Heckler & Koch of Germany, could be possible acquirers, according to a banker familiar with the weapons industry.” Mr. Lattman continues: “Though the Freedom Group was unable to complete its initial public offering, the deal has been largely successful, with Cerberus already maki ng a small profit via a dividend payment, a person briefed on the investment said.”

ZUCKERBERG'S $500 MILLION GIFT  |  Mark Zuckerberg is making another big donation, this time using publicly traded stock. The chief executive of the social network announced a gift of 18 million Facebook shares to the Silicon Valley Community Foundation, a donation valued at about $500 million based on the closing price on Tuesday. “We will look for areas in education and health to focus on next,” Mr. Zuckerberg wrote. The donation follows Mr. Zuckerberg's gift of $100 million worth of Facebook shares to Newark public schools in 2010, when the company was private. He also signed on to Warren E. Buffett's Giving Pledge that year.

ON THE AGENDA  |  A Senate Banking subcommittee conducts a hearing at 10 a.m on consumer credit reports. Navistar International, FedEx and General Mills report earnings before the market opens. Bed Bath & Beyond announces results this evening. Data on housing starts for November are released at 8:30 a.m. Leon Cooperman of Omega Advisors and Glenn Hutchins of Silver Lake Partners are on CNBC at 8 a.m. Donald Drapkin, the onetime associate of Ronald O. Perelman and current chairman of Casablanca Capital, is on CNBC at 1:30 p.m. Kevin Rose, a general partner at Google Ventures, is on Bloomberg TV at 6 p.m.

KNIGHT SAID TO AGREE TO GETCO DEAL  |  The board of the Knight Capital Group agreed on Tuesday to sell the trading firm to a rival, the Getco Holding Company, according to reports in The Wall Street Journal and Bloomberg News. The reported price of $3.75 a share represents a 13 percent premium to Knight's closing price on Tuesday. The deal values Knight at about $1.8 billion, according to the Journal. Through a reverse merger structure, the privately held Getco will gain a public listing, the reports said. An agreement would end a difficult chapter for Knight, after a computer glitch caused crippling losses this summer. Getco's offer, which beat an all-cash proposal from Virtu Financial, is one-third composed of stock, according to Bloomberg.

THE MYTH OF GLOBAL DEAL-MAKING  |  There has been plenty of talk in the last few years of exporting Wall Street-style business to emerging market economies around the world. “Yet, there are increasing signs that global deal-making was always a myth,” Steven M. Davidoff writes in the Deal Professor column. The United States has led the world so far this year in initial public offerings and in volume of mergers and acquisitions, according to Renaissance Capital and Dealogic. “With the slowdown in once-hot emerging markets, the tide is going out, baring all of the problems and issues associated with global deal-making. China is a prime example,” Mr. Davi doff writes. “Now, with the Chinese I.P.O. market at a virtual standstill and the Shanghai market down more than 30 percent from its high last year, that avenue to riches is over. People are starting to say that investment in China resembles a ‘No Exit' sign.”

VETTING KENNETH CHENAULT  |  The White House is said to have approached Kenneth I. Chenault, the chief executive of American Express, about possibly joining President Obama's administration as Treasury secretary or Commerce secretary, according to Bloomberg News. In the event he is chosen, how would Mr. Chenault stand up to scrutiny? “Pretty favorably, actually,” DealBook's Peter Eavis writes. “As with many other banks, the government took an equity stake in American Express under the Troubled Assets Relief Program. While it received $3.4 billion under the program in January 2009, the company paid the money back six months later.”

Mergers & Acquisitions '

Penguin Settles E-Book Case Ahead of Merger  |  The Media Decoder blog reports: “Penguin, trying to ensure a clean slate before its planned merger with Random House, announced on Tuesday that it was settling a lawsuit brought by the Justice Department over the pricing of e-books.”
NEW YORK TIMES MEDIA DECODER

Wells Fargo Buys a Stake in Hedge Fund Firm  |  The bank bought a 35 percent stake in the Rock Creek Group, a Washington-based fund of hedge funds that oversees about $7 billion, Bloomberg News reports.
BLOOMBERG NEWS

SPX Said to Approach $4.2 Billion Deal for Gardner Denver  | 
REUTERS

Already Criticized, Freeport Deals Raise Questions of Conflicts  |  The brouhaha over Freeport-McMoran Copper and Gold's recent acquisitions illustrat es the sometimes unsatisfying way that corporate law deals with conflicts of interest, Steven M. Davidoff writes in the Deal Professor column.
DealBook '

Billabong Gets a Fresh Offer  |  A consortium led by a director and Sycamore Partners offered $556 million for Billabong International, but investors registered their displeasure, Reuters reports.
REUTERS

UniCredit Says It Might Sell Kazakh Unit  | 
REUTERS

INVESTMENT BANKING '

A Boon for Bank Shareholders, But Less So for Employees  |  Bloomberg News writes: “For employees at the biggest Wall Street banks, 2012 brought a humbling post-crisis reality of job cuts, lower pay and tarnished reputations. For investors, it was a happier story.”
BLOOMBERG NEWS

After Cab Ride, More Troubles for Morgan Stanley Banker  |  Criminal charges against William Bryan Jennings, the Morgan Stanley banker who pulled a pen knife on a cab drive r, were dropped. But Morgan Stanley officials say the banker violated the firm's code of conduct, The Wall Street Journal reports.
WALL STREET JOURNAL

Jefferies Posts $71.6 Million Profit in 4th Quarter  |  The investment bank said on Tuesday that it earned about $71.6 million in profit for the fourth quarter, up 48 percent from the same time a year ago as its core businesses showed marked improvement.
DealBook '

Jefferies's Exceptionalism  |  The investment bank has some advantages that its much bigger banking rivals lack - and that does not bode well for Wall Street firms when they report results next month, Antony Currie writes in Reuters Breakingviews.
DealBook '

Macquarie Plans to Shut Singapore Infrastructure Fund  | 
BLOOMBERG NEWS

PRIVATE EQUITY '

Carlyle Completes Sale of Auto Parts Supplier  |  The Carlyle Group sold Metaldyne, which it had bought in bankruptcy, for about $820 million to another private equity firm, Reuters reports.
REUTERS

Bain Capital Names Ex-JPMorgan Executive Senior Adviser  | 
WALL STREET JOURNAL

HEDGE FUNDS '

Third Point's Bet on Greek Bonds Pays Off  |  Third Point, the hedge fund run by Daniel S. Loeb, made a $500 million profit on i ts holdings in Greek bonds, The Financial Times reports, citing unidentified people familiar with the firm.
FINANCIAL TIMES

