Top Federal Prosecutor of Corporate Crime Will Resign

Lanny A. Breuer, the federal prosecutor who led the Justice Department’s response to corporate crime in the wake of the financial crisis, will announce on Wednesday that he is stepping down after nearly four years in the post.

As head of the Justice Department’s criminal division, one of the most senior roles at the agency, Mr. Breuer tackled corporate bribery and public corruption. But it was his focus on Wall Street that received the most attention, from supporters and critics alike.

While he has come under fire for a dearth of prosecutions on Wall Street in response to the crisis, Mr. Breuer also oversaw an aggressive crackdown on money-laundering and interest-rate manipulation at some of the world’s biggest banks. In two weekslast month, he joined a nearly $2 billion case against HSBC for money-laundering and a $1.5 billion settlemet with UBS for rate-rigging. Next week, he is expected to take a similar rate-rigging action against the Royal Bank of Scotland.

“I think the criminal division is a fundamentally different place than it was four years ago,” Mr. Breuer said in an interview. “It’s the highlight of my professional career.”

His departure, effective March 1, was widely expected. Mr. Breuer had told friends for weeks that he was ready to leave the public sector. While he has not announced his next step, it is expected that he will return to private practice. He was previously a partner at Covington & Burling, a white-shoe law firm.

By virtue of his perch at! the Justice Department in Washington, Mr. Breuer became the face of Wall Street prosecutions in the aftermath of the financial crisis. But when few such cases materialized, critics like the Occupy Wall Street protesters turned on him, portraying him as an apologist for banks at the center of the mortgage mess.

In contrast, he drew praise for the sweeping crackdown on rate-rigging in the banking industry, which has largely involved international benchmark rates.

In a rate manipulation case last month, Mr. Breuer’s team secured a major payout from UBS and a guilty plea from the bank’s Japanese unit, making UBS the first big global bank in more than two decades to have a subsidiary plead guilty to fraud. Mr. Breuer, who announced the action after rejecting a last-minute plea from the bank’s chairman, aso filed criminal charges against two former employees at the bank.

The deal sent a strong signal that the authorities wanted to hold banks responsible for their wrongdoing.

Following the UBS model, the Justice Department is now pursuing a guilty plea from a Royal Bank of Scotland subsidiary in Asia over its role in the interest rate manipulation scandal, people briefed on the matter said. That settlement, which could come as soon as next week, is likely to include more than $650 million in fines imposed by American and British authorities, two other people with direct knowledge of the matter said.

In an interview, Mr. Breuer said the rate-rigging case amounted to “egregious criminal conduct.” He struck a similar tone about two other major financial cases â€" the convictions of executives from Taylor, Bean & Whitaker, a now-defunct mortgage lender, and the 110-year prison term imposed on R. Allen Stanford for his Ponzi scheme.

Mr. Breuer has also focused on money-laundering, creating a task force in 2010 that has levied more than $3 billion in fines from banks, including the record fine against HSBC. He stopped short of indicting HSBC after some regulators warned that doing so could destabilize the global financial system.

Mr. Breuer argued that the charges he did not bring â€" for example, against Goldman Sachs and other banks suspected of fraud after selling toxic mortgage securities to investors â€" could not have been proved. I was not for a lack of trying, he said, noting that United States attorneys across the country, after reviewing the same evidence he did, also declined to act.

“It’s important for me to hold the financial institutions accountable,” he said. “There’s never been a time that a prosecutor said we should bring a securitization case and I said no.”

Under Mr. Breuer, the division has also increasingly used a 1977 law, the Foreign Corrupt Practices Act, to prosecute corporate bribery.

He also helped run the Justice Department’s investigation of the BP oil spill in the Gulf of Mexico, resulting in the company paying $4.5 billion in fines and other penalties and pleading guilty to 14 criminal charges related to the rig explosion in 2010.

In a statement, Attorney General Eric H. Holder Jr. praised Mr. Breuer. “Lanny has led one of the most successful and aggressive criminal divisions in the history of the Department of Justice,” he said.

Mr. Holder stood behind Mr. Breuer when questions arose about his involvement in the botched gun-trafficking case known as Operation Fast and Furious. The pair, who were both largely cleared after an inspector general investigation, worked together at Covington.

For years, Mr. Breuer moved in and out of government. The son of Holocaust survivors who fled Europe and settled in Queens, he landed at the Manhattan district attorney’s office after graduating from Columbia Law School. n between stints at Covington, he worked as a White House special counsel, defending President Bill Clinton amid federal investigations and impeachment proceedings.

