JPMorgan Chase disclosed in a regulatory filing on Wednesday that it faced a criminal and civil investigation into whether it sold shoddy mortgage securities to investors before the financial crisis, Jessica Silver-Greenberg and Ben Protess report in DealBook. The investigation is the latest legal threat to the bank and one of several mortgage-related problems for the industry.
JPMorgan said the civil division of the United States attorney’s office for the Eastern District of California had “preliminarily concluded†that JPMorgan flouted federal laws with its sale of subprime mortgage securities from 2005 to 2007. The parallel criminal inquiry is in a preliminary stage, according to a person briefed on the matter.
“Adding to scrutiny of the bank, federal prosecutors in Philadelphia are examining whether JPMorgan duped investors into buying troubled mortgage securities that later imploded, according to people briefed on the matter, who spoke on the condition of anonymity,†DealBook writes. “The prosecutors are investigating whether JPMorgan churned out the mortgage-backed securities without ensuring that the investments met underwriting standards, the people said.â€
BLACKSTONE MOVES TO SELL HILTON IN I.P.O.  | Hilton Worldwide, the giant hotel company that the Blackstone Group bought in the summer of 2007 for $26 billion, has begun preparations for an initial public offering, DealBook’s Michael J. de la Merced reports. That includes hiring four banks â€" Deutsche Bank, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley â€" to start the process, according to people briefed on the matter. An offering for Hilton would probably come in the first half of next year, one of these people said.
“Private equity firms have been eager to sell their companies, either outright or through an initial offering, to take advantage of booming stock markets and generate realized profits for themselves and their limited partners,†Mr. de la Merced writes. “That has served to bolster the financials of the alternative investment giants. Last month, Blackstone reported a tripling of its second-quarter profit, thanks in part to cashing out of its investments.â€
ON THE AGENDA Â |Â
T-Mobile US and Apollo Global Management report earnings before the market opens. Eric Lefkofsky, the newly named chief executive of Groupon, is on CNBC at 10:15 a.m. Joan Solotar, senior managing director at Blackstone, is on CNBC at 5 p.m.
ICAHN BOLSTERS ASSAULT ON DELL  | Carl C. Icahn is not giving up his fight against the effort by Michael S. Dell to buy the computer maker he founded. The question is whether Mr. Icahn’s latest moves shore up his assault as the odds stack up against him, Mr. de la Merced writes in DealBook. On Monday, Mr. Icahn disclosed that he bought an additional four million shares in Dell late last week, bringing his stake to roughly 9 percent. He has also filed a lawsuit in an effort to prevent a special committee of Dell’s board from altering the rules of the proposed leveraged buyout.
“By buying the additional shares, Mr. Icahn has cemented himself as Dell’s biggest outside investor with an 8.9 percent stake, surpassed only by the company’s eponymous founder and his 15.7 percent stake,†Mr. de la Merced writes. “But the Dell special committee’s move greatly diminished Mr. Icahn’s power to block the deal.â€
The Times Is Not for Sale, Publisher Says  | “Will our family seek to sell The Times? The answer to that is no,†the newspaper’s publisher said in a statement Wednesday night. NEW YORK TIMES
MegaFon to Buy Russian Cellphone Provider for $1.2 Billion  | MegaFon, one of Russia’s largest mobile phone companies, agreed on Thursday to buy a local rival, Scartel, for $1.2 billion in a bid to increase its access to fast data networks. The deal will give MegaFon ownership of Scartel’s so-called fourth-generation cellphone network, which provides customers with high speed access to the Internet through their smartphones. DealBook »
American Greetings Buyout Is Approved by Shareholders  | A $606 million buyout of the company by its founding family received support from 81 percent of the voting power of the outstanding shares. DealBook »
Bidders Said to Circle French TV Distribution Group  | The domestic unit of Télédiffusion de France has attracted about seven bidders for a deal that could be worth about $5.3 billion, Reuters reports, citing unidentified people familiar with the matter. REUTERS
Yahoo Rethinks Its Logo  | The company announced it would reveal a new design for its logo next month. NEW YORK TIMES BITS