S.&P. Lifts Greece's Credit Rating Out of Default  | 
ASSOCIATED PRESS

Hedge Fund Fights for Argentina in Debt Battle  |  Gramercy Funds Management leads the group of hedge funds that participated in Argentina's debt restructuring, but now “past legal problems at the firm are coming into focus,” The New York Times reports.
< a href="http://www.nytimes.com/2012/12/19/business/gramercy-funds-in-middle-of-argentinas-debt-battle.html?ref=todayspaper"> NEW YORK TIMES

I.P.O./OFFERINGS '

Instagram's Plan to Make Money Prompts Backlash  |  The New York Times writes: “On Tuesday evening, the complaints, which included angry Twitter posts and images on Instagram protesting the changes, prompted action. Kevin Systrom, a co-founder of Instagram, wrote a blog post saying the company would change the new terms of service to make clearer what would happen to users' pictures.”
NEW YORK TIMES

VENTURE CAPITAL '

Online Retailers Open Physical Stores  |  The New York Times writes: “After years of criticizing physical stores as relics, even e-commerce zealots are acknowledging there is something to a bricks-and-mortar location.”
NEW YORK TIMES

LEGAL/REGULATORY '

Another SAC Trader Draws Scrutiny  |  Reuters reports: “U.S. authorities are examining trading by one of SAC Capital Advisor s' most successful portfolio managers, Gabriel Plotkin, as part of a probe into the $14 billion hedge fund firm's investment in Weight Watchers International Inc last year, according to a person familiar with the investigation.”
REUTERS

S.E.C. Said to Interview Candidate for General Counsel  |  Geoffrey Aronow, a partner at law firm Bingham McCutchen and a former enforcement director at the Commodity Futures Trading Commission, is a “leading candidate” to become the next general counsel of the Securities and Exchange Commission, according to Bloomberg News.
BLOOMBERG NEWS

U.S. Inquiry of Google Is Expected to Continue in January  |  The expected delay comes after the chairman of the Federal Trade Commission consistently said the agency was aiming to finish the inquiry by the end of 2012, The New York Times reports.
NEW YORK TIMES

The American at the Bank of England  |  Adam Davidson writes in The New York Times Magazine about Adam Posen, a member of the Monetary Policy Committee of the Bank of England. “It's impossible to imagine the uproar if President Obama ever nominated a British academic to work at the highest level of the Federal Reserve. But when Posen arrived, in September 2009, his job was to provide an outsider's perspective.”
NEW YORK TIMES

Former Managing Director Sues Deutsche Bank for Age Discrimination  | 
REUTERS

The Impact of the Latest Insider Trading Convictions  |  The convictions of Anthony Chiasson and Todd Newman in a lucrative insider trading case may well send a message to Matth ew Martoma, the former SAC Capital portfolio manager, about the risks he runs if he fights recently filed charges, Peter J. Henning writes in the White Collar Watch column.
DealBook '

How Local Tax Rates Affect High-Income Professionals  |  What impact do high state and local taxes have on Wall Street executives and fund managers? The example of professional athletes offers some insights, Victor Fleischer writes in the Standard Deduction column.
DealBook '

Treasury to Sell G.M. Stake Within 15 Months

11:13 p.m. | Updated

For months, General Motors executives have been pressing Washington to sell its stake in the company, desperate to rid itself of the yoke of being called Government Motors.

Nearly four years after what became a $49.5 billion bailout, the Treasury Department announced on Wednesday that it would sell 200 million shares back to the company for $5.5 billion, then sell an additional 300 million shares by early 2014.

Currently, the exit would produce a loss of more than $12 billion for taxpayers - one of the few major bailouts that did not produce a return. Yet, after the sale of its remaining stake in the American International Group last week, the government can now claim that it has largely unwound the huge, poli tically contentious corporate rescues it undertook amid the worst economic crisis since the Great Depression.

“This can't happen soon enough,” said Henry T. C. Hu, a professor at the University of Texas School of Law. “You don't want an industrial corporation being subject, in effect, to government limits.”

The Treasury's presence in G.M. disturbed investors and prompted some consumers to avoid its products in an increasingly competitive United States auto market. Independence, however, will leave the company with no excuse as it battles domestic and foreign rivals, many of whom did not turn to the government for a lifeline.

When G.M. was given its first loans by the Bush administration, the company was still the industry leader, with a 22 percent share of the market in the United States. After bankruptcy and its re-emergence as a public company, that dominance has eroded.

As of the end of November, G.M.'s market share had slipped below 18 percent this year, and it was struggling with hefty inventories of some major models like the Silverado pickup and the Malibu midsize sedan.

And while General Motors has benefited from shedding debt and four brands in bankruptcy, it has considerable work ahead to rebuild a product lineup that withered during its financial crisis. For one, its hometown rival, Ford Motor, earns more money in North America despite selli ng fewer vehicles.

“There's no doubt that General Motors is in a better position now than it was four or five years ago,” said Michelle Krebs, an analyst with the car research site Edmunds.com. “The key is to watch and see if the company falls back into old habits.”

G.M. executives say that the company has changed its ways.

“As today's news travels around the world, the question will be asked, ‘Did G.M. truly learn the lessons of the bankruptcy?' ” Daniel F. Akerson, the chief executive, wrote in an internal memo. “Our results show that we are changing the company so we never go down that path again.”

The sale is expected to bolster morale inside the company.

“It's probably more significant on the employee front than on the automotive side,” s aid Mike Wall, director of analysis at the research firm IHS Automotive. “After what they have gone through the past four years, this is an emotional event and a rallying point for the future.”

Executives were eager to shed the government's 32 percent ownership stake, but the election in November delayed any talk of a share buyback. But soon after President Obama's victory, G.M.'s chief financial officer, Daniel Ammann, called Timothy G. Massad, the Treasury Department's assistant secretary for financial stability, to begin negotiations, according to people with direct knowledge of the matter.

An offer to buy back a substantial number of G.M. shares at the market price - no premium for the Treasury - was rejected. Several weeks of start-and-stop negotiation followed, during which the company demanded a firm timetable for the government's exit.

By about 5 p.m. Tuesday, G.M.'s board had voted to offer $27.50 for the Treasury stake, an approximately 8 perc ent premium to the stock price at that day's close. By about 7:30 p.m., the sides signed off on the deal.

Despite the relief of reaching an accord, G.M. executives planned no celebration or new marketing campaign, feeling that might look unseemly or even arrogant.

Wednesday's deal all but guarantees a loss for taxpayers. The remaining shares need to be sold at close to $70 each to break even. But a Treasury official argued that the company's stock hadn't surpassed $27.50 since the government was legally cleared to sell additional shares after G.M.'s initial public offering.

