Peter Madoff Is Sentenced to 10 Years for His Role in Fraud

8:48 p.m. | Updated

Peter B. Madoff was sentenced on Thursday to 10 years in prison for crimes that helped his brother, Bernard L. Madoff, swindle investors out of billions of dollars in a Ponzi scheme that collapsed four years ago this month.

A lawyer by training, Peter Madoff is the second figure in the scandal to be sentenced. His older brother, Bernard, pleaded guilty in March 2009 and is serving a prison term of 150 years.

Mr. Madoff, in a slate blue suit and striped blue tie, entered the crowded courtroom a ccompanied only by his lawyers, although many members of his family and friends had written letters of support for him. The 63 character references stood in stark contrast to his brother's sentencing, when the judge in that case noted that he had not received a single supportive letter.

Still, a handful of victims attended the hearing, including two who spoke emotionally about the financial and psychological hardships they are enduring and urged the judge to impose a life sentence.

In his own brief statement to the judge, Peter Madoff said he was “deeply ashamed” of his conduct and had “tried to atone by pleading guilty.” He added: “I am profoundly sorry that my failures have let so many people down, including my own loved ones and family.”

In June, Peter Madoff, 67, admitted to a range of crimes, including falsifying documents, lying to securities regulators and filing sham tax returns. Prosecutors said that if Peter Madoff had properly done hi s job as chief compliance officer at Bernard L. Madoff Investment Securities, regulators would likely have detected the fraud years earlier.

Peter Madoff was not charged with knowing about the Ponzi scheme, and insists that he first learned about it only 36 hours before his brother's arrest.

During the sentencing in Federal District Court in Manhattan, Judge Laura Taylor Swain expressed skepticism about that assertion.

“Peter Madoff's contention that he did not know that anything was wrong with the investment advisory business is beneath the dignity” of a sophisticated Wall Street executive, Judge Swain said.

“It is also, frankly, not believable,” she added.

Peter Madoff's lawyer, John R. Wing, has portrayed his client as a loving, charitable family man who was bullied, betrayed and destroyed by the imperious older brother he had idolized all his life. Bernard Madoff was widely viewed as an honorable and successful trader, Mr. Wing wrote in a letter to the court, “and no one believed it more than Peter did. Peter revered him and trusted him implicitly.”

In the geography of the Madoff offices, the money management business run by Bernard Madoff operated from a separate suite two floors below Peter Madoff's office and the firm's trading operations. With separate key cards, Bernard Madoff kept the suite off limits, shutting his brother and sons out of the investment advisory business.

In pleading guilty, Peter Madoff has agreed to a 10-year sentence and a forfeiture order of $143 billion. Though a staggering sum that does not bear any relation to what Mr. Madoff could pay, it is tied to the amount of the crime's proceeds. The government set the amount that high to send a clear signal that it would seize all of his and his family's assets and distribute them to victims.

On the day of Bernard Madoff's arrest, his customers thought their accounts contained a total of $64.8 billion, but most of that wealth was fictitious. Madoff's customers had actual cash losses of about $17.3 billion in the fraud, according to Irving H. Picard, the Madoff bankruptcy trustee.

Mr. Picard has recovered about $9.3 billion and distributed about $3.7 billion of that to eligible victims. An additional $2.35 billion has been seized by federal prosecutors under forfeiture laws and will be distributed separately by the Justice Department.

Peter Madoff worked alongside his brother for 39 years. Though Bernard was the firm's sole owner, he paid Peter handsomely. The government said that Peter received about $40 million in compensation from 1998 to 2008. That money was put toward his and his wife, Marion's, lifestyle that included homes in Old Westbury, N.Y., on Long Island, and Palm Beach, Fla., as well as a $4 million apartment on Park Avenue.

In his letter to the judge, Mr. Wing cited the early patterns of the Madoff family as a reason Peter Madoff dutifully obeyed his brother. “Their mother viewed Bernie as the prince, and Peter longed for the love and approval of his brother and family,” Mr. Wing wrote. “Peter had a large build, and Bernie ridiculed him mercilessly, calling him ‘Rollo,' which hurt Peter deeply.”

But despite that demeaning abuse, “Peter seemed to be blind to his brother's flaws,” Mr. Wing wrote.

Judge Swain saw it differently. In her view, Peter knew for decades that the Madoff business operation was “a little bit crooked and he was content to go along with that.” She then added, “We all know that a crooked operation is only rarely, if ever, just a little bit crooked.”

Before Thursday's hearing, both sides filed letters to the judge highlighting factors they hoped she would consider.

The prosecuto rs stressed the harm done by Peter Madoff's willful failure to carry out his duties. They cited a letter submitted by Marion Wiesel, the wife of the Nobel Peace Prize-winner Elie Wiesel, whose foundation lost $15.2 million in the fraud. Mrs. Wiesel said the crime that flourished under Peter Madoff's neglect caused “the immediate and dramatic loss of a lifetime's worth of work and savings.”

Judge Swain directed Peter Madoff to report to prison on Feb. 6, implicitly granting a request that he not be incarcerated until after his granddaughter's bat mitzvah in late January.

In her own appeal to the court, the granddaughter wrote, “I would give anything just to have him see me reading from the Torah even if it was only for a second.”

The judge also complied with a request by Mr. Wing that she ask that Peter be assigned to a nearby prison in Otisville, N.Y., permitting regular visits from his family, though that decision ultimately rests with the Bureau of Prisons.

Besides the two brothers, criminal charges have been filed against a dozen other defendants. Bernard Madoff, 74, is serving his sentence at a federal prison near Raleigh, N.C. Peter's daughter, Shana Madoff Swanson, was a lawyer at the Madoff firm but has not been charged with any crime.

Frank DiPascali, a longtime Madoff employee, pleaded guilty in August 2009 and is awaiting sentencing. Of the remaining defendants, six have pleaded guilty to violations of tax and securities laws that sustained the scheme. The remaining five defendants have denied the government's charges and their trial is scheduled for October.

Among the 41 victim letters submitted by prosecutors was an unexpected one from Robert Roman, the brother-in-law of Bernard's wife, Ruth Madoff. Mr. Roman said that although he and his wife lost their life savings in the fraud, he did not want to see Peter imprisoned.

“Our family is supposed to hate him. But - we do not,” Mr. Roman wrote. “Peter in prison is an answer only to those who seek revenge. It is not a solution.”

Toward the end of the hourlong sentencing, as Peter Madoff fought back tears, Judge Swain counseled the defendant that true atonement required that he fully disclose what happened at his brother's firm.

“Be honest about all that you have done and all that you have seen,” the judge said. “In other words, all that you know.”

A version of this article appeared in print on 12/21/2012, on page B1 of the NewYork edition with the headline: Peter Madoff Sentenced to 10 Years in Fraud Case.

