SAC IS CALLED A MAGNET FOR CHEATING  | Federal authorities delivered a crippling blow to SAC Capital Advisors on Thursday, announcing criminal charges against the hedge fund that could threaten its survival, DealBook’s Peter Lattman and Ben Protess report. Calling SAC “a veritable magnet of market cheaters,†the authorities argued that the firm and its units permitted a “systematic†insider trading scheme to unfold from 1999 to 2010, generating hundreds of millions of dollars in profit for the firm, owned by the billionaire Steven A. Cohen.
The indictment offers a detailed account of SAC’s inner workings, citing e-mails indicating Mr. Cohen and other executives failed to prevent possible insider trading. Federal prosecutors on Thursday portrayed the “rampant insider trading†at SAC as having no equal. Preet Bharara, the United States attorney for the Southern District of New York, said the scheme at SAC was “substantial, pervasive and on a scale without known precedent in the history of hedge funds.â€
In response to Thursday’s developments, a spokesman for SAC said, “SAC has never encouraged, promoted or tolerated insider trading.†The spokesman added, “The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years.â€
For Mr. Bharara, this may be the case of his career, some legal and political experts say. A victory could propel Mr. Bharara onto a bigger platform, Julie Creswell writes in DealBook. “While Mr. Bharara’s march on Wall Street has not quite turned him into a household name, it has landed him television interviews with the likes of Charlie Rose and an appearance on the cover of Time Magazine,†Ms. Creswell writes. “Already, many political analysts are drawing comparisons between Mr. Bharara and another former United States attorney who rode convictions against Wall Street into the New York mayor’s office, Rudolph W. Giuliani.â€
Wall Street now must contemplate life without SAC, DealBook’s Peter Eavis writes. “Not only does Wall Street support the fund’s stock and derivatives trades, but the firm is also a reliable client for those further down the food chain, like technology equipment providers. Now, the fund’s banks face an uncomfortable choice. Should they keep acting as a broker to SAC Capital? There will be strong temptation to maintain full ties with the fund.â€
As for SAC’s possible defense, there are few options, Peter J. Henning writes in the White Collar Watch column. “Although SAC has denied engaging in any misconduct, the criminal liability of an organization is very broad in the United States, and there are no effective defenses once the government proves one of its agents engaged in criminal conduct on its behalf.â€
ACTIVISION IN $8.2 BILLION DEAL TO BUY BACK STAKE FROM VIVENDI  | Activision Blizzard, the world’s biggest video game publisher, has a reached an $8.2 billion deal to separate from Vivendi and become an independent company. Under a deal that was announced early Friday, Activision Blizzard and a group of investors led by the company’s management will buy back shares owned by Vivendi, the French conglomerate that controls the video game maker, leaving a majority of Activision Blizzard’s shares held by the investing public.
Activision Blizzard will buy about 429 million of its shares and certain tax attributes from Vivendi for roughly $5.83 billion in cash, or $13.60 a share, the company said. In addition, Robert A. Kotick, 50, the chief executive, and Brian Kelly, the co-chairman, are leading a group in buying about 172 million shares of the company from Vivendi for about $2.34 billion. Vivendi will retain a stake of about 12 percent, or 83 million shares, in Activision Blizzard, the company said.
WALL STREET’S EXPOSURE TO HACKING  | “The indictment on Thursday of a long-running hacking ring is kindling fears that rogue programmers are going beyond theft and developing the capacity to wreak havoc on the broader financial system,†Nathaniel Popper writes in DealBook. “Five Eastern European computer programmers were charged by the United States attorney in New Jersey with hacking into the servers of more than a dozen large American companies and stealing 160 million credit card numbers in what the authorities called the largest hacking and data breach case ever.â€
“But one company had nothing to do with credit cards or bank accounts: Nasdaq. In a separate indictment unsealed in federal court in New York, one of the men, Aleksandr Kalinin of Russia, was charged with having gained access for two years to the servers of the Nasdaq stock exchange.â€
ON THE AGENDA Â |Â Kohlberg Kravis Roberts & Company reports earnings before the market opens. The Thomson Reuters/University of Michigan consumer sentiment index for July is out at 9:55 a.m. Mario Gabelli is on Bloomberg TV at 8:15 a.m.
DEFENSE TRIES TO SHOW TOURRE’S SYMPATHETIC SIDE  | “I am here to tell the truth and clear my name,†Fabrice P. Tourre said to his lawyer Pamela Chepiga after she asked him why he was sitting in a courtroom in Lower Manhattan. Mr. Tourre has been accused by the Securities and Exchange Commission of duping unsuspecting investors into buying toxic real estate securities he knew were doomed to fail.
Ms. Chepiga’s questioning is aimed at undoing some of the damage inflicted this week by the S.E.C.’s lead lawyer, Matthew T. Martens, DealBook’s Susanne Craig writes. Mr. Martens has used e-mails Mr. Tourre wrote to a girlfriend where the former trader joked about potentially toxic products he was selling. “It was a silly, romantic e-mail I sent late at night during a period of market stress,†Mr. Tourre said.
Glenn Britt to Step Down as Time Warner Cable Chief  | Time Warner Cable said on Thursday that Mr. Britt would retire at the end of the year, to be succeeded by Robert D. Marcus, the chief operating officer, The New York Times reports.
NEW YORK TIMES
Lazard Quarterly Profit Rises 81% Â |Â The investment bank Lazard defied a weak merger market in the second quarter, reporting that adjusted profit rose to $60 million from $33 million in the period a year earlier.
DealBook »
M.&A. Tables Don’t Give Full Score  | Lazard, for example, ended this year’s first half with a 10 percent share of completed deals, leaving it in ninth place, Antony Currie of Reuters Breakingviews writes. Yet by revenue, the Wall Street firm was in the top five.
REUTERS BREAKINGVIEWS
Google’s Deals So Far This Year  | Google spent $1.3 billion on acquisitions this year, mostly on the social mapping start-up Waze, AllThingsD reports.
ALLTHINGSD
Airlines Said to Offer Concessions in Merger  | As US Airways and the parent of American Airlines begin a series of meetings with United States regulators, the airlines have offered to divest a pair of slots at London’s Heathrow Airport to secure support for the deal in Europe, The Wall Street Journal reports.
Profit at Nomura Surges on Rally in Japanese Markets  | Japan’s biggest brokerage said Friday its net income for the most recent quarter was nearly 35 times higher than a year ago.
DealBook »
A Note of Caution From Blankfein on the Economy  | The United States “feels like it is recovering but I wouldn’t say that it is quite healthy yet,†Lloyd C. Blankfein, the chief executive of Goldman Sachs, told a business group in Sydney, according to Bloomberg News. “It is a very poor time to take risk and without risk taking there is less growth.â€
BLOOMBERG NEWS
Barclays Expected to Report Gain in Profit  | Analysts polled by Bloomberg expect Barclays to report a 19 percent gain in second-quarter profit, Bloomberg News writes. The bank reports results on July 30.
BLOOMBERG NEWS
Oaktree Said to Hire Goldman to Sell Packaging Firm  | The Oaktree Capital Group is said to be seeking a buyer for Tekni-Plex, a packaging company that could sell for around $800 million, Reuters reports.
REUTERS
In TXU Deal, a Focus on Junior Bonds  | “KKR & Co. and TPG Capital’s best chance for salvaging their failing $48 billion purchase of Energy Future Holdings Corp. in the biggest leveraged buyout ever may hinge on $1.48 billion of junior bonds,†Bloomberg News reports. “The odds are rising that the group of private-equity firms will try to buy the 11.25 percent debt due December 2018 and linked to the company’s regulated business, according to debt research firm CreditSights Inc.â€
BLOOMBERG NEWS
Elliott Management to Retain Stake in BMC After Buyout  | The hedge fund Elliott Management is rolling over about $137 million of its shares in BMC Software into a new stake once the company goes private, The Wall Street Journal reports.
WALL STREET JOURNAL
Facebook’s Stock Levitates Amid Rosy Expectations  | Shares of the social network rose nearly 30 percent on Thursday to $34.36 a share after a surprisingly strong second-quarter earnings report. “Even the bears were impressed with the company’s second-quarter performance,†Vindu Goel writes on the Bits blog of The New York Times.
NEW YORK TIMES
DealBook »
Steve Jobs’s Widow Backs Media Site  | Laurene Powell Jobs has joined with other prominent figures in Silicon Valley to back a journalism Web site called Ozy Media, Fortune reports.
FORTUNE
Code Would Require Apps to Disclose Collection of Data  |Â
NEW YORK TIMES
Gender Undertones in Tug of War Over New Fed Leader  | “President Obama’s choice of a replacement for the Federal Reserve chairman, Ben S. Bernanke, is coming down to a battle between the California girls and the Rubin boys,†The New York Times writes.
NEW YORK TIMES
UBS to Pay $885 Million to Settle U.S. Claims Over Bonds  | The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, announced the settlement on Thursday.
THE ASSOCIATED PRESS
U.S. Said to Push for Big Payments Over Mortgage Securities  | With UBS having settled, “Bank of America, JPMorgan Chase and Royal Bank of Scotland are being pressed for multibillion-dollar payments to the US government over toxic mortgage-backed securities, according to people familiar with negotiations,†The Financial Times reports.
FINANCIAL TIMES
When Fraud and Traffic Violations Intersect  | “Three academics set out to see whether there were any clear differences between chief executives of companies where fraud was committed and chiefs of similar companies where fraud did not take place â€" or at least where it was never detected. And they found evidence that those who are willing to violate other rules are also more willing to violate securities laws,†Floyd Norris, a columnist for The New York Times, writes.
NEW YORK TIMES
Glaxo Replaces Chief of China Unit in Bribery Inquiry  | Hervé Gisserot, who was co-head of GlaxoSmithKline’s pharmaceutical business in Europe, is succeeding Mark Reilly as general manager in China, Agence France-Presse reports.
AGENCE FRANCE-PRESSE