The Obama administration has long argued that the rescue was always about saving the American auto industry, not making money. On Wednesday, Treasury claimed to have saved more than one million jobs through the bailout.

The administration is hoping to offset the losses from the G.M. rescue with the profits from its A.I.G. investments and the bank recapitalization program, which tog ether have reaped about $46 billion for taxpayers.

The Treasury Department has also long favored a quick exit from its investments rather than turning a profit. It has already divested its stake in Chrysler, selling it last year to Fiat, the Italian carmaker that was a crucial ally during Chrysler's bankruptcy.

“The government should not be in the business of owning stakes in private companies for an indefinite period of time,” Mr. Massad, of the Treasury Department, said in a statement. “Moving to exit our investment in G.M. within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protec ting taxpayer interests.”

But the government still owns large portions of other firms, including 74 percent of Ally Financial, G.M.'s former lending arm.

Being a ward of the state has cost G.M. more than its reputation. The company has been subject to a number of restrictions that it claims have hampered its ability to attract fresh talent. Some of those limits, including the use of corporate aircraft, will be lifted after the stock buyback.

But the biggest, a cap on the compensation of top executives, will remain in place until the government sells off its entire stake.

The news was welcomed by some of G.M.'s biggest investors. Among them is Greenlight Capital, a prominent hedge fund that has called the company an “ugly duckling” underappreciated by the market.

“We appla ud G.M. management for unlocking shareholder value by releasing excess capital and beginning a resolution of the government stake overhang,” David Einhorn, the head of Greenlight, said in a statement.

G.M. has improved in several respects. Its annual profit has risen over the last two years, and as of the end of the year will have about $38 billion in cash and credit lines to draw upon.

But much hard work remains. Ford has had a head start on G.M. in globalizing its products and spreading out development costs. And during its bankruptcy, G.M. had to delay some new models, costing it valuable time in reacting to market trends

Given the challenges that lie ahead for G.M., the company cannot appear to be celebrating or placing too much emphasis on the government's ultimate exit.

“They have to keep their head down and keep plugging away and executing their strategy,” Mr. Wall of IHS Automotive said. “It is the beginning of the end of government ow nership, but way too soon to celebrate anything.”

Knight Capital and Getco to Merge

Knight Capital, the stock market-making firm that nearly collapsed last summer after a $440 million trading glitch, has reached an agreement to merge with Getco, the Chicago-based high-speed trading firm.

The $1.4 billion deal, which was announced on Wednesday, will give privately held Getco a public listing in a new holding company.

“The combination of Knight and Getco will create a powerful, dynamic firm with an unmatched ability to deliver results for clients,” Daniel Coleman, Getco's chief executive, said in a statement. “Market participants will benefit from industry-leading services, and our larger capital base will provide strong support for existing operations, as well as an attractive currency for growth.”

Under the terms of the deal, shareholders of Knight other than Getco can receive $3.75 for every share or one share in the new holding company. Getco will get 233 million shares in the new company, and its 57 million shares of Knight will be retired.

Getco, a big Knight shareholder, was among the financial firms that swooped in with a $400 million rescue package for the firm, based Jersey City, in August, days after its trading loss.

The firm that led and assembled the lifeline, Jefferies Group, is heading up the financing for the merger, including refinancing all existing Knight and Getco debt. The private equity firm General Atlantic is making an additional $55 million equity investment.

Sandler O'Neill & Par tners and the law firm Wachtell, Lipton, Rosen & Katz advised Knight. Jefferies and the law firm Sullivan & Cromwell advised Getco. Bank of America Merrill Lynch provided a fairness opinion to the board of Getco.

S.E.C. Moves Against Day-Trading Broker

SHANGHAI - The Securities and Exchange Commission has revoked the license of a Canadian brokerage firm over failing to prevent overseas day traders that used its system from manipulating stocks in the United states.

The firm, the Biremis Corporation, worked with more than 5,000 day traders in 30 countries, including China, Nigeria and Uzbekistan, allowing them to trade stocks in the United States and other markets. Biremis, which is affiliated with Swift Trade of Canada, lost its license in the United States and its two owners were barred from the securities industry.

Most of Biremis's trading operations are based in China, where there are few regulations covering overseas trading.

The S.E.C. said on Tuesday that from 2007 to 2010, day traders working with Biremis engaged in manipulative practices known as “layering,” “gaming” or “spoofing,” which involved entering trades with no intention of executing them, simply to trick other buyers and s ellers into trading at unfavorable prices. The S.E.C. said Biremis and its owners ignored red flags and warnings about manipulative trading and did not act to stop it.

The firm helped manage one of the world's largest groups of day traders - people who speculate on stocks by buying and selling on the same day.

In recent years, United States and Canadian trading firms like Swift, Hold Brothers and Title Trading had been recruiting young people in China to use the companies' software and capital that they supplied to make money on securities listed in the United States and other markets.

Exactly how the day traders could make money trading in overseas markets was a mystery to many trading experts, since there is fierce competition and trading fees could mount.

Biremis traders had access to about $2.4 billion in buying power in 2009, according to the S.E.C. But the broker had been sanctioned by regulators in several countries, including Canada and Brita in.

Peter Beck, 57, and Charles Kim, 40, the owners of Biremis, were fined $250,000 each and barred from the industry. Mr. Beck also helped found Swift Trade.

Mr. Beck and Mr. Kim could not be reached for comment early Wednesday.

$3.13 Billion Specialty Insurance Deal

The Markel Corporation, a specialty insurer, on Wednesday said it had agreed to acquire a rival, Alterra Capital Holdings, for $3.13 billion.

Under the terms of the deal, Markel will offer 0.04315 of a share and $10 in cash for every Alterra share, representing a premium of nearly 34 percent to Alterra's closing price of $23.15 on Tuesday.

Steven A. Markel, vice chairman of Markel, in a statement called Alterra “an impressive company with proven worldwide underwriting operations in product lines that we believe are highly complementary to Markel's existing lines.”

“In particular, the addition of Alterra's reinsurance and large account insurance portfolios will serve to diversify and strengthe n Markel's current book of specialty insurance business,” he said.

Based in Richmond, Va., Markel has patterned itself after Warren E. Buffett‘s Berkshire Hathaway, a 2008 column in Barron's noted. After the deal, Markel said it expected to write annual gross premiums of roughly $4.4 billion and to have some $6 billion in equity.

Alterra, based in Hamilton, Bermuda, is the product of a 2010 merger between the Max Capital Group and Harbor Point.

Citigroup and the law firms Debevoise & Plimpton and Appleby's advised Markel. Bank of America Merrill Lynch acted as financial adviser to Alterra and the law firms Akin Gump Strauss Hauer & Feld and Conyers Dill & Pearman provided legal counsel.

