Regulators looking into suspicious trading ahead of the $23 billion takeover of H.J. Heinz are focusing on a complex derivative bet routed through London, DealBook’s Ben Protess and Susanne Craig report. The Securities and Exchange Commission is examining a product known as a contract-for-difference, which allows investors to bet on changes in stock prices without owning the shares, two people briefed on the matter said. The development comes after the F.B.I. said it had opened a criminal inquiry.
The expanding investigation “illustrates the growing challenges facing American regulators,†Mr. Protess and Ms. Craig write. “Charged with policing the American exchanges, authorities increasingly find themselves having to hunt through a dizzyingly complex global marketplace.†As the government cracks down on insider trading, investorsare seeking subtler ways to take advantage of confidential information. The derivative product in question is not regulated in the United States but is popular in Britain, where authorities also opened an inquiry into the Heinz trades, according to one of the people briefed on the matter. The inquiry began when regulators noticed an unusual spike in trading volume in Heinz options a day before the deal was announced.
Complicating the job for regulators, the suspicious options trades were routed through a Goldman Sachs account in Zurich that masked information about the trader. “While the identity remains a secret, the account holder is a Goldman private wealth management client, according to a person briefed on the matter who was not authorized to speak on the record. Goldman executives in Zurich know the identity of the person, but laws prohibit those executives from sharing the name with American regulators and even Goldman executives outside of Switzerland.â€
DEWEY IS OFFICIALLY DISSOLVED  | The once-venerable law firm Dewey & LeBoeuf effectively ceased to exist when it filed for bankruptcy nine months ago. But its dissolution became official when a federal bankruptcy judge on Wednesday confirmed a plan to unwind the firm and pay back creditors, DealBook’s Peter Lattman reports. Dewey’s lead bankruptcy lawyer, Al Togut, said the process had moved more swiftly and less contentiously than previous law firm liquidations. “I want to congratulate all the professionals,†Judge Martin Glenn said at the end of a three-hour hearing.
The liquidation plan describes how the estate will compensate creditors, whose claims total about $550 million. “At the heart of the proposal is an innovative arrangement under which about 450 former Dewey partners agreed to returna portion of their pay, raising about $72 million for creditors,†Mr. Lattman writes. “By accepting the deal, former Dewey partners insulate themselves from future lawsuits connected to the firm’s demise.†Still, a criminal investigation into possible financial misconduct at Dewey is in progress.
EUROPE MOVES TO LIMIT BONUSES  | The European Parliament reached a tentative deal on Wednesday evening to limit bankers’ bonuses at twice the value of their fixed pay, moving to impose the toughest limits on pay since the financial crisis. The deal, which still must be endorsed formally by governments and lawmakers, caps 18 months of negotiating and sets the stage for the implementation of the so-called Basel III rules on capital. It is “a major victory for the European Parl! iament ne! gotiators, who insisted on pay curbs as their price for passing Basel, and a sign of London’s relative isolation on some financial services issues,†The Financial Times writes. Britain had opposed some of the limits.
“I find it difficult to imagine that we would now scrap this compromise,†Michel Barnier, the European Union’s financial services chief, said, according to Bloomberg News. Under the terms of the deal, a one-to-one ratio of salary to bonus can increase to two-to-one with shareholder approval. “While bonuses worth more than twice fixed pay would be banned, special treatment would be given to loss-absorbing securities such as shares and debt that can be written down during a crisis, according to E.U. officials. That would apply if that part of the bonus is deerred for at least five years, they said,†Bloomberg News writes.
ON THE AGENDA Â |Â Barnes & Noble, Best Buy and Sears report earnings before the market opens. Jamie Dimon, chief executive of JPMorgan Chase, appears on Fox Business Network at 5 p.m. James E. Rogers, chief executive of Duke Energy, is on Bloomberg TV at 4 p.m. A revised estimate of gross domestic product for the fourth quarter is out at 8:30 a.m.