Wall St. Downsizes Holiday Parties

In the year of Hurricane Sandy, looming fiscal austerity and global scrutiny of banks, Wall Street is just not in a celebratory mood.

Banks that once took over entire floors of Manhattan nightclubs and reserved Midtown steakhouses are continuing to follow restrictions on the office holiday party, many of which have been in place since the 2008 financial crisis.

Witness the scene at the 40/40 Club in New York's Flatiron district on a recent December evening. There was no lavish, companywide affair; instead, a group of 40 Morgan Stanley employees gathered in a private room off to the side of the club.

The generous platters of sliders and lobster crab cakes were present. But instead of Grey Goose vodka, there was Smirnoff and Stolichnaya.

“It's probably not going to be caviar and ice sculptures, but it's still going to be something,” said Dale Winston, chief executive of the executive search firm Battalia Winston.

Intimate group gatherings, paid for out of pocket by department heads and managing directors, are the new norm. With tighter budgets and dwindling salaries, investment bankers in the bulge bracket can hardly count on dinner, let alone top-shelf liquor.

Smaller holiday gatherings mean more face time with superiors and less opportunity to let loose. A Morgan Stanley financial adviser in Los Angeles described the new, austere conditions as “stiff and boring.”

“I went and made sure my managing director saw me, and then I just left,” he said. “They've taken what used to be a party and have reduced it to an event where people just meet up and chat.”

While the parties are a subject of much conversation, few if any lower-ranking employees are willing to discuss them on the record. Under stern orders not to talk to reporters about anything - including seating arrangements at company get-togethers - workers insisted on anonymity to describe the holiday merrymaking.

Neither Mo rgan Stanley nor Credit Suisse held company-sponsored holiday parties this year. Citigroup, Deutsche Bank, Barclays and the investment banking division of Bank of America decided against them as well, but departments can do as they please as long as the costs come from their own accounts. Representatives of Morgan Stanley, Credit Suisse, Bank of America and Barclays declined to comment.

The restaurants and other sites the banks once frequented say they are feeling the pinch as “budget conscious” has become a motto of party planners.chains that Wall Street might once have considered déclassé are being welcomed by the staff in accounting.

For example, Brother Jimmy's, a barbecue restaurant with a number of Manhattan locations, catered many more in-house celebrations this year for corporate clients, including major banks, said a spokeswoman, Jenna Fritsche.

The reluctance of Wall Street firms to return to sponsored parties runs contrary to a general resu rgence of corporate holiday celebrations. In its annual study, Battalia Winston found that 91 percent of the 105 companies surveyed planned to hold a party this year, up from 74 percent in 2011.

“The banks are still image-conscious,” Ms. Winston said. “It's hard to have a party when you're laying people off.”

Restaurants and clubs have responded accordingly, convinced that the belt-tightening is here to stay.

“People aren't just going to say, ‘I have $10,000, throw me a party,' ” said Lauren Menache, a publicist for Berk Communications in New York, which represents high-end group dining spots like Junoon and those owned by the restaurateur Richard Sandoval. “They really want to try and understand where their money is going.”

This year, sites like the 40/40 Club, once the beneficiaries of opulent affairs, have shifted their focus to enticing smaller groups with specific food and drink packages.

“Companies are dividing up and h aving smaller events,” said Amber King, director of sales at the 40/40 Club, who has booked parties for three Credit Suisse groups this holiday season, charging around $60 to $150 per person. “That's how they are maintaining costs. Instead of a 500-person gala, firms are holding more intimate, 10- to 80-person events.”

Still, the lavish party hasn't completely become a Wall Street myth. Companies in the private equity and hedge fund sectors - which tend to face less public and shareholder scrutiny than investment banks - are free to spend whatever millions their annualized returns will bear.

The downsized gatherings present new challenges to Wall Streeters, particularly younger employees at investment banks. Some have realized that because of budgetary pressures, financial modeling skills won't necessarily guarantee them continued employment or a big year-end bonus. With this in mind, small holiday parties can be an opportunity to impress their bosses with their social panache.

“Even though groups are more aware of their cost structures, the holiday party is still a big deal,” a Credit Suisse analyst said, adding that the senior members of his group came around the day of the party and made sure everyone put work aside to attend.

“It's huge in my eyes to have a group outing,” another analyst said. “The associates you get to know because you work with them until midnight all the time, but the senior guys leave at 6 and you don't get to chat with them much, so I'm looking forward to it.”

A version of this article appeared in print on 12/21/2012, on page B5 of the NewYork edition with the headline: Wall St. Downsizes Holiday Parties.

U.S. Makes an Arrest in Olympus Scandal

U.S. Makes Arrest in Olympus Scandal

Federal agents arrested a former bank executive in Los Angeles on Thursday in connection with the accounting scandal that erupted last year at Olympus, the Japanese camera and medical equipment maker.

Prosecutors in New York said that the executive, Chan Ming Fon, received more than $10 million from Olympus for assisting in its accounting fraud.

The Federal Bureau of Investigation said Mr. Chan, 50, was a citizen of Taiwan living in Singapore. He was charged with conspiracy to commit wire fraud, with a maximum potential penalty of 20 years in prison. His lawyer was not disclosed.

“As alleged, Chan Ming Fon was handsomely paid to play an international shell game with hundreds of millions of dollars of assets in order to allow Olympus to keep a massive accounting fraud going for years,” said Preet Bharara, the United States attorney in Manhattan, in a news release.

The authorities did not identify the financial institutions with which Mr. Chan was affiliated.

In February, the Japanese authorities arrested seven people in connection with the accounting missteps at Olympus, including Tsuyoshi Kikukawa, the company's former chairman. Mr. Chan was not among those seven.

The company has admitted that executives set up a scheme to cover up $1.7 billion in losses. The illicit maneuvers came to light after Olympus fired Michael C. Woodford, its British chief executive, in October 2011. Soon after, Mr. Woodford made allegations of accounting misdeeds at Olympus.

The Olympus scandal rocked the Japanese corporate sector. The case is being watched closely to gauge how serious the Japanese authorities will be in their pursuit of white-collar crime. The men arrested in February could each serve up to 10 years if found guilty.

The allegations against Mr. Chan could shed more light on Olympus's elaborate accounting ruses. The company hid losses sustained in the 1990s, later masking them with inflated acquisitions and payments through shadowy overseas funds.

Mr. Chan was a principal at a fund that received large payments from Olympus, according to the F.B.I. The bureau contends that Mr. Chan told Olympus's auditors in 2009 that the fund held hundreds of millions of dollars on behalf of Olympus, in the form of conservative investments like Japanese government bonds. The complaint says, however, that the money had been passed on to an entity controlled by Olympus to pay off a loan.

In the complaint, the F.B.I. said that Mr. Chan “acknowledged that it was wrong to assist Olympus in deceiving its auditor.”