Kodak to Sell Patents for $525 Million

Kodak to Sell Digital Imaging Patents for $525 Million

Eastman Kodak once described the sale of 1,100 digital imaging patents as a windfall that could prop up and even save the beleaguered company.

Kodak, known for cameras, is working to strengthen itself.

On Wednesday, the sale was finally announced, but instead of bringing as much as $2.6 billion as Kodak once predicted, the selling price was far short of that amount, at about $525 million. The buyer was a consortium that includes many of the world's biggest technology firms, among them Apple, Google, Facebook and Samsung Electronics.

Kodak officials said the sale was another step toward emerging from bankruptcy, and turning around a decades-long slide for the Rochester-based corporation.

“This monetization of patents is another major milestone toward successful emergence,” Antonio M. Perez, Kodak's chief executive, said in a news release. “Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company.”

Among the benefits of the sale, Mr. Perez noted, was that it would allow Kodak to largely repay a debtor-in-possession loan it obtained nearly a year ago. It also satisfied a major provision for an $830 million financing facility, approved in November, that required Kodak to sell its patent portfolio for no less than $500 million.

Kodak will retain a license to use the digital imaging portfolio patents in its future businesses, and for those businesses that it is selling.

Part of the sale will be paid by a consortium of technology companies that was organized by Intellectual Ventures and RPX Corporation. The licensees will receive rights to the digital imaging patent portfolio and certain other Kodak patents.

“No single company could have completed this deal, and by creating a consortium we were able to ensure that members get access to these important invention rights,” according to a news release by Intellectual Ventures, a firm in Bellevue, Wash., that invests in patents. “The patent marketplace is very active, and I.V. expects to be involved in more complex transactions like this in the future.”

Mr. Perez said Kodak was now focused on building its commercial imaging business, which includes printing and packaging for businesses. The company believes it has “significant competitive advantages and strong growth prospects,” according to its news release.

The sale is subject to the approval of the bankruptcy court. Kodak filed for Chapter 11 in January. In the time since, it has withdrawn from the market for consumer inkjet printers, which were once part of Mr. Perez's turnaround strategy, and sold its film business, which had made Kodak a household name.

“There has been strong interest in that business, as well as our document imaging business that is also for sale, and we are on track to sell them in the first half of 2013,” Christopher K. Veronda, a Kodak spokesman, said in an e-mail.

As for the sale price of its patent portfolio, Mr. Veronda noted that the $2.6 billion estimate was made by a third party that Kodak cited in court papers.

“Certainly other recent speculation was around a fraction of the $525 million we received,” he said. “The price paid is always a reflection of what buyers are willing to pay for an asset or a license.”

A version of this article appeared in print on December 20, 2012, on page B3 of the New York edition with the headline: Kodak to Sell Digital Imaging Patents for $525 Million.

Morgan Stanley Makes Donation After Sandy Hook Massacre

Morgan Stanley, where three employees lost family members in the Sandy Hook Elementary School shootings, has donated $150,000 to charities honoring the victims.

“No word or deed can right these wrongs or take away our colleagues' suffering â€" but as a firm, we can lend them support,” James Gorman, the company's chairman and chief executive, wrote on Tuesday afternoon in a memo to the staff that was reviewed by The New York Times.

Mary Sherlach, the school psychologist, was married to Bill Sherlach, a financial adviser at the bank. Jack Pinto, 6, was the son of Dean Pinto, a lawyer at Morgan Stanley. Grace McDonnell, 7, was the niece of Paul Minella, who works in the company's capital markets division within Morgan Stanley's wealth management unit.

Last week, a gunman opened fire in the elementary school in Newtown, Conn., killing 20 children and six adults. He then shot himself. The gunman killed his mother at their home before he went to the school . The massacre has spurred a national call for greater gun control.

In addition, the spouses of two Morgan Stanley employees were teachers at the school but were not injured.

So far, about 1,400 employees of Morgan Stanley have made pledges, contributing just over $1 million to various charities. Mr. Gorman said  the company would match all employee contributions.

This week, Morgan Stanley held a memorial service at its offices in Westchester County, which was attended by Mr. Gorman and other senior Morgan Stanley executives.

This post has been revised to reflect the following correction:

Correction: December 19, 2012

An earlier version of this article misstated some of the details of the school shootings in Newtown, Conn. The shootings took place in several locations within the school, not in one classroom, and the victims included 20 children and seven adults, including the gunman -- not eight adults. An eighth adult v ictim, the gunman's mother, was killed in their home.

2 Former UBS Traders Exposed in Rate-Rigging Case

As the Justice Department announced its case against UBS, prosecutors also took aim at two former UBS trader at the center of the rate-rigging scheme, the first criminal action against individuals tied to the broad investigation.

On Wednesday, the Justice Department charged Tom Hayes and Roger Darin with conspiracy to commit wire fraud. Mr. Hayes also faces an additional count of wire fraud and another related to price fixing.

“By causing UBS and other financial institutions to spread false and misleading information,” Attorney General Eric Holder said in a statement, “these alleged conspirators â€" and others at UBS â€" manipulated the benchmark interest rate upon which many consumer financial products â€" including credit cards, student loans, and mortgages â€" are frequently based.

The criminal charges against the former traders underscore the new aggressive phase of the multiyear investigation into rate manipulation. Global authorities are look ing into the actions of more than a dozen big banks involved in the rate-setting process. The inquiry centers on key benchmarks like the London interbank offered rate, or Libor, which underpins trillions of dollars of financial products.

The Justice Department's case portrays brazen acts of wrongdoing by the two employees. According to prosecutors, the two men worked with UBS colleagues and traders at other banks to influence interests and increase their own profits for several consecutive years. At one point in early 2007, Mr. Darin told a junior employee that a main consideration for rates submissions was the needs of Mr. Hayes and his fellow yen swaps traders.

The gains could be substantial, according to prosecutors. Trading records at UBS show that Mr. Hayes held a position on a single day that would have profited by $2.1 million given the movement in a yen-dominated Libor rate. He looked to make $459,000 on another one, according to prosecutors.

The Ju stice case lays out a series of instant messages on Bloomberg terminals in which Mr. Hayes and Mr. Darin execute their plans to influence Libor.

In one instance, Mr. Darin was hesitant to adjust the rate submissions too aggressively for fear of raising red flags. “i dun mind helping on your fixings,” Mr. Darin wrote to Mr. Hayes via Bloomberg. “but i'm not setting libor 7bp away from the truth,” adding “i'll get ubs banned if i do that.”

Mr. Hayes was also willing to reward others to further his efforts, according to the complaint. At one point, Mr. Hayes trumpeted the work of an outside broker who helped him, saying “i reckon i owe him a lot more.” Another broker responded via Bloomberg that the person was “ok with an annual champagne shipment,” and “a small bonus every now and then.”