In the interview on Tuesday, Mr. Breuer reflected on his unusual path to the Justice Department.

“The fact that I got to go from Elmhurst, Queens, to the criminal division is remarkable,” he said.

MF Global\'s Bankruptcy Nears a Happy Conclusion

When Mahesh Desai checked his MF Global account 15 months ago, his $580,000 nest egg was gone. Like thousands of investors and farmers who had their savings with MF Global, Mr. Desai lost his money in the brokerage firm’s chaotic final days. Regulators discovered that $1.6 billion was trapped in a web of improper wire transfers, a stunning breach that sent federal investigators scrambling to build a case.

On Thursday, a bankruptcy court will review a proposal that would return 93 percent of the missing money to customers like Mr. Desai. And the trustee who has submitted the proposal, James W. Giddens, has quietly identified a way that, if approved by the judge, could plug the remaining shortfall for customers in the United States, according to people involved in the case.

The broad push to make MF Global customers nearly whole, a goal now surprisingly within reach, is a remarkable turnaround from the firm’s Halloween 2011 bankruptcy filing when such a recovery seemed impossible.

“’m surprised that, magically, the money has shown up,” said Mr. Desai, a software account executive who, like most customers in the United States who traded futures contracts, has only 80 percent of his money. “I feel very relieved.”

Customers are not the only ones exhaling. The hearing on Thursday presents a turning point for several major players in the MF Global case, including the firm’s trustees, creditors and former executives.

For one, Mr. Giddens late last year made peace with an overseas administrator tending to the firm’s British unit and Louis J. Freeh, the MF Global trustee recovering money for creditors. The pact ended a bitter fight over access to limited resources.

And Jon S. Corzine, the former New Jersey governor who headed MF Global when it collapsed, can now claim some small degree of vindication. The European bonds at the center of a $6.3 billion bet by Mr. Corzine fully paid out when they matured in recent months.

The large position in European sovereign debt in 2011 unnerved MF Global’s investors and ratings agencies. Yet it is now clear that the bonds, which were sold to George Soros and other investors, were not by themselves to blame for felling MF Global. The firm also struggled after a one-time charge depressed its earnings.

Mr. Corzine, a former chief of GoldmanSachs, has started to regain his footing. He spent the summer on Long Island, traveled to France around the holidays and visited Central America for a humanitarian project involving children, setting up what he hopes will become a broader charitable effort. Mr. Corzine, 66, also spends time with his grandchildren and has office space in Midtown Manhattan, where he writes and trades with his own money.

In the most telling indication that Mr. Corzine is taking steps to put MF Global behind him, he was close to cooperating with Richard Ben Cramer, an author and a Pulitzer Prize-winning reporter, on a biography. Mr. Corzine’s lawyers were in the final stages of negotiating with Mr. Cramer this month when the author died from complications of lung cancer.

Despite Mr. Corzine’s progress, he still must shake a nagging federal investigation. While investigators have long doubted their ability to file criminal charges against him, suspecting that chaos and lax controls were at play, rather! than out! right fraud, they continue stitching together evidence on the firm’s demise.

Federal authorities interviewed the former chief over two days in September, according to people close to the case, a sign that the F.B.I. saw him more as a witness than a suspect. When prosecutors have damning evidence, they often file charges rather than offer a voluntary interview.

But Mr. Corzine, unsurprisingly, has yet to receive assurances that he is in the clear. And investigators continue to examine one of his statements from the September session, the people close to the case said. The statement involved Mr. Corzine’s recollection about a phone call he had with JPMorgan Chase, which received a suspicious $175 million transfer from MF Global on its last day of business. A spokesman for Mr. Corzine declined to comment on the case.

JPMorgan sought written promises that the money did not belong to customers, but never received such assurances. An e-mail reviewed by The New York Times shows that Edith O’Brien, an MF Global employee who oversaw the transfer, told Mr. Corzine that the money belonged to the firm, not clients.

Ms. O’Brien declined to cooperate with the investigation without receiving immunity from criminal prosecution. But the government is hesitating to grant her request, according to the people close to the case, fearing that doing so would set a bad example for future investigations.