A version of this article appeared in print on December 21, 2012, on page B5 of the New York edition with the headline: U.S. Makes Arrest in Olympus Scandal.

At the Big Board, Seeking Rejuvenation in Consolidation

When the chief executive of IntercontinentalExchange approached his counterpart at NYSE Euronext about a merger in late September, they quickly came to terms, hashing out a deal in only three months.

The union just made sense.

NYSE Euronext, the owner of the New York Stock Exchange, facing a slowdown in its core equities trading business, was mulling a number of options after a deal with the German exchange fell apart last year. IntercontinentalExchange, an upstart in the high-growth derivatives market, had long sought both an international platform and a way to expand its footprint in futures trading, having lost a bidding war for a London exchange.

They both got what they wanted.

On Thursday, IntercontinentalExchange, or ICE, said that it would pay $8.2 billion for NYSE Euronext, creating an imposing trans-Atlantic giant in stocks, derivatives and commodities trading. The deal revives a stalled push for consolidation among market operators at a ti me when bigger is not only better but necessary.

“It's about the things that don't happen,” Duncan Niederauer, NYSE Euronext's chief, said in an interview on Thursday. “It's good that we kept the door open. We always thought that this was a good partnership.”

NYSE Euronext has eyed a deal with its younger rival for a while.

In internal discussions with his board three years ago, Mr. Niederauer noted that ICE would complement its core businesses and help the company gain scale. He contended that marrying his slow-growing stock trading business with ICE's enormously profitable commodities markets would rejuvenate NYSE Euronext.

It would also benefit the crown jewel of NYSE's portfolio, Liffe, a London-based futures exchange. By teaming up with ICE, the company would add a much-needed platform to settle customer trades. In essence, NYSE would have a one-stop shop for trading and clearing futures.

The merger also seemed unlikely to invoke th e ire of antitrust regulators, unlike a deal with a top rival in equities like the Nasdaq OMX Group. NYSE Euronext and ICE have very little overlap in their main businesses.

Last year, NYSE Euronext tried to strike a deal with the German exchange, hoping to create one of the world's biggest derivatives exchanges. The threat of that was enough to drive ICE's chief, Jeffrey Sprecher, to partner with Nasdaq on a hostile $11 billion bid for NYSE Euronext.

During that time, Mr. Sprecher - by his own reckoning - criticized the parent of the New York Stock Exchange in as many ways as he could. NYSE Euronext's board, he said, was “the only obstacle” preventing shareholders from getting a good deal. But the ICE chief said on Tuesday that he had refrained from personal attacks, given his long and friendly relations with Mr. Niederauer.

When the Justice Department blocked the hostile bid on antitrust grounds, Mr. Sprecher wondered whether he had severed their frie ndship. But several weeks later, after one of ICE's quarterly earnings presentations with analysts, he received a quick e-mail from Mr. Niederauer. It simply read: Good call.

“It was a magnanimous gesture,” Mr. Sprecher said on Thursday.

Soon, the NYSE Euronext found itself in a bind. European regulators squashed the deal with the German exchange in February, leaving NYSE scrambling to find another solution to its growth problems.

The NYSE Euronext had lost a year in creating a clearing platform for Liffe, putting those efforts aside as it focused on the German merger. And investors continued to lose faith in the company. At a market value of $5.6 billion in June, NYSE Euronext seemed to have little of value but its London unit.

The board considered multiple options, including buying and selling assets. NYSE Euronext joined the bidding for the London Metal Exchange, but dropped out of the race early as the potential price rose. ICE also took a run at the London market, ultimately losing to the Hong Kong Exchange's $2.1 billion bid.

NYSE and ICE went back to the drawing board. In late September, Mr. Sprecher approached Mr. Niederauer, and the two companies found themselves in alignment on several issues.

Mr. Sprecher indicated that he was willing to maintain two headquarters, ICE's home in Atlanta and the Big Board's center in New York City. He hoped the move would help allay concerns from people like Senator Charles E. Schumer of New York, who had warned that the N.Y.S.E. name had to come first in the deal for the German exchange.

The two sides struck a separate agreement in which Liffe would use ICE's clearing services by next June, even if the merger fell apart. Mr. Sprecher will also weigh a spinoff of NYSE's European stock markets in an effort to shed nonessential businesses that come with a tangle of national regulators.

During the talks, Mr. Niederauer showed little hesitation in the rev amped management structure. When the deal closes, he will be ICE's president and will report to Mr. Sprecher.
ICE offered a generous premium for NYSE Euronext from the start, according to people briefed on the matter. Eventually, the company sweetened the terms to $33.12 per share in stock and cash. The two sides also calculated $450 million in cost savings in the second year after the deal closes. While Mr. Niederauer met with officials from the CME Group several weeks ago, no rival proposal emerged, some of the people briefed on the matter said. By that point, most of the terms of the deal with ICE had been ironed out.

People involved in the talks said that one date - Dec. 20 - had been circled on Mr. Niederauer's calendar. The NYSE chief had a longstanding appointment to meet with European regulators the day before, and wanted to have a done deal to present alongside Mr. Sprecher when he met with them.

With NYSE's board having discussed the transaction at length in meetings last week and on Monday, the two men flew to Europe to make their presentation. They returned to New York City after midnight on Thursday to unveil the deal - one that ultimately reflected the diminished position of the once powerhouse market.

“Let me be clear that this combination - while friendly and strategic - is an acquisition, not a merger of equals,” Mr. Niederauer wrote in an internal memo to NYSE employees on Thursday. “We've built a stronger company, with a great brand and a bright future.”

A version of this article appeared in print on 12/21/2012, on page B1 of the NewYork edition with the headline: From Old and New, a Powerhouse: At the Big Board, Seeking Rejuvenation in Consolidation With an Upstart.

Exchange Sale Reflects New Realities of Trading

On a warm day in Boca Raton, Fla., the host of a reception for an annual financial conference was not a big bank or a powerful exchange as in years past, but a young firm based in Atlanta.

Guests who gathered at the oceanfront resort were surprised. They were greeted with bottled ice water that carried the company's logo, and as they left, were invited to grab iPod Shuffles.

That event, some four years ago, was the Wall Street equivalent of a coming-out party for the firm, IntercontinentalExchange, or ICE, an electronic operator of markets for derivatives and commodities. Now, the markets upstart is announcing itself to a much larger world with an $8.2 billion deal to buy the symbolic cradle of American capitalism, the New York Stock Exchange.

The takeover illustrates starkly how trading in commodities and derivatives has become much more lucrative than trading in the shares of companies. Warren E. Buffett warned in 2003 that the “derivatives genie is now well out of the bottle,” and that the genie, even after a global financial crisis, was not going back. Currently, derivatives - financial bets tied to underlying assets like oil prices or interest rates, among other things - are a $600 trillion market. Even the parent of the N.Y.S.E. attracted its suitor largely because of its ownership of Liffe, a major derivatives exchange in London.