As the Justice Department ramped up its investigation, Mr. Hayes took efforts to dissuade former colleagues to talk to the government. According to th e complaint, Mr. Hayes advised a junior trader to “remove any belonging from Japan” and return home.

“The U.S. Department of Justice, mate, you know, they're like…the dudes who…put people in jail.” Mr Hayes warned. “Why the hell would you want to talk to them.”

Ally Repays Last of Debt Borrowed Under F.D.I.C. Guarantee

Ally Financial, the former G.M.A.C., said Wednesday that it had repaid the last of the debt it had borrowed in response to the financial crisis under a Federal Deposit Insurance Corporation program.

Ally, which became a bank holding company after the 2008 crisis, said it had repaid $4.5 billion in debt that was guaranteed by the F.D.I.C. under the Temporary Liquidity Guarantee Program. Ally had repaid another $2.9 billion of debt guaranteed under the program on Oct. 30.

Under the program, banks and other financial institutions issued the debt themselves while the F.D.I.C. guaranteed it. That guarantee is set to expire at the end of this year, said an F.D.I.C. spokesman, David Barr. Dozens of banks participated in the program, and most of the debt has matured leading up to the end of the guarantee.

Jeffrey Brown, Ally's senior executive vice president for finance and corporate pla nning, said that the debt repayment was “an important milestone for Ally as we continue our plans to exit the government support programs utilized during the financial crisis.”

Ally's predecessor, the General Motors Acceptance Corporation, staved off collapse after a $17.2 billion government infusion. Many of its problems stemmed from bad mortgages in its Residential Capital, or ResCap, unit. That unit filed for Chapter 11 bankruptcy in May.

The Treasury Department still holds a 74 percent stake in Ally. It also holds $5.9 billion worth of convertible preferred securities and has recouped about $5.8 billion of its investment.

N.Y.S.E. Is in Talks for Merger

An $8 billion exchange merger is in the works that underscores how the global market for derivatives has eclipsed that for stocks.

The owner of the venerable New York Stock Exchange is in talks to be acquired by an upstart commodities and derivatives trading platform, according to people briefed on the matter. The IntercontinentalExchange is expected to offer about $33 a share, with two-thirds of that in stock, one of these people said. That represents a premium of 37 percent to NYSE Euronext's closing stock price on Wednesday.

A deal could be announced as soon as Thursday morning, though these people cautioned that talks may still break down.

While the New York Stock Exchange, with its opening bell and floor traders, has been the public image of a stock market for two centuries, it is NYSE Euronext's businesses in the over-the-counter trading of derivatives - including the Liffe market in London - that appear to be the main attraction in the merger talks.

IntercontinentalExchange, or ICE, was founded in 2000 and is based in Atlanta. It competes fiercely with the CME Group, a derivatives trading powerhouse that owns the Chicago Mercantile Exchange and the Chicago Board of Trade.

More than a year ago, ICE teamed up with the New York exchange's chief rival, the Nasdaq OMX Group, to make a hostile bid for NYSE Euronext. The two had sought to break up their older competitor's plan to merge with Deutsche Börse of Europe, which would have created a powerful trans-Atlantic company with a big market share in the trading of stocks and derivatives.

Under the terms of that deal, valued at about $11 billion, Nasdaq would have taken NYSE Euronext's equities busines s, while ICE would have assumed the derivatives operations.

But the Justice Department threatened to block that joint offer, on the ground that combining NYSE Euronext and Nasdaq would create an overwhelming monopoly in the world of stock trading.

The planned merger of NYSE Euronext and Deutsche Börse itself fell apart early this year after European antitrust regulators opposed the combination, on the ground that it would corner too much of the market in exchange-traded derivatives.

But the newest merger might pose fewer problems because ICE focuses on commodities like oil, natural gas and cotton, while NYSE Euronext plies mainly in stock and stock options and derivatives.

And unlike several proposed mergers, like that of the Singaporean and Australian stock exchanges, which fell apart last year on nationalist concerns, this potential deal would take place between two companies from the same country.

After its deal with Deutsche Börse col lapsed, NYSE Euronext was left to conduct some soul-searching. At the time, the company said that it would most likely look to smaller acquisitions and cost-cutting.

The trading of stocks has become a less attractive business. The New York Stock Exchange is now responsible for only about 11 percent of all stock trading, while NYSE Euronext's electronic Arca platform accounts for another 12 percent, according to industry data.

The average number of American stocks traded each day has fallen every year since 2009, and has continued to decline over the course of 2012, according to statistics from Credit Suisse. The volume of trading in futures and options, where ICE is focused, has also fallen since last year, but less than in stocks.

A tie-up with ICE, however, would link NYSE Euronext to one of the i ndustry's fastest-growing exchanges. ICE has some of the highest profit margins in the business.

It might also reap some of the benefits that have driven a decade-long spree of consolidation among exchanges. Such companies have long sought to gain the greater scale and cost savings that come from combining back-end operations and staff cuts.

Still, the potential merger would sharply expand ICE, which despite its bigger market value is a smaller company. It has a little more than 1,000 employees, while NYSE Euronext has 3,077.

It isn't clear whether other exchanges would seek to break up the proposed transaction. The CME Group is a candidate to express opposition. But the firm appeared to have little appetite in bidding for NYSE Euronext last year, and it may run into antitrust concerns.

Other potential spoilers, including the Hong Kong and Singaporean exchanges, could run into nationalist concerns.

Shares of NYSE Euronext rose more than 21 p ercent in after-hours trading, to $29.20, after The Wall Street Journal reported news of the talks.

Nathaniel Popper contributed reporting.

Ireland Passes Law to Bolster Housing

Ireland's Parliament passed a sweeping new law on Wednesday that could let thousands of borrowers reduce the amounts they owe on their mortgages.

The impact of the so-called personal insolvency bill, which overhauls several aspects of Ireland's consumer debt laws, will be closely watched in other countries still grappling with housing busts.

The bill contains a groundbreaking measure that would let stressed borrowers work with their banks to write down the value of their mortgages. The intent is to make the loans more affordable and avoid a wave of foreclosures.

In America and Europe, officials have generally shied away from policies that would make mortgage write-downs a major part of efforts to clean up their housing messes.

In a news release, Ireland's Department of Justice and Equality, which handled the legislation, said the bill was “a fundamental part of the government's strategy to return this country to stability and economic growth.”

The department acknowledged that the part of the bill that could lead to write-downs was unorthodox, saying it introduced “a concept unique in international insolvency law.”

The law, however, may not translate that readily to the United States.