Other MF Global employees, including several who stayed to help unwind the firm, are moving on. Henri Steenkamp, MF Global’s chief financial officer, recently departed. And Bradley Abelow, the firm’s chief ope! rating of! ficer, who worked for Mr. Corzine at Goldman and the New Jersey governor’s mansion, left late last year. Weeks earlier, he bought a $1 million condominium in the Williamsburg neighborhood of Brooklyn, according to property records.

With Mr. Abelow gone, Laurie Ferber, the firm’s general counsel, remains the highest-ranking executive on Mr. Freeh’s payroll.

For Mr. Freeh, the most significant breakthrough came in late December when he joined a deal with Mr. Giddens and the British administrator.

Under the terms of the broad settlement, the administrator will pay an estimated $500 million to $600 million to Mr. Giddens, ending a dispute over customer money trapped overseas. The deal also prompted Mr. Freeh to drop more than $2 billion in claims against Mr. Giddens, who hailed the pact as a “critical milestone.”

“This is the eighth-largest bankruptcy in history and we’ve been able to sprint ahead on some occasions, but this is a marathon,” Mr. Giddens’s spokesman, KentJarrell, said in a statement.

The deal, if approved by the bankruptcy judge on Thursday, will enable Mr. Giddens to return up to 93 percent of the money of MF Global’s United States customers. If a series of settlements with JPMorgan and other firms fall into place, people involved in the case said, Mr. Giddens could ultimately return 100 percent of the missing money.

To plug the gap, he must also pursue a small pot of money sitting in MF Global’s general estate, a move that would require court approval. Even if he takes that path, foreign clients will still face significant shortfalls.

For some creditors, the race to recover their millions has moved too slowly. Some have grumbled about the roughly $42 million in fees for Mr. Freeh and other lawyers, focusing on parking bills and first-class air travel.

A group of hedge funds and other companies that held MF Global bonds at the time of the bankruptcy recently introduced a plan to liquidate the firm’s remains and accelera! te the pa! yout process. The group, led by Silver Point Capital, said it expected customers to recover 100 percent of their money.

But not every customer will cash in. Some, in desperation, sold their claims last year at 89 or 91 percent to hedge funds and banks. Mr. Desai held out. “My hope has always been 100 percent,” he said.

Mr. Desai credits the turnaround to Mr. Giddens and James L. Koutoulas, a Chicago hedge fund manager who became a voice for thousands of customers whose money disappeared.

While Mr. Koutoulas continues to fight, it has come with collateral damage. After he appeared on CNBC in 2011 to criticize JPMorgan Chase over its role in the bankruptcy, the bank closed his account and froze his credit card. The bank declined to comment.

Lessons for Entrepreneurs in Rubble of a Collapsed Deal

One lesson to be learned from Goldman Sachs’s victory in a legal dispute over its role as the adviser in the sale of the speech recognition company Dragon Systems may be an old one. If you don’t know who the chump is, then you’re probably it.

For the rest of us, the biggest lesson may be to know your advisers. Deal-making is a high-pressure business where entrepreneurs sometimes believe they can manage the process as they do their own businesses. They not only fail to understand what the role of the banker is, but often seem heedless to the risks. This may have succeeded at the time to build their business, but they do so at their peril in pursuing a deal.

Both sides in the legal dispute would probably agree that the $580 million sale of Dragon Systems to Lernout & Hauspie belongs in the category of deals from hell. The main reasonis that Lernout & Hauspie, a Belgian company, paid for Dragon with its own stock. The sale occurred in 2000, and when Lernout’s accounting was exposed in a year as a huge fraud, the company collapsed into bankruptcy.

As a result, Dragon’s shareholders, including James and Janet Baker, Dragon’s co-founders and holders of 51 percent of its stock, lost almost everything.

Of course, no deal from hell goes away quietly. The Bakers have spent the last 12 or so years largely consumed in litigation. Before their lawsuit against Goldman, the couple had sued roughly 30 other parties and collected $70 million, according to public reports.

By 2009, it was time to turn to one with big pockets, Goldman Sachs. The Bakers, along with two smaller shareholders, sued Goldman, claiming that the firm had, among other things, negligently advised them and misled them during the sale. The Bakers’ main claim was that Goldman was responsible for due diligence on Lernout and, despite warning signs, di! d not adequately advise the Bakers not to do the deal.

The Bakers’ argument was artfully spun for both the media and the jury. The plaintiffs’ lawyers told a tale of the “Goldman 4” â€" a D-team of inexperienced and young Goldman bankers who had botched their job, leaving the Bakers in the lurch and Goldman $5 million richer from its fee. All four subsequently left Goldman, as investment bankers are wont to do.