For many, the Beaux-Arts New York Stock Exchange, and images of traders looking despondent or exuberant on its floor, represent what making money is all about. Yet Wall Street itself has found it more profitable to bet on fluctuations in natural gas or corn or on interest rates. The financial industry often does so electronically and through platforms in cities as scattered as London, Chicago and Atlanta. The biggest bonuses each year are typically for traders who reaped rich gains on these often complex financial products.

That change, decades in the making, has left the New York exchange, with roots going back 220 years, in an increasing difficult position as trading volumes slump and profit margins stay razor thin. While its acquirer has pledged to keep a dual headquarters in the exchange building in Lower Manhattan, as well as in Atlanta, the center of power in finance long ago migrated elsewhere.

The success of the newly combined companies hinges on the derivatives business. ICE is hoping that a greater share of derivatives trading will go through its clearinghouse operations, which act as backstops in case one party defaults. It is being aided by the Dodd-Frank financial regulatory overhaul, which is forcing Wall Street banks to push their derivatives trades into clearinghouses and regulated exchanges.

“For the past decade, our solutions made our markets increasingly electronic and increasingly clear,” Jeffrey C. Sprecher, chief executive of ICE, said this month. “Today, financial reform is imposing that vision on many ma rkets through a rule-making process.”

While Dodd-Frank compliance is still in its early days, and the volume of derivatives trading remains depressed amid broader economic uncertainty, the law is ultimately expected to cement ICE's business model into the regulatory code.

“Despite the complaints, there's no question that at the end of the day, Dodd-Frank will be a financial boon to exchanges,” said Bart Chilton, a Democratic member of the Commodity Futures Trading Commission, which regulates derivatives.

Still, such a development will not do much for the traditional business of the New York Stock Exchange. Mr. Sprecher said on Thursday that he was committed to keeping the floor of the exchange open. But according to people briefed on his plans, he intends to use the stock trading operation and its steady cash-generating abilities to finance future deals and expansion efforts.

Nowhere have the changing fortunes of ICE and the parent of the New Yo rk exchange, NYSE Euronext, been more apparent than in their value on the stock market. In April 2011, when ICE first tried to acquire NYSE Euronext in league with Nasdaq OMX, it was worth about $1.5 billion less than the New York company. Just over a year later, ICE was worth nearly $4 billion more than NYSE Euronext, even with less than a third of its revenue.

ICE was founded in 2000 by Mr. Sprecher, who began his career developing power plants. In the 1990s, he saw that many power companies and financial firms wanted to hedge their investments in energy with financial contracts, but the market for these contracts was disorganized and opaque.

Mr. Sprecher bought an obscure exchange for buying and selling electricity in Atlanta and turned it into ICE with financing from BP and Wall Street firms, including Goldman Sachs and Morgan Stanley.

Banks were drawn to the idea of a standardized place to buy and sell derivatives tied to the value of oil and other com modities. But they also hoped to create a competitor to the virtual monopoly position being built up by the Chicago Mercantile Exchange in futures trading.

“You talk to people in Chicago, they basically think that ICE is just a front for the banks,” said Craig Pirrong, an expert in futures trading and director of the Global Energy Management Institute at the University of Houston.

As the company grew through a quick series of acquisitions, Mr. Sprecher won a reputation for being the “enfant terrible” of the energy industry, with a “sharp eye for identifying opportunities and seizing on them in a very aggressive way,” Dr. Pirrong said.

Early on, ICE sought to move all trading onto computers, allowing firms to buy and sell contracts 24 hours a day. Soon after buying the International Petroleum Exchange in London, ICE shut down its trading floor.

“They were a technology company from Day 1,” said Brad Hintz, an analyst with Sanford C. Bern stein.

ICE also decided to fashion its own clearinghouse, rather than tap an outsize firm. It expanded through acquisitions, planting the seeds for growth in 2008, when it took over the Clearing Corporation, home to a popular derivative known as a credit-default swap.

The Dodd-Frank overhaul may provide additional benefits for ICE. Under the law, exchanges must turn over public and private information to outside data warehouses, which will, in turn, share the information with regulators. Sensing an opportunity, ICE created its own warehouse, named ICE Trade Vault.

ICE and its Chicago rival, CME Group, have also moved in recent months to convert swaps trades, which are facing more scrutiny under Dodd-Frank, into old-fashioned futures contracts. Futures trading is lucrative territory for the exchanges in part because they can shut out competitors.

“The reality is that there are incentives to convert swaps into futures, where there's less competition,â € said Richard M. McVey, chief executive of MarketAxess, an independent trading platform that is expanding into the swaps business. “There's no requirement for CME and ICE to open their futures clearinghouses to other exchanges.”

Despite its growing prominence, ICE has a small footprint in Washington. With only two full-time lobbyists, the company relies on Mr. Sprecher to communicate with regulators.

“Jeff is the company,” one official said, though others said he had loosened his grip over the last year or so.

He is well received, officials say, in part because he has embraced some reforms. Unlike executives of other exchanges and financial firms, Mr. Sprecher did not resist an effort in 2009 by the Commodity Futures Trading Commission to close certain loopholes.

Officials recall him saying, “Tell me what the rules are, and I'll make money with them.”

Michael J. de la Merced contributed reporting.

A version of this article appea red in print on 12/21/2012, on page A1 of the NewYork edition with the headline: Exchange Sale Reflects New Realities of Trading.

General Electric to Buy Avio for $4.3 Billion

LONDON â€" General Electric agreed on Friday to buy the Italian aerospace company Avio for $4.3 billion, acquiring a long-time partner in its jet engine business.

G.E. and Avio have deep ties. Avio has been supplying components to the American conglomerate since 1984, and more than half of last year's revenues in the aviation sector came from selling engine components to G.E.

Now, G.E. hopes to tap Avio's expertise for other industries. The conglomerate said it planned to create “additional opportunities to offer Avio's products and services beyond the aviation industry” and that it would “pursue new opportunities for Avio in power-generation, oil and marine products.”

“This acquisition is a great strategic fit with our existing portfolio,” David Joyce, president and chief executive o f GE Aviation, a G.E. unit, said in a statement. “Avio has technologies, capabilities and outstanding engineers to help grow our business.”

G.E. is buying Avio from Cinven, the British private equity firm, which acquired the company in 2006 for 2.57 billion euros, or $3.4 billion. After the purchase, Cinven installed a new chief executive and started a broad investment program in research and development.

Cinven moved to take the company public. But the private equity firm shelved the plan amid the doldrums of the markets, according to a person briefed on the plan.

Several companies had approached Cinven about Avio, with G.E. eventually emerging as the front-runner. The purchase price for Avio is about 8.5 times Avio's estimated 2012 earnings before interest, taxes, depreciation and amortizat ion, G.E. said.