There have been very few foreclosures in Ireland. The government owns large stakes in the biggest mortgage banks, and officials instructed the banks to refrain from repossessing large numbers of homes. As a result, uncertainty hangs over struggling households and weighs on the banks. The new bill aims to resolve that limbo.

Banks are expected to work with borrowers to make their mortgages payable. Where deals are possible, the borrower and the bank will be on a much more certain footing. Where there is too much debt, the banks will have more leeway to foreclose.

Nearly 18 percent of Iri sh mortgages on first homes were in default at the end of September, according to the Central Bank of Ireland. Ireland has nearly $150 billion of mortgage debt on first homes. Defaults are also high on mortgages taken out on investment properties, a big part of Ireland's housing market.

Though the new law was constructed carefully to avoid unintended circumstances, it still carries significant risks.

It could prompt borrowers to default even if they can afford to repay the loan. That could lead to unexpected losses for Ireland's banks, which could undermine their ability to finance a recovery. In a letter in September, Mario Draghi, the pres ident of the European Central Bank, expressed concern about the potential costs the bill could place on Ireland's banks.

The banks could still decline mortgage write-downs even when they may help borrowers. As the law is written, a majority of creditors have to agree to a write-down. Consumer advocates have criticized this part of the bill, saying it tips the balance of power in favor of the banks.

Alan Shatter, Ireland's minister of justice, responded to those concerns on Wednesday. In the department's news release, he said, “The reality is that it is in the best interests of both debtors and creditors to seek to conclude an acceptable and workable bilateral arrangement.”

Leniency Denied, UBS Unit Admits Guilt in Rate Case

UBS on Wednesday became the first big global bank in more than two decades to have a subsidiary plead guilty to fraud.

UBS, the Swiss bank, scrambled until the last minute to avoid that fate. A week ago, in a bid for leniency over interest-rate manipulation, the bank's chairman traveled to Washington to plead his case to the Justice Department, according to people briefed on the matter. Knowing the long odds, the chairman, Axel Weber, asked the criminal division for a lighter punishment.

But the government did not budge. With support from Attorney General Eric H. Holder Jr., the agency's criminal division decided the bank's actions were simply too egregious, people briefed on the matter said.

On Wednesday, UBS announced it would plead guilty to one count of felony wire fraud as part of a broader settlement. With federal prosecutors, British, Swiss and American regulators secured about $1.5 billion in fines, more than triple the only other rate-rigging case, against Barclays. The Justice Department also filed criminal charges against two former UBS traders.

The guilty plea and the individual charges provide the Justice Department with a long-awaited case to prove it is taking a hard line against financial wrongdoing.

Since the financial crisis, the government has faced criticism that it has not brought significant criminal actions. The money-laundering case against HSBC, which averted indictment when it agreed instead last week to pay $1.9 billion, raised more concerns that the world's largest and most interconnected banks were too big to indict.

With UBS, prosecutors wanted to send a warning.

The Justice Department's decision stops short of imperiling the broader financial system because it shields UBS's parent company from losing its charter, among other major repercussions. But by securing a guilty plea against a subsidiary, the department has shown that it is willing to punish severely one of the world's most powerful banks. It was the first guilty plea from a major financial institution since Drexel Burnham Lambert admitted to six counts of fraud in 1989.

< p>“We are holding those who did wrong accountable,” Lanny A. Breuer, the head of the Justice Department's criminal division, said at a news conference on Wednesday. “We cannot, and we will not, tolerate misconduct on Wall Street.”

The rate-rigging inquiry, which has ensnared more than a dozen big banks, is focused on major benchmarks like the London interbank offered rate, or Libor. Such rates are central to determining the borrowing rates for trillions of dollars of financial products like corporate loans, mortgages and credit cards.

The fallout from the UBS case is expected to increase pressure on some of the world's largest financial institutions and spur settlement talks across the banking industry. The Royal Bank of Scotland has said it expects to pay fines before its next earnings statement in February, while American institutions, including JPMorgan Chase, also remain in regulators' cross hairs.

The UBS case highlighted a pattern of abuse that authorities have uncovered in a multiyear investigation into the rate-setting process. The government complaints laid bare a 10-year scheme, describing how the bank had reported false rates to squeeze out extra profits and deflect concerns about its health during the financial crisis.

“The settlement reflects the magnitude of the wrongdoing and how critical it is that these be honest and reliable,” said Gary S. Gensler, chairman of the Commodity Futures Trading Commission, the American regulator that opened the UBS investigation.

Six months ago, authorities did not seem ready to take an aggressive stance with UBS.

They had just scored their first Libor settlement, a $450 million payout from Barclays. UBS, which had already struck a conditional immunity deal with the Justice Department's antitrust division, figured its penalty would be similar.

The immunity deal, some UBS executives contended, would protect the bank from criminal charges. Even officials at th e Justice Department were skeptical about the prospect of levying large penalties, according to people briefed on the matter.

Then the tone shifted this fall. After examining thousands of e-mails and hours of taped phone calls, the agency's criminal division concluded that the conduct at the Japanese subsidiary warranted a criminal charge.

Agency officials also cited the bank's repeated run-ins with authorities. For example, the Swiss bank had agreed in 2009 to pay $780 million to settle charges that it had helped clients avoid taxes.

Not everyone in the Justice Department agreed on the course of action. According to people briefed on the matter, the antitrust unit pushed for less-onerous penalties, citing the cooperation of UBS. With officials split over how to proceed, Mr. Holder cast the deciding vote in favor of securing a guilty plea from the subsidiary.

The move caught UBS off guard. The bank dispatched dozens of lawyers to Washington to negotia te the fine print of the deal, setting up makeshift offices at the Four Seasons hotel in Georgetown.

Mr. Weber joined the lawyers, in a typical last-ditch appeal to the criminal division. Last Wednesday, Mr. Weber and his general counsel explained to the agency how UBS had overhauled its management ranks, bolstered internal controls and generally tried to clean up its act.

Mr. Breuer and other Justice Department officials agreed to consider the bank's request to abandon the guilty plea, people briefed on the talks said. But hours later, a prosecutor phoned to say the agency was standing firm.

UBS agreed to the guilty plea, conceding that the Japanese unit would otherwise most likely face an indictment. In turn, prosecutors credited the bank for its recent efforts to improve.

“We are pleased that the authorities gave us credit for the important and positive changes we have already made,” Mr. Weber said in a statement.

The Commodity Futures Tr ading Commission adopted a similarly tough attitude.

Since Thanksgiving, UBS has tried to negotiate lower penalties with the regulator, according to people briefed on the matter. But David Meister, the agency's enforcement chief, would not back down from $700 million in fines, an agency record.