ACKMAN’S RETAIL WOES  | J.C. Penney’s disappointing fourth-quarter results underscored the challenges facing the hedge fund manager William A. Ackman, who is wagering on the retailer’s turnaround. “It’s hard to call J.C. Penney’s latest quarterly report anything but breathtakingly bad,†DealBook’s Michael J. de la Merced writes. “The retailer lost $552 million for the quarter, which at $1.95 a share on an adjusted basis far exceeded the 17-cent loss that analysts had been expecting. Same-store sales tumbled nearly 32 percent from the period a year earlier. Shares in the company were down nearly 9 percent in after-hours trading.â€
The chief executive of J.C. Penney, Ronald B. Johnson, who was recruited from Apple, pointed to the changes he had made and asked investors for patience. “One might wonder whether Mr. Ackman, whose Pershing Square Capital Management owns a 17.8 percent stake in J.C. Penney, can wait that long. That said, a person familiar with his thinking said Mr. Ackman believed that the quarter had cleaned up the retailer’s legacy issues, including old and unattractive inventory and cutting out roughly hundreds of millions of dollars in costs.â€
Mylan Buys Drug Maker of Generic Injectables  | Mylan is acquiring Agila Specialties Private, an Indian manufacturer, for $1.6 billion in a deal that doubles Mylan’s presence in the injectable-drug market. DealBook »
The Promise of a Higher Bid for REIT  | The activist hedge fund Corvex Management and The Related Companies offered to raise their takeover bid for CommonWealth REIT on Wednesday to about $2.26 billion, aiming to put additional pressure on the real estate company. DealBook »
Activist Investors Ratchet Up Pressure on a Big REIT  | Corvex Management, a hedge fund run by Keith Meister, and The Related Companies, led by Jeff T. Blau, have filed a lawsuit to block a proposed stock offering by CommonWealth REIT and reiterated a proposal to buy the real estate company. DealBook »
BCBG Said to Weigh a Sale  | The fashion company BCBG Max Azria “is exploring a potential sale that could fetch around $1 billion, two people familiar with the matter said on Wednesday,†according to Reuters. REUTERS
Vivendi Said to Consider Putting GVT Sale on Hold  |Â
REUTERS
Samsung Moves Onto BlackBerry’s Turf  | Samsung Electronics is trying to challenge a market that traditionally was dominated by BlackBerry, “quietly beefing up the Google Android software that runs on its smartphones to give businesses a phone with more security,†The New York Times reports. NEW YORK TIMES
Private Equity’s Tax-Advantaged Rivals !  | Master limited partnerships received a tax break decades ago when United States oil production was declining. Now, with oil output booming, Christopher Swann of Reuters Breakingviews asks, is this a wasteful subsidy DealBook »
Ellison, Oracle’s Chief, Buys Hawaiian Airline  |Â
WALL STREET JOURNAL
Morgan Stanley Sells Stock Plan Services Unit in Europe  |Â
BLOOMBERG NEWS
R.B.S. Reports Wider Loss Than Expected  | The Royal Bank of Scotland said on Thursday that it lost £5.97 billion ($9 billion) in 2012, much larger than the £2 billion loss recorded in 2011, underscoring the troubles the bank continues to face. Analysts surveyed by Bloomberg News had been expecting a loss of £5.1 billion. BLOOMBERG NEWS
Bankia Reports a Record Loss  | Bankia of Spain reported a net loss of roughly $25.04 billion for 2012, “by far the largest in Spanish corporate history,†The Wall Street Journal reports. WALL STREET JOURNAL
Fighting Over the Future of Banking  | Bank chief executives have to answer to regulators, investors and employees, groups that each want different things, Bloomberg Markets Magazine writes. BLOOMBERG MARKETS MAGAZINE
Goldman Hires Lobbyist From Citigroup  | Amy Overton, a lobbyist who spent less than two years at Citigroup, is heading to Goldman Sachs, Reuters reports. REUTERS
Citigroup Executive Heads to Promontory  | Joe Petro, the longtime head of Citigroup’s security and investigative services unit, has left for the consulting firm Promontory Financial Group, American Banker reports. AMERICAN BANKER
Bank of America Appoints Officers in Asia  |Â
WALL STREET JOURNAL
In t! he Hunt f! or Capital, Private Equity Executives Outnumber Investors  | Networking at the SuperReturn conference in Berlin is an exhausting process, as private equity firms set up shop in private rooms, at tables and even at the bar in the conference hotel. DealBook »
Despite Uncertainty, Private Equity Remains Bullish on Europe  | Speaking at an industry conference in Berlin, David M. Rubenstein and other private equity executives outlined investment opportunities in Europe, including sales related to bank bailouts by local governments. DealBook »
In India, Blackstone Turns to Commercial Real Estate  | The Blackstone Group is among private equity firms shifting money into commercial real estate in India, Reuters writes. REUTERS
Argentina’s Bond Case Is Being Closely Watched for Ramifications  | A federal appeals court on Wednesday heard impassioned arguments from two of the nation’s most prominent lawyers in a case that pits a group of bond investors in a long-running battle with the country of Argentina. DealBook »
Man Group Reports Decline in Assets  | The Man Group said assets under management fell to $57 billion in the fourth quarter from $58.4 billion a year earlier, Bloomberg News reports. BLOOMBERG NEWS
Fortress Profit Doubles on Rising Investment Values  | The Fortress Investment Group said its profit more than doubled in the fourth quarter, to $107 million, as the value of its investments showed solid growth. For the year, the firm reported earning $278 million. DealBook »
A Race Against Loeb That Left Ackman Breathless  | In an excerpt from his article in the latest Vanity Fair, William D. Cohan recounts what was supposed to have been a friendly long-distance bike ride involving William A. Ackman and Daniel S. Loeb in the Hamptons. It didn’t end well for Mr. Ackman. DealBook »
Groupon Shares Tumble on Disappointing Results  | Reuters reports: “Groupon Inc. lost a quarter of its market value on Wednesday after the company revealed it began to take a smaller cut of revenue on! daily de! als during the holidays, sacrificing revenue and profits to attract and keep merchants.†REUTERS
Intel to Invest in Research and Development in Brazil  | Intel will invest $152 million in Brazil, which has made increasing the country’s software output a priority. DealBook »
Senate Confirms Lew as Treasury Secretary
Wal-Mart Executive Said to Be Stepping Down  | Tom Mars, Wal-Mart’s chief administrative officer, “will leave the retailer on March 13 after more than a decade with the company,†according to The Wall Street Journal. WALL STREET JOURNAL
Milken’s Relationship With Guggenheim Said to Draw Scrutiny  | The Securities and Exchange Commission is looking into whether Michael Milken, “the onetime king of junk bonds who agreed to a lifetime ban from the securities industry, is violating the terms of that ban in his dealings†with Guggenheim Partners, Fortune reports. FORTUNE
UBS Sued by Former Traders Over Dismissal  | Two former UBS traders in Singapore “claimed they were fired in a bid by the bank to cover up its role in allegedly manipulating key reference rates,†Bloomberg News reports. BLOOMBERG NEWS