A version of this article appeared in print on 12/22/2012, on page B2 of the NewYork edition with the headline: G.E. To Buy Italian Aerospace Company For $4.3. Billion.

Changing Face of Finance

CHANGING FACE OF FINANCE  |  The $8.2 billion deal for the New York Stock Exchange showed how the power base in finance has shifted. Once seen as the cradle of American capitalism, the stock exchange has suffered from declining trading volumes and razor-thin margins. Meanwhile, its acquirer, the Atlanta-based IntercontinentalExchange, or ICE, has bolstered its position as “trading in commodities and derivatives has become much more lucrative than trading in the shares of companies,” DealBook's Ben Protess and Nathaniel Popper write.

The Dodd-Frank financial regulatory overhaul may be a plus for the combined company. The law, which forces Wall Street banks to push derivatives trades into clearinghouses and regulated exchange s, “is ultimately expected to cement ICE's business model into the regulatory code,” Mr. Protess and Mr. Popper write. Jeffrey C. Sprecher, chief executive of ICE, said: “Financial reform is imposing that vision on many markets through a rule-making process.”

Duncan L. Niederauer, the chief executive of the stock exchange's parent NYSE Euronext, acknowledged that the deal was “not a merger of equals.” When Mr. Niederauer was approached by Mr. Sprecher of ICE, reaching a deal took only three months, Michael J. de la Merced reports. “The two companies found themselves in alignment on several issues. Mr. Sprecher indicated that he was willing to maintain two headquarters, ICE's home in Atlanta and the Big Board's center in New York City.”

But even that arrangement shows how the N.Y.S.E.'s clout has declined over the years. What was once “the temple of commerce” is now “not much more than a television studio,” The New York Times columnist Floyd Norris writes. “The transformation of the New York Stock Exchange from its position at the apex of the world financial system to an asset to be bought and sold like any other - and one that is not deemed to be worth as much as it would be if it traded more modern derivative securities rather than old-fashioned stocks - has been going on for decades, but has accelerated in recent years.”

PETER MADOFF SENTENCED TO 10 YEARS  |  Bernard L. Madoff's brother and former chief compliance officer is headed to prison for his role in aiding the Ponzi scheme. Peter B. Madoff, the second figure in the scandal to be sentenced, received 10 years on Thur sday. Peter Lattman and Diana B. Henriques write in DealBook: “Mr. Madoff, in a slate blue suit and striped blue tie, entered the crowded courtroom accompanied only by his lawyers, although many members of his family and friends had written letters of support for him. The 63 character references stood in stark contrast to his brother's sentencing, when the judge in that case noted that he had not received a single supportive letter.” For his part, Peter Madoff said he was “deeply ashamed” of his conduct and had “tried to atone by pleading guilty.”

F.B.I. DIGS INTO OLYMPUS SCANDAL  |  The Federal Bureau of Investigation arrested a former bank executive in Los Angeles in connection with the the accounting scandal at Olympus, Peter Eavis reports in The New York Times. “Prosecutors in New York said that the executive, Chan Ming Fon, received more than $10 million from Olympus for assisting in its accounting fraud.” Mr. Chan, who authorities said was a citizen of Taiwan living in Singapore, was charged with conspiracy to commit wire fraud, with a maximum potential penalty of 20 years in prison. In February, Japanese authorities arrested seven people in connected with the scandal, including the company's former chairman.

ON THE AGENDA  |  Please note that the morning newsletter is off for the holidays, to resume on Jan. 2. Walgreen, which recently bought a stake in Alliance Boots, reports earnings today before the market opens. Personal income and sp ending data for November are out at 8:30 a.m., and the Thomson Reuters/University of Michigan consumer sentiment index for December is released at 9:55 a.m. Thorsten Heins, the chief executive of Research in Motion, is on CNBC at 7:30 a.m. Austan Goolsbee, the former adviser to President Obama and current University of Chicago economist, is on CNBC at 8 a.m.

DOWN TO THE WIRE IN FISCAL TALKS  |  It looks like we'll be heading into Christmas without a deal to avoid the so-called fiscal cliff. The New York Times reports: “Speaker John A. Boehner's effort to pass fallback legislation to avert a fiscal crisis in less than two weeks collapsed Thursday night in an embarrassing defeat after conservative Republicans refused to support legislation that would al low taxes to rise on the most affluent households in the country.” The White House press secretary, Jay Carney, said the defeat should push Mr. Boehner back into talks with the president. “We are hopeful that we will be able to find a bipartisan solution quickly,” Mr. Carney said.

WALL STREET'S LOW-KEY HOLIDAY SEASON  |  Wall Street firms have little to celebrate this holiday season. And with new restrictions on parties since the financial crisis, holiday gatherings have been decidedly understated. Michael Kaplan writes in DealBook: “Witness the scene at the 40/40 Club in New York's Flatiron district on a recent December evening. There was no lavish, companywide affair; instead, a group of 40 Morgan Stanley employees gathered in a private room off to the side of the club. The generous platt ers of sliders and lobster crab cakes were present. But instead of Grey Goose vodka, there was Smirnoff and Stolichnaya.”

Mergers & Acquisitions '

A Top Deal Maker at Sony Is Headed to Warner Music  |  The Media Decoder blog reports: “Robert S. Wiesenthal, a top deal maker at Sony for the last decade, is leaving the company to become chief operating officer of the Warner Music Group, the company announced on Thursday. The move could help Warner expand through acquisitions and compete more handily against the music world's two corporate giants, Universal and Sony.”
NEW YORK TIMES MEDIA DECODER

Forrest Shumway, the Deal World's White Knight, Dies at 85  |  The New York Times writes: “Forrest N. Shumway, a California businessman who built Signal Oil and Gas from a regional energy company into one of the nation's largest conglomerates, a role in which he embraced his reputation as a high-stakes takeover artist but shunned the hostile deals that long defined corporate culture, died on Dec. 4 at his home in the La Jolla neighborhood of San Diego.”
NEW YORK TIMES

Aviva to Sell U.S. Life Insurance Business for $1.8 Billion  |  The British insurer is selling the unit to Athene Holding.
BLOOMBERG NEWS

BlackBerry Maker Reports 48% Drop in Revenue  |  The New York Times reports: “Research in Motion said on Thursday that it lost a million BlackBerry owners worldwide during the company's last financial quarter, the first such decline in the device's history.”
NEW YORK TIMES

Flight Attendants Invited to Join Airline Merger Talks  |  The union representing flight attendants at American Airlines said it had been invited to join confidential talks over a pote ntial merger with US Airways, Reuters reports.
REUTERS

Panasonic to Sell Digital Camera Unit  |  Panasonic said on Friday it would sell its Sanyo business to Advantage Partners, a Japanese private equity fund, for an undisclosed amount, Reuters reports.
REUTERS