“Even for a megabank, that amount serves as a direct deterrent,” said Bart Chilton, a commissioner at the regulator.

Authorities' strict stance stems from the extent of the bank's actions. The Commodity Futures Trading Commission cited more than 2,000 instances of illegal acts involving dozens of UBS employees across continents.

The most significant wrongdoing took place within the Japanese unit, where traders colluded with other banks and brokerage firms to tinker with yen-denominated Libor and bolster their returns.

In colorful e-mails, instant messages and phone calls, traders tried to influence the rates. “I need you to keep it as low as possibl e,” one UBS trader said to an employee at another brokerage firm, according to the complaint filed by the Financial Services Authority of Britain.

As the employees carried out the ostensible manipulation, they also celebrated the efforts, with one trader referring to a partner in the scheme as “superman.” “Be a hero today,” he urged, according the complaint.

The Justice Department also took aim at two former UBS traders, Tom Hayes, 33, and Roger Darin, 41, bringing the first criminal charges against individuals connected to the Libor case.

Like other traders at UBS, Mr. Hayes was willing to reward others for their efforts. He trumpeted the work of an outside broker who had helped, writing in a message, “i reckon i owe him a lot more.” Another broker responded that the person was “ok with an annual champagne shipment,” and “a small bonus every now and then.”

As prosecutors ramped up their investigation, Mr. Hayes even tried to dis suade former colleagues from cooperating, the complaint said. “The U.S. Department of Justice, mate, you know,” he said, they are the “dudes who…put people in jail. Why…would you talk to them?”

Mark Scott, Ashley Southall and Julia Werdigier contributed reporting.

Pogue\'s 12 Days of Gadgets: Cirago iAlert Tag and Cobra Tag

December 19, 2012, 3:12 pm

Oh, holy night - you've forgotten your phone!

Why can't somebody invent a little beeper for your key ring? If you walk away from your smartphone (iPhone, Android phone or BlackBerry), your key chain beeps to alert you.

And it could work the other way, too. If you leave your keys somewhere, the phone beeps to alert you as you walk away!

That's exactly the point of the Cirago iAlert Tag ($50) and the similar but more polished Cobra Tag ($70), the subjects of Day 10 in Pogue's 12 Days of Gadgets Under $100.< /p>

They look like cheap black key fobs of the sort that unlock your car. Each pairs to your phone using the battery-frugal Bluetooth 4.0. (The iAlert uses a hearing-aid battery; the Cobra Tag has a built-in five- to seven-day battery that recharges from a USB cord.)

Then, if you ever leave your phone behind - on a cafe table, for example - your keys start beeping. It's a high, insistent beep. You'll smack your forehead and go back to get the phone before it's too late.

It works the other way, too: if you pick up your phone but leave your keys behind, the phone beeps to let you know. In the case of the Cobra, it can actually start playing a song of your choice.

And if the phone is lost somewhere in your living room, you can press a button on the fob to make it start beeping, as long as it's within about 30 feet.

The Cobra has a backup feature, too: if your keys and your phone are separated and, for some reason, you don't notice, the phone sends an e -mail notification that records the last known time it was near the key chain, along with GPS coordinates. You can specify multiple e-mail addresses for this purpose, or even request that it auto-post your little phone distress call to Facebook or Twitter. (“Hey, world - help me find my keys?”)

Neither one is exactly built like a Lexus. (The iAlert is especially flimsy.) But maybe small, light and cheap is just the point; if something weighs nothing, you won't mind adding it to your key ring. You'll forget all about it - until the moment comes when you desperately need it.

UBS E-Mails Show How Traders Gamed the System

LONDON â€" For some traders, trying to manipulate a global interest rate benchmark was somehow heroic.

“Be a hero today,” a trader at UBS asked (in all caps) a broker at another firm in 2009 when the two discussed a specific inter-bank lending rate in an e-mail. But the financial regulators found little heroism in the conduct.

The exchange is among the colorful and brazen e-mails between UBS traders and brokers outside the firm that were published on Wednesday by the Financial Services Authority of Britain. The F.S.A. and other global regulators reached a $1.5 billion settlement with the Swiss banking giant over a multiyear scheme to manipulate interest rates.

In an exchange in July 2007, a broker was told to make sure the trader at UBS knows that he owes a favor:

Panel Bank 1 submitter: â €œAlright, well make sure he [Trader A] knows.”

Broker B: “Yeah, he will know mate. Definitely, definitely, definitely.”

Panel Bank 1 submitter: “You know, scratch my back yeah an all”

Broker B: “Yeah oh definitely, yeah, play the rules.”

In another exchange on July 29, 2009, a trader who was not working for UBS received a warning about a future change in a six-month rate.

The trader “could be in for a shock going into August,” the broker said, according to the F.S.A. documents. “the three muscateers [sic] could do him a fair bit of damage.”

The reference to the three musketeers was to individuals at three banks, including UBS, according to the regulator.

The e-mails show the close relationship between UBS traders and employees at other banks and brokers involved in the setting of the yen-denominated Libor.

A UBS trader who was handling interest rate derivatives made 39 requests in July 2009 to an unidentified brokerage firm. In one request about a six-month rate, requested a “high 6m superman … be a hero today.” To which the broker replied “Ill try mate … as always”, the F.S.A. documents showed.

There was also some joking in the exchanges. During a chat by the same trader with a different broker, the broker said: “putting the captain caos [sic] outfit on as we speak”.

Similar e-mail exchanges were released when regulators reached a $450 million settlement with Barclays in June over rate manipulation. In those exchanges, traders had called each other affectionately “big boy” and promi sed each other bottles of Bollinger champagne for their help in fiddling with the rate.

Yet some of the UBS e-mails released on Wednesday were much cruder.

One UBS trader openly discussed paying the broker for his help on trying to move the benchmark rate.

In an e-mail exchange on Sept. 18, 2008, the trader wrote “If you keep 6s [referring to the six-month yen Libor rate] unchanged today … I will [expletive] do one humongous deal with you … Like a 50,000 buck deal, whatever … I need you to keep it as low as possible … if you do that …. I'll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want … I'm a man of my word”, according to the F.S.A. document.

As Unit Pleads Guilty, UBS Pays $1.5 Billion Over Rate Rigging

UBS, the Swiss banking giant, announced a record settlement with global authorities on Wednesday, agreeing to a combined $1.5 billion in fines for its role in a multiyear scheme to manipulate interest rates.

In a sign that officials are increasingly taking a hard line against financial wrongdoing, the Justice Department also secured a guilty plea from the bank's Japanese subsidiary, sending a warning shot to other big banks suspected of rate rigging. The UBS subsidiary, which agreed to plead to a single count of wire fraud, is the first unit of a big bank to agree to criminal charges in more than a decade.