But Goldman defended itself with a much different story. First, the firm argued that its financial engagement letter, which was heavily negotiated by high-powered lawyers on both sides, required it only to provide “financial advice and assistance in connection with the transaction.” The firm argued that as an investment bank, its job was not to do the kind of searching due diligence into the accounting of Lernout that the Bakers should have done. That job was for Dragon itself and its accountants.

So what was Goldman supposed to do to earn its fee Coordinate the sale, neotiate the price and evaluate the growth prospects for Lernout because the Dragon shareholders received stock (more on that later).

But beyond the dry technical talk of what investment bankers actually do, at trial and in its briefs, Goldman strenuously sought to rebut the Goldman 4 depiction. The firm presented testimony at trial that the Bakers and other executives at Dragon were in a rush to sell in part because Dragon was in financial trouble. (Dragon was later sold out of the Lernout bankruptcy for only $33 million.)

There were warning signs about Lernout that the Dragon executives ignored, including news reports that questioned Lernout’s accounting. But the Bakers wanted to do a deal with Lernout as quickly as possible, the Wall Street firm argued. Goldman even sent a memo to the company warning that for these reasons, it should conduct extensive due diligence on the accounting at Lernout. This, too, was ignored.

And there were other problems. Dragon chose to take an all-sto! ck deal i! nstead of half-cash and half-stock at a meeting that did not include its bankers. (Goldman says it was not invited, while the Bakers claim the bank was a no-show.) The deal occurred during the Internet bubble, so it is likely that the Bakers, like many other investors, had nothing but high hopes for the stock. Indeed, the Bakers did not take steps to hedge the Lernout stock they received when advised of their ability to do so.

Goldman’s tale was thus of headstrong executives who plowed ahead and ignored the investment bank’s advice.

After a 16-day trial, the jury agreed with Goldman. It found for Goldman on all counts, and also found that the Bakers had breached their fiduciary duties to the board in failing to inform it of Lernout’s issues.

Goldman’s case was helped by testimony from the president of Dragon at the time of the sale, who said that he didn’t blame Goldman. And one of the Goldman 4, Richard Wayner, testified voluntarily to clear his name, breaking down on the stand n the process. He also testified that after Goldman’s due diligence memo on Lernout, he had “a very heated conversation” with Ellen Chamberlain, Dragon’s chief financial officer, in which she said, according to Mr. Wayner, that “Dragon did not want to do this additional level of detail.”

There was even a moment worthy of “Perry Mason.” The Bakers’ testimony in earlier suits was that the fraud couldn’t have been spotted or that such diligence wouldn’t have been permitted because Lernout and Dragon were competitors â€" this was most likely intended to help them win their case against Lernout’s accountants and bankers. And it worked. But when they turned their sights on Goldman, they were haunted by this testimony. Goldman’s lawyers repeatedly harped on these points.

In truth, the Bakers always had an uphill fight. Engagement letters that clients sign with investment banks are beasts. These letters limit the banks’ liabilities to all but gross negligence, restrict! who they! are responsible to if things go bad and strictly detail what the banks’ duties are. There have been only a handful of cases where investment banks have been found to be liable to their clients for bad advice. So, even if the Bakers were able to prove Goldman’s misdeeds, there was always that engagement letter to frustrate them.

Alan K. Cotler, a lawyer for the Bakers, said that there was still one Massachusetts State law claim pending and that the “Bakers would continue to pursue that claim.”

Ultimately, there are a number of lessons here.

First, it is perhaps no coincidence that this suit was brought in 2009 â€" in the wake of the financial crisis, when Goldman’s unpopularity made it a good time to sue. These claims would go to a jury, and Goldman was hardly the most sympathetic defendant. But bashing Goldman or any other bank goes only so far when the hard truth spells otherwise.

And, as this case showed, the role of the investment banks can be quite narrow.

With te Dragon sale, you can’t help but feel that this deal was particularly influenced by the Internet frenzy. But while the testimony may have led the jury to conclude that the Bakers plunged heedlessly along, this doesn’t excuse Goldman.

It does appears that there was some dysfunction between the Wall Street firm and Dragon. After all, the price for this deal appears to have been negotiated without Goldman even being present and with its warnings being ignored. While Goldman may have been rightly found to be not liable, one has to wonder why the firm didn’t act more forcefully to push its client’s interests in exchange for its $5 million fee.