Adobe to Acquire Behance, Social Media Platform  | 
WALL STREET JOURNAL

Mohawk Industries to Buy Marazzi Group of Italy for $1.5 Billion  | 
REUTERS

Compuware Said to Hire Advisers to Review Takeover Offer  | 
BLOOMBERG NEWS

INVESTMENT BAN KING '

A Year of Slumping Investment Bank Fees  |  Reuters writes: “Fees for advising on mergers, share listings and bond issues have fallen again in 2012, forcing investment banks to cut jobs and start overhauling business models they had stuck by in times of crisis over the past decade.”
REUTERS

Mortgages Yield Profit, But Giant Lenders Hold Back  |  Bank of America and Citigroup “are missing out on the biggest mortgage profits on record after catastrophic losses during the housing crash made them wary of offering new loans,” Bloomberg News reports.
BLOOMBERG NEWS

Managers at Citigroup's Hedge Fund Said to Get Stake for Free  |  “While Citigroup is keeping a 25 percent stake, managers at the Citi Capital Advisors unit will pay nothing for the remaining 75 percent of that business as it becomes a new firm managing as much as $2.5 billion of the bank's money, according to people with knowledge of the plan,” Bloomberg News reports.
BLOOMBERG NEWS

UBS Names Barclays Banker to Lead Financial M.&A. in Americas  | 
REUTERS

UBS Appoints Global Head of Equity Capital Markets  | 
BLOOMBERG NEWS

PRIVATE EQUITY '

Private Equity Stokes Demand for Credit Securities  |  The Financial Times reports: “It has been a vintage year for private equity firms seeking to take money out of their portfolio companies, and a gathering boom in an often overlooked part of the credit markets means 2013 is shaping up to be potentiall y even more lucrative.”
FINANCIAL TIMES

Apax Partners Warns Investors It May Not Reach Target for Fund  | 
REUTERS

HEDGE FUNDS '

Ackman Outlines Bet Against Herbalife  |  At an event held by the Sohn Conference Foundation in Manhattan, William Ackman of Pershing Square kicked off a three-hour presentation arguing that Herbalife's retail sales were far less than it claimed.
DealBook '

Investors Move to Withdraw More Money From Hedge Funds  |  Reuters reports: “Client demands to pull money out of hedge funds rose to their highest level in more than three years in December, at the end of a year that has left many investors disappointed with performance.”
REUTERS

Hedge Fund Managers Offer Predictions for 2013  | 
FINALTERNATIVES

I.P.O./OFFERINGS '

Twitter Quietly Reshuffles Top Ranks  |  The moves seemed to signal the company's preparations for an eventual I.P.O., AllThingsD writes.
ALLTHINGSD

China Relaxes Rules on Overseas Listings  | 
BLOOMBERG NEWS

VENTURE CAPITAL '

Instagram Reverses Course on Privacy Policy  |  The Bits blog writes: “In the aftermath of the uproar over changes to Instagram's privacy policy and terms of service earlier this week, the company did an about-face late Thursday.”
NEW YORK TIMES BITS

Instagram's Rivals Benefit From User Uproar  |  The anger over changes to Instagram's privacy policy “has helped a number of photo-sharing applications garner unprecedented amounts of traffic and new users,” the Bits blog writes.
NEW YORK TIMES BITS

Chinese Venture Capital Firm T ests Appetite for Yuan  |  Innovation Works, which is based in Beijing, “closed a small pool worth less than $100 million dollars in Chinese currency this February,” The Wall Street Journal writes. It also raised a fund denominated in dollars.
WALL STREET JOURNAL

LEGAL/REGULATORY '

S.E.C.'s Khuzami Said to Be Leaving Next Month  |  Robert Khuzami, the enforcement director at the Securities and Exchange Commission, who had been considered a long shot contender for the agency's top job, “plans to step down as early as next month, three people with knowledge of the ma tter said,” according to Bloomberg News.
BLOOMBERG NEWS

Making It Easier to Estimate Libor Losses  |  A government watchdog's report estimating Fannie Mae and Freddie Mac's Libor losses lays out an easy-to-follow road map for others.
DealBook '

Questions Remain About New Plan on ‘Too Big to Fail'  |  The Federal Deposit Insurance Corporation and the Bank of England recently put out a new paper on how they might work together to aid a major financial institution who gets into trouble, Stephen J. Lubben wr ites in his column, In Debt.
DealBook '

UBS Settlement Minimizes Impact of Guilty Plea  |  To settle a rate-rigging case, the Japanese securities subsidiary of UBS pleaded guilty to a charge of felony wire fraud as part of a settlement that was structured to keep the potential fallout from the plea to a minimum, Peter J. Henning writes in the White Collar Watch column.
DealBook '

Japan's Move for Higher Inflation  |  The New York Times columnist Floyd Norris writes: “Japan appears to be ready to do whatever it takes to end its long run of falling prices. The Bank of Japan took limited action on Thursday, and more is expected in the new year.”
NEW YORK TIMES

British Commission Says Bank Reforms Don\'t Go Far Enough

LONDON - Regulators in Britain should have the power to completely split up banks, a government-commissioned report concluded Friday, adding that changes being currently proposed do not go far enough to prevent a future crisis.

Plans to tighten banking regulation, which are expected to go before Parliament early next year, “fall well short of what is required,” the report said.

After the rate-rigging scandal that erupted this summer, Britain's chancellor of the Exchequer, George Osborne, asked a parliamentary commission to take a closer look at the planned banking regulation overhaul. While Mr. Osborne had previously backed the plan, the commission found the proposals lacking.

“Banks need to be discouraged from gaming the rules,” the report said. “All history tells us they will do this unless incentivized not to.”

Now, Mr. Osborne has to decide whether to follow the recommendations of the Independent Commission on Banking and further str engthen the rules or bow to pressure from the banking sector, which argued that any strict rules would harm its competitiveness. Under the current proposals, banks would have to protect, or ring-fence, their retail banking operations from possible losses at their investment banking units.

But the commission said on Friday that the rate-manipulation investigation, which has ensnared more than a dozen big banks around the globe, highlighted the need for even stricter rules. “The latest revelations of collusion, corruption and market-rigging,” the commission wrote in the report, are “the clearest illustration yet that a great deal more needs to be done to restore standards in banking.”

The commission recommended “electrification” of such a ring-fence, meaning there needed to be periodic reviews that the partition remained in place and realistic threats to keep banks from trying to bend the rules.

“Over time, the ring-fence will be tested and chal lenged by the banks,” the commission said in the report. “Politicians too, could succumb to lobbying from banks and others, adding to pressure to put holes in the ring-fence.”

Authorities in the United States and Europe are putting the finishing touches on a new set of banking regulations intended to avoid a repeat of the financial crisis that started in 2007.