The cash penalties represented the largest fines to date related to the rate-rigging inquiry. The fine is also one of the biggest sanctions that American and British authorities have ever levied against a financial i nstitution, falling just short of the $1.9 billion payout that HSBC made last week over money laundering accusations.

The severity of the UBS penalties, authorities said, reflected the extent of the problems. The government complaints laid bare a scheme that spanned from 2005 to 2010, describing how the bank reported false rates to squeeze out extra profits and deflect concerns about its health during the financial crisis.

“The findings we have set out in our notice today do not make for pretty reading,” Tracey McDermott, the enforcement director for the Financial Services Authority of Britain, said in a statement. “The integrity of benchmarks,” she said, “are of fundamental importance to both U.K. and international financial markets. UBS traders and managers ignored this.”

The UBS case reflec ts a pattern of abuse that authorities have uncovered as part of a multi-year investigation into rate-rigging. The inquiry, which has ensnared more than a dozen big banks, is focused on key benchmarks like the London interbank offered rate, or Libor. Such rates are used to help determine the borrowing rates for trillions of dollars of financial products like corporate loans, mortgages and credit cards.

In the UBS matter, the wrongdoing occurred largely within the Japanese unit, where traders colluded with other banks and brokerage firms to tinker with Yen denominated Libor and bolster their returns. During the 2008 financial crisis, UBS managers also “inappropriately gave guidance to those employees charged with submitting interest rates, the purpose being to positively influence the perception of UBS's creditworthiness,” according to authorities.

In a series of colorful e-mails and phone calls, traders tried to influence the rate-setting process. “I need you to keep it as low as possible,” one UBS trader said to an employee at another brokerage firm in September 2008, according to the complaint filed by the Financial Services Authority. “If you do that,” the trader promised to pay “whatever you want. I'm a man of my word.”

As the employees carried out the alleged manipulation, they also celebrated the efforts, with one trader referring to a partner in the scheme as “superman.” “Be a hero today,” he urged, according the complaint by regulators.

The British and Swiss authorities released their complaints on Wednesday before the bank's shares began trading in Switzerland. American authorities are expected to release their own complaints later Wednesday in Washington.

In a statement, UBS highlighte d its cooperation with the investigation. The firm previously stated that it made provisions of 897 million Swiss francs ($975 million) to cover potential legal and regulatory fines.

“We discovered behavior of certain employees that is unacceptable,” the chief executive of UBS, Sergio P. Ermotti, said in the statement. “We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”

The UBS case provides a lens to view broader problems in the rate-setting process, which affects how consumers and companies borrow money around the world. In June, authorities scored their first Libor settlement, securing a $450 million payout from Barclays, the big British bank.

The UBS case - the pr oduct of cross-border collaboration among regulators and federal prosecutors â€" is more than triple the earlier fine.

The Commodity Futures Trading Commission and the Justice Department leveled about $1.2 billion in combined fines. The Financial Services Authority of Britain fined the bank $260 million. The Swiss Financial Market Supervisory Authority, which does not have the power to fine, recovered $65 million in the bank's supposed ill-gotten gains.

The Justice Department's criminal division, which arranged the guilty plea with the Japanese subsidiary, also struck a non-prosecution agreement with the parent company. The exact total of the penalties was unclear, because the department has not yet released its settlement documents .

The Justice Department's case is also expected to take aim at some of the bank's traders, including 33-year-old Thomas Hayes. The Justice Department plans to announce charges against Mr. Hayes, the former UBS and Citigroup trader, who featured prominently in the investigation, according to people with knowledge of the matter. He was arrested in London last week and later released on bail. Other UBS employees have been suspended or fired following an internal investigation.

The fallout from the UBS case is expected to ratchet up the pressure on some of the world's largest financial institutions and spur settlement talks across the banking industry.

The Royal Bank of Scotland has said it expects to pay fines before its next earnings statement in February, while Deutsche Bank has set aside an undisclosed amount to cover potential penalties. Some American institutions, including Citigroup and JPMorgan Chase, also remain in regulators' crosshairs.

The UBS case has exposed the systemic problems with the rate-setting process. Over a 6-year period, UBS traders targeted the major currencies that form the Libor system, including the U.S. dollar denominated rate. The bank was also cited for attempting to manipulate other benchmarks like the Euro Interbank Offered Rate, or Euri bor, and the Tokyo Interbank Offered Rate, or Tibor.

Much of the activity took place in the bank's Japanese unit. Authorities said four UBS traders colluded to manipulate submissions to Yen Libor. The individuals made more than 1,900 requests to brokers and other banks to alter the rate, according to regulatory filings. As part of their efforts, UBS employees made quarterly payments of £15,000 ($24,000) to outside brokers involved in the rate-rigging for at least 18 months for their help, the complaint said.

To avoid arousing suspicion, UBS employees routinely made small changes to submissions, the complaint detailed. The individuals, who communicated with colleagues about the rate-setting through emails and instant messages, also altered rate submissions to benefit traders at other banks.

The Japanese unit's guilty plea for wire fraud follows frantic last-minute negotiations last week between senior UBS officials and American authorities. The actions detailed in the complaint emboldened the Justice Department to seek the guilty plea from the Japanese unit. By forcing the plea from the firm's Japanese subsidiary, federal authorities sent a clear message about the level of wrongdoing, but stopped far short of shutting UBS out of the American markets.

Still, the steep sanctions come as a surprise, given the bank's cooperation with investigators.

Since first announcing that it was the subject of Libor investigations, the Swiss bank has eagerly worked with authorities in a bid for leniency. UBS, for example, had received conditional immunity from the Justice Department's antitrust unit, a deal that did not apply to the Justice Department's criminal division.

The case presents the latest setback for UBS.

The Swiss bank already agreed to a $780 million fine in 2009 with American authorities to settle charges that it helped American clients avoid tax. The firm also announced a $2.3 million loss last year related to illegal trading activity by a former employee, Kweku M. Adoboli. Mr. Adoboli subsequently was sentenced to seven years, and British authorities fined UBS $47.5 million over the scandal.

UBS said it expected to report a net loss of up to $2.7 billion in the fourth quarter of the year because of the costs related to Libor and other legal matters. The figure includes around $2.3 billion of provisions of legal and regulatory costs, as well as $548 million in restructuring charges.

In the wake of the Libor scandal, UBS has been forced to beef up its compliance and rate-setting procedures, according to the Swiss regulator. The bank has also fired individuals connected to the rate-rigging.

“We are pleased that the authorities gave us credit for the important and positive changes we have already made,” the chairman of UBS, Axel Weber, said in a statement. “I have zero tolerance for inappropriate and unethical behavior of any of our staff.”