In the end, an adviser would say the client, no matter how foolish, is in charge. And that was the problem. The Bakers, who had built a $600 million business from scratch, appear to think that their advisers should have saved them from themselves and that they could negotiate a better deal than Goldman Sachs. That was a mistake.

Chesapeake\'s Chief to Retire

Chesapeake Energy’s co-founder and chief executive, Aubrey McClendon, will retire on April 1, the producer of oil and natural gas announced on Tuesday, almost eight months after investors complained about a contentious compensation plan.

Mr. McClendon, who gave up his chairman role last May, will also leave Chesapeake’s board on that date. Until then, he will transfer daily management responsibilities to other executives. A successor wasn’t named, though the company said that it had hired an executive search firm to find his replacement.

The surprise announcement followed months of investor dissatisfaction with Chesapeake, which has struggled withprolonged low natural gas prices and efforts to move into more lucrative oil production. But shareholder ire spiked last spring, after Reuters reported on an unusual executive perquisite in which he was allowed to buy stakes in each well the company drilled.

To help finance those investments, Mr. McClendon often borrowed from companies that had conducted business with Chesapeake, raising concerns that he faced a conflict of interest.

In an attempt to quell the turmoil, Mr. McClendon agreed last May to give up his chairman role and to end the compensation plan ahead of schedule.

Chesapeake said on Tuesday that it expected to announce the results of a monthslong review into the compensation plan when it discloses its earnings next month. In the interim, the company said that the inquiry has not unveiled any improper conduct.

“Over the past 24 years, I have had the privilege of developing Chesapeake into one of the world’s premier energy companies,” Mr. McClendon said in a ! statement. “While I have certain philosophical differences with the new board, I look forward to working collaboratively with the company and the Board to provide a smooth transition to new leadership for the company.”

It\'s Pensioners on the Side of Hedge Funds Making Their Case Against Argentina

Maria Teresa Muñoz, a retired secretary from Buenos Aires, has something in common with Paul Singer, the billionaire hedge fund manager who is suing Argentina’s government.

They are both “holdouts” â€" the term given to owners of defaulted Argentine sovereign debt who refused to swap their debt for restructured government bonds that had a much lower value. Instead, they have chosen to hold out, in the hope that the government will one day repay them in full. Argentina’s government, led by President Cristina Fernández de Kirchner, vigorously rejects these claims.

But Ms. Muñoz has another connection with Mr. Singer.

She and 14 other holdouts were brought to New York this week by a lobbying group that is partly financed by Mr. Singer’s firm, Elliott Management. The group, American Task Force Argentina, paid for the holdouts’ flights and lodging, according to Robert Raben, its executive director.

He declined to say how much the trip was costing the group, which held a meting for the 14 holdouts at the Warwick Hotel in Midtown Manhattan on Tuesday. He said his group met most of the holdouts through contacts with Argentine lawyers.

The timing of their trip to New York was no accident. It comes just weeks before an appeals court is scheduled to make an important decision on a legal case that has pitted Mr. Singer against the government of Argentina.

Mr. Singer and other hedge fund holdouts have recently enjoyed a series of legal victories, including a ruling from a federal judge that demanded that the they get paid when holders of restructured Argentine bonds get paid. The judge gave the ruling real teeth. He effectively said that the third-party banks that transfer payments from the Argentine government to holders of the restructured bonds also had to comply with this order. That means the restructured bonds would potentially be deprived of payments.

On Feb. 27, the United States Court of Appeals for the Second Circuit is scheduled to take up the ju! dge’s ruling, which has been delayed by a stay. The appeals court will decide whether the tough ruling should take effect, or whether it should be softened in some way. This is where the hedge fund holdouts could lose. The appeals court may decide that the ruling has gone too far, and would be needlessly disruptive, especially the part that forces third-party banks to comply.

As a result, in the lead up to that decision, it makes sense for America Task Force Argentina to show a human face, and present some middle-class losers. After all, the last big public action orchestrated by Elliott Management â€" the seizure of an Argentine naval ship by the government of Ghana â€" arguably lacked the human touch. (The ship was later released.)

And the stories of those at the Warwick Hotel should generate sympathy.