In the United States, the Volcker Rule, a part of the Dodd-Frank act that would prohibit banks from making risky bets with their money, is nearing approval by regulators. In France, the finance minister, Pierre Moscovici, introduced a banking bill similar to one planned by Mr. Osborne.

But in some cases, the details remain murky. While latest recommendations by the British lawmakers might not fundamentally chan ge the requirements for banks, they do add to the regulatory uncertainty for banks, which the industry contends makes it difficult to shape strategy.

“It's suffocating,” Ian Gordon, an analyst at Investec, said. “There is constant speculation and change, and the number of resources banks have to make available is becoming more than a distraction.”

Anthony Browne, the chief executive of the British Bankers' Association, an industry lobby group, warned that such uncertainty could threaten London's position as a global financial center. “While it is clearly important to retain a degree of flexibility around the scope of the ring-fence, it is equally critical that any new system creates regulatory certainty for banks and their investors,” he said.

A version of this article appeared in print on 12/22/2012, on page B3 of the NewYork edition with the headline: Bank Reforms Fall Short, British Commission Says.

Pinnacle to Buy Ameristar Casinos for $869 Million

Pinnacle Entertainment agreed on Friday to buy Ameristar Casinos for $869 million in cash, in a deal that would more than double its size.

Under the terms of the deal, Pinnacle will pay $26.50 a share, a 20 percent premium to Ameristar's closing price on Thursday. Pinnacle will also assume Ameristar's $1.9 billion in debt.

Shares in Ameristar jumped 16 percent in premarket trading, to $25.75.

Through the takeover, Pinnacle will quickly expand both its number of properties and its footprint. Ameristar runs eight casino hotels in 11 states, including Illinois, Kansas and its home state of Nevada.

Pinnacle oversees seven casinos in Lo uisiana, Missouri and Indiana, with a racetrack in Ohio. It also holds a 26 percent stake in an international venture, building what is expected to be the first luxury gaming resort in Vietnam.

“The acquisition of Ameristar is a transformative transaction for Pinnacle that will provide us the scale and diversification to more effectively compete,” Anthony Sanfilippo, Pinnacle's chief executive, said in a statement.

The company, which grew out of the Hollywood Park Turf Club racetrack owned by the movie mogul Jack Warner, has steadily moved into the casino business through a series of transactions.

Pinnacle, which had $158.8 million in cash and equivalents on hand as of Sept. 30, said that it had committed bank financing from JPMorgan Chase and Goldman Sachs. It received advice from Goldman and the law firm Morrison & Foerster.

Ameristar was advised by Lazard, Centerview Partners and the law firm Gibson Dunn & Crutcher.

Apollo Unit to Buy Aviva\'s U.S. Unit for $1.8 Billion

A unit of Apollo Global Management agreed on Friday to buy the American operations of Aviva, the British insurer, for about $1.8 billion in cash.

The deal is meant to improve Aviva's financial strength as the insurer rebuilds a balance sheet ravaged by the European debt crisis. The firm has embarked on a series of asset sales meant to raise cash.

Friday's deal will generate about $1.55 billion in proceeds for the insurer, after it pays off some debt.

“The sale of Aviva USA is an important step forward in the delivery of our strategic plan,” John McFarlane, Aviva's chairman, said in a statement. “It considerably strengthens Aviva's financial position, increases group liquidity and improves our economic capital surplus whilst also reducing its volatility.”

The Aviva unit's acquirer is Athene Holding , a four-year-old Bermuda-based insurance holding company that has grown through a series of acquisitions. The deal for the Aviva unit is its biggest to date, according to data from Standard & Poor's Capital IQ.

Athene plans to fold the acquisition into its existing American business, which will become one of the biggest providers of fixed-index annuities in the United States.

“With this acquisition, Athene is a leader in the fixed-annuity space,” James R. Belardi, Athene's chief executive, said in a statement. “The purchase of Aviva's U.S. annuity business will add significant scale to our retail sales and reinsurance operations and provides Athene with best in class operational capabilities.”

The insurer will also weigh a potential sale of the Aviva unit's life insurance operations.

Athene had already received about $621 million in additional capital to help bolster its financial health in advance of the transaction. On Friday, Apollo agreed to provide up to $100 million in additional support.

Athene was advised by Deutsche Bank, Lazard and the law firm Sidley Austin.

Aviva was advised by Goldman Sachs and Morgan Stanley.

Breakup Fees in NYSE\'s Deal With ICE Show Lessons From Past

After its attempted merger with Deutsche Börse collapsed, NYSE Euronext‘s board grew a little wary of jumping into another major deal that could fall apart on antitrust grounds.

A reading of the exchange operator's sale agreement with the IntercontinentalExchange suggests that the Big Board's parent has taken that lesson to heart.

If the $8.2 billion sale falls apart on antitrust grounds, ICE will owe NYSE Euronext a breakup fee of $750 million. That's about a 9.1 percent breakup fee, on the high side for major deals.

But it isn't a record by any means. AT&T's breakup fee in its aborted $39 billion bid for T-Mobile USA was - depending on whom you asked - 10 percent to 15 percent of the total deal price.

And Google was liable for a $2.5 billion breakup fee in its takeover of Motorola Mobility, which was worth some 20 percent of the $12.5 billion deal. (Subtract the $3 billion in cash that Motorola held, and that was a whopping 26 percent.)

According to the merger agreement, if either NYSE Euronext or ICE chooses to break off the deal because of another higher offer, or if either materially breaches contractual requirements, the penalty is $300 million, a much more customary 3.6 percent of the total deal price.

If the board of either company changes its m ind, the breakup fee rises to $450 million. If shareholders of one of the exchange operators fail to approve the merger, then their company is on the hook for a $100 million breakup fee.

People briefed on the matter said on Thursday, before the merger agreement was filed, that the breakup fees were “market rate” and wouldn't be seen as excessive.

(By the way, it appears that the deal's architects are sports fans. The document refers to NYSE Euronext as the “Yankees,” for obvious reasons. ICE is named “Braves,” after the Major League Baseball team in its hometown of Atlanta.)

A version of this article appeared in print on 12/22/2012, on page B2 of the NewYork edition with the headline: NYSE Deal Has Breakup Fee of Up To $750 Million.

Weighing the Consequences of a Money Fund Overhaul

Anyone know what to do with $2.6 trillion?

That's the sum managed by money market funds, a type of mutual fund in which companies and individuals park their cash. Regulators are pressing hard to overhaul money market funds, advocating measures they say would make the funds more resilient to financial panics. The industry opposes the measures, arguing that they are unnecessary and could cause the funds to shrink drastically.

If the money fund sector were to contract markedly, investors would have to find alternative places to park their cash. Such a shift could have important consequences for the financial system.

Before looking at what those might be, it's worth considering that money market funds may in fact survive the changes largely intact. The fund companies may be overstating the economic impact of proposed overhaul measures, like requiring the funds to hold loss buffers.