AOL to Buy Adap.tv, a Video Ad Platform, for $405 Million  | AOL agreed on Wednesday to buy Adap.tv, a video advertising platform, for about $405 million in cash and stock, in its biggest acquisition since becoming an independent company. DealBook »
Commerzbank Earnings Exceed Expectations  | Shares of Commerzbank, the German lender, rose as much as 11 percent after the bank said net income fell 84 percent in the second quarter, a decline that was not as steep as analysts had expected, Bloomberg News reports. BLOOMBERG NEWS
London Metal Exchange Said to Consider C.E.O. Candidates  | Three people are being considered to succeed Martin Abbott as chief executive of the London Metal Exchange when he steps down at the end of the year, according to Bloomberg News, which cites two unidentified people familiar with the process. BLOOMBERG NEWS
Cargill Expands in Energy Trading  | The move by Cargill, a giant trader of agricultural commodities, is coming even as banks retreat from physical energy markets, The Financial Times reports. FINANCIAL TIMES
Investors Grant TPG More Time to Spend Capital  | Investors in TPG’s flagship fund agreed to give the private equity firm more time to spend a pile of capital that was reported to be $3 billion. REUTERS
Carlyle Profit Rises as Firm Continues to Cash Out  | The investment giant said on Wednesday that it earned $155.8 million for the quarter ended June 30, up nearly fourfold from the period a year earlier, but the result fell short of expectations. DealBook »
Pressure Mounts on Ackman in Herbalife Bet  | Herbalife’s stock has risen since Soros Fund Management bought a significant stake in the nutritional supplements company this summer, creating more losses for William A. Ackman’s Pershing Square Capital Management, which is betting the stock will fall. “Pershing Square now faces paper losses amounting to roughly $350 million on its $1 billion bet, according to people familiar with the matter,†The Wall Street Journal reports. WALL STREET JOURNAL
Loeb Humbly Accepts Sony’s Rebuff of His Shake-Up Plan  | In an interview with Variety - whose parent company is partially owned by Daniel S. Loeb’s firm, Third Point - the hedge fund manager contended that he was actually pleased with the outcome of his effort to prod Sony into partially spinning off its entertainment arm. DealBook »
Groupon Names a New Chief Executive  | Eric Lefkofsky, the co-founder of Groupon who was named interim chief executive after Andrew Mason, the other co-founder, stepped down in February, was named chief executive on Wednesday. Groupon also announced a $300 million share repurchase program. REUTERS
Tesla Reports Narrower Quarterly Loss  | Shares of Tesla, the maker of electric cars, jumped in trading after hours on Wednesday after the company reported a narrower net loss in the second quarter and an unexpected operating profit. ASSOCIATED PRESS
Not Banks, but Still Lending Money and Drawing Investors  | The success of Lending Club, which links up borrowers with investors who are willing to make loans, has spawned imitators and venture capital backers that are looking for similar results. DealBook »
A Day in the Life of Wall Street’s Cop  | Preet Bharara, the United States attorney for the Southern District of New York, tells Bloomberg Businessweek: “My movements are a state secret, and I’m not allowed to tell you that. Other than to say I eat the same thing every day: raw meat.†BLOOMBERG BUSINESSWEEK
Mine Deal Adds Scrutiny on China’s State Industries  | “A moribund coal mine here descends deeply, more than 3,800 feet underground. But the deal in which a Chinese state-owned conglomerate bought it may be even darker and more labyrinthine,†The New York Times writes. NEW YORK TIMES
Investor Group Challenges Eminent Domain Plan in Richmond  | The Wall Street Journal reports: “Banks representing some of the nation’s largest bond investors filed suit against the city of Richmond, Calif., on Wednesday to block plans by city officials to seize and buy mortgages using their powers of eminent domain.†WALL STREET JOURNAL
Bank of England Links Interest Rate to Employment  | The New York Times reports: “In a significant shift in strategy intended to spur Britain’s economic recovery, the Bank of England said on Wednesday that it would aim to keep interest rates at a record low until the nation’s unemployment rate declines to at least 7 percent.†NEW YORK TIMES
Wal-Mart Settles OSHA Case  | The New York Times reports: “Wal-Mart Stores has agreed to a corporatewide settlement to improve safety conditions related to trash compactors and cleaning chemicals in more than 2,800 of its stores, the United States Department of Labor announced on Wednesday.†NEW YORK TIMES