Ms. Muñoz, 76, said she was holding $65,000 of Argentine government bonds at the time of the 2001 default. “From then on, it was a nightmare,” she said. Her mother was ill and Ms. Mñoz said she lacked the funds for proper medical care. Her mother died in 2009, and Ms. Muñoz, unmarried, said she was living on a pension of about $1,000 a month.

Another ordinary holdout was Eva Geller, a 66 year old Uruguayan who declined to disclose the amount of defaulted Argentine bonds she was holding. “For me, it was an enormous amount of money,” she said.

Ms. Geller said she has no government pension. Instead, she gets by on money left by her deceased husband, and on a German pension collected by her 90-year-old mother, who Ms. Geller said is a Holocaust survivor.

The ordinary holdouts said their fight was as much about principle as the money.

Ms. Geller said that, if the government offered to fully repay the bonds of ordinary holdouts, but not those of big hedge funds, she’d refuse. “Equality is for all,” she said.

Some analysts argue that Argentina’s default, while a shock, at least cut the country’s debt load. In other words, the country might! have bee! n stuck in a protracted slump if it had kept trying to pay back all the debt it owed.

But Horacio Vazquez, a Buenos Aires native who was also at the Warwick, thinks that analysis too simplistic. He said the government had other ways to restructure its debt short of forcing such large losses on creditors. “The default was not necessary,” said Mr. Vazquez, who was holding $73,000 of bonds when the government reneged on them.

Elliott Management, through one of its hedge funds, owns over $1 billion of Argentine debt.

The Case for Shaking Up the Hess Board

An activist investor has exposed Hess as the latest governance villain in the energy patch.

Hedge fund Elliott Associates reckons that the oil company could be worth more than double its current $20 billion-plus value. But as at other energy groups, like Chesapeake Energy and SandRidge Energy, a too-cozy board has brought waste and strategic blunders.

Being a Hess director looks like a pretty safe job. Typically board members stick around 50 percent longer than the average for Standard & Poor’s 500 companies, according to Elliott. Thomas Kean, for example, has been a director for 23 years. Three other non-executive directors, including Nicholas Brady, the 82-year-old former Treasury secretary, boast tenures approaching 20 years.

They don’t even offer industry expertise or much independence. Nobody on the Hess board hasdrilling experience outside the company, and only the three executive directors have any at all. Several directors also have connections to the founding family - from which the chief Executive, John Hess, in situ for 17 years, hails - and its charity.

It’s no coincidence that Hess has a record of inefficient operations. It spends far more as a proportion of revenue on its exploration efforts than big rivals like Exxon Mobil. And Elliott reckons its wells in North Dakota’s Bakken shale cost about a third more to drill than those of its peers.

The chief executive also looks overpaid considering the company’s performance. Over the past five years he has earned $96 million, according to Thomson Reuters data, making him well above averagely remunerated for his sector by Elliott’s analysis. Yet even after this week’s gains, Hess’s shares are down 30 percent over the same period, among the oil business laggards. Anadarko Petroleum, by contrast, is up 40 percent.

Hess has been doing some sensible housekeeping, like closing money-losing refineries. But it’s not enough. As at Chesapeake and SandRidge, shareholders are starting to challenge the complacent boardroom status quo. With some prime assets in areas like the Bakken and limited exposure to painfully low U.S. natural gas prices, there’s a case that the company could, or even should, have been among the star performers in its industry. New broom directors, like the five industry heavyweights put forward on Tuesday by Elliott, would make that more liely to happen.

Christopher Swann is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Jefferies C.E.O. Earned $19 Million in 2012

The head of the Jefferies Group was one of the better-paid chief executives on Wall Street in 2012, as the firm put a difficult period behind it.

Richard B. Handler, the chief executive of Jefferies, earned a total of $19 million for 2012, the firm said in a filing on Tuesday. That included a $5 million cash bonus and a $13 million long-term equity incentive award, on top of a $1 million base salary.

The board’s compensation committee was “unanimously impressed with our financial performance and Mr. Handler’s role in that performance,” Jefferies said in the filing. The board said that Mr. Handler was eligible for a bonus of $8.1 million but volunteered to take a smaller amount.

Jefferies reported profit of $71.6 million in the fourth quarter, an increase of 48 percent from a year earlier. It was the final independent earnings eport for the boutique investment bank, which is becoming part of the Leucadia National Corporation in a $3.6 billion deal. Mr. Handler is set to become Leucadia’s chief executive.

Mr. Handler’s pay package for 2012 was higher than that of Jamie Dimon, head of JPMorgan