Also, investors may not all head for the exit if their shares in the fun ds go from being fixed at $1 to floating in value, which is another of the proposed changes. And the funds may soon get a big inflow of new money if, as looks likely, a type of federal guarantee on bank deposits ends.

Still, if a large amount of money flowed out of the funds, it would mostly end up in the banks, according to analysts.

“Bank deposits would clearly get the lion's share,” said Pete Crane, president of Crane Data, which publishes Money Fund Intelligence, an industry publication.

Assets managed by American money market funds peaked at $3.9 trillion in January 2009, according to Mr. Crane. A substantial proportion of the $1.3 trillion decline since then has probably ended up in banks, he says.

In some ways, the regulators might favor a greater shift of money to the banks they oversee. It would further the broad policy aim of paring back the shadow banking system, the name given to an array of less regulated financial activities and ent ities.

The additional cash might make it easier for banks to meet new regulations.

For example, banks are being required to have set amounts of liquid assets on hand. The Clearing House, a banking industry group, recently asked for a loosening of these regulations. If the banks get a big cash windfall from the wind down of money market funds, the new liquidity rules would be easier to meet.

Also, banks may allocate the money in a more rational way than money market funds do.

The funds' corporate investments are very much skewed toward paper issued by foreign banks. One reason is that foreign banks often have the sort of high credit ratings that the money funds require. In reality, though, the foreign banks may be shakier than American corporations with lower ratings. With the freedom to care less about ratings, an American bank could invest less in foreign banks.

But there are concerns about what might happen if large American banks end up with a piles of money market cash. Such moves might help some of them grow even bigger, exacerbating the “too big to fail” problem.

Also, the money market fund industry argues that the funds are far more transparent than bank balance sheets. Investors in money market funds know exactly what assets their money is being invested in. They don't get that with bank deposits, the fund industry says.

Not all of the money leaving money funds would go into banks. A significant proportion could go into vehicles that aren't subject to strong regulation, like offshore money funds, private funds and other types of investment pools. This would run contrary to regulators' wishes.

As regulators push forward with a money fund overhaul in 2013, they will no doubt be giving much thought to the consequences. After all, $2.6 trillion is a lot of money.

Former SAC Trader Is Indicted

6:23 p.m. | Updated

A former SAC Capital Advisors portfolio manager was indicted on Friday on securities fraud and conspiracy charges in a case that federal prosecutors have called the most lucrative insider trading scheme ever uncovered.

A federal grand jury in Manhattan indicted the former portfolio manager, Mathew Martoma, a month after the government arrested him on charges that he used inside tips about a clinical drug trial to help SAC earn profits and avoid losses. Prosecutors said the total benefit to SAC was $276 million.

SAC, based in Stamford, Conn., has been touched by several insider trading cases in recent years, but there is heightened attention surrounding the Martoma prosecution. For the first time, the government has tied questionable trades to Steven A. Cohen, the billionaire owner of SAC.

“Though disappointing, today's events come as no surprise,” Mr. Martoma's lawyer , Charles A. Stillman, said in a statement. “The simple fact is that Mathew Martoma did not trade on inside information, is innocent of all these charges, and we look forward to his ultimate vindication.”

Before Friday's indictment, there had been speculation that the government, before formally presenting evidence to a grand jury, was trying to gain Mr. Martoma's cooperation in building a case against Mr. Cohen. Mr. Martoma has rebuffed several earlier efforts by the authorities to enter into plea talks and implicate his boss.

Mr. Cohen has not been charged with any wrongdoing, and a spokesman for SAC has said that he thinks that he and SAC have acted appropriately at all times. The Securities and Exchange Commission, which bro ught a parallel civil action against Mr. Martoma, has warned SAC that it is likely to file a fraud lawsuit against the firm related to the Martoma case.

Mr. Martoma, 38, is set to appear in Federal District Court in Manhattan for his arraignment on Jan. 3, when he will enter a plea. The case was assigned to Judge Paul G. Gardephe, a former federal prosecutor who assumed his seat on the bench in 2008 after an appointment by President George W. Bush.

The government says that Mr. Martoma obtained secret, negative information from a doctor about clinical trials of an Alzheimer's drug being developed by the pharmaceutical companies Elan a nd Wyeth. He then had a 20-minute telephone conversation with Mr. Cohen, prosecutors say.

A day after the phone call, SAC sold $700 million in Elan and Wyeth stock and made a large negative bet on the companies. The companies' shares plummeted after they announced the disappointing trial results, and SAC booked big profits.

The doctor, Sidney Gilman, is cooperating with prosecutors and has agreed to testify against Mr. Martoma. The government gave Dr. Gilman a nonprosecution agreement, meaning it will not bring criminal charges against him. Such an agreement is highly unusual, legal experts say, and is being used as a pressure point on Mr. Martoma in an effort to get him to “flip” against Mr. Cohen.

Before coming to New York for his arraignment, Mr. Martoma will be spending the holidays with his wife and three young children at home, in Boca Raton, Fla.

A version of this article appeared in print on 12/22/2012, on page B3 of the NewYork edition with the headline: Former SAC Trader Is Indicted in Insider Case.

MF Global Overseers Reach Accord Over Claims

5:15 p.m. | Updated
The officials supervising the wind-down of MF Global's remains said on Saturday that they had reached a broad settlement over claims among the entities they oversee.

The trustees representing the failed firm's main brokerage arm and its holding company, James W. Giddens and Louis J. Freeh, agreed to settle claims with the administrators of MF Global's London arm.

The deal means that an estimated $500 million to $600 million will be returned to MF Global's brokerage unit, which has been paying back customers. Mr. Giddens had previously sought to take back abo ut $700 million from the London unit.

“These agreements are in the best interests of former customers and other creditors and allow us to request court approval for significant additional distributions for securities and commodities customers,” Mr. Giddens said in a statement. “Resolving complex issues with these entities marks a critical milestone in administering the MF Global Inc. estate.”

Mr. Giddens said in the statement that he was seeking to make additional distributions to customers soon.

Mr. Giddens and Mr. Freeh also agreed to settle claims between their two entities, which had often feuded over money to pay out their claims. While MF Global's brokerage arm represents customers of the bankrupt firm, its holding company is charged with paying off creditors.

This year, Mr. Freeh called for a “global settlement” of claims among the three overseers, arguing that the disputes had slowed down the disposition of claims and return of money.

The confusion arose from MF Global's dipping into customer accounts - many held by farmers, ranchers and other small clients - to pay off the firm's needs. Authorities have been investigating the circumstances behind the firm's collapse.

The proposed settlement still requires approval from the federal judge overseeing MF Global's bankruptcy case.

A version of this article appeared in print on 12/23/2012, on page A24 of the NewYork edition with the headline: MF Global Officials Reach Accord Over Claims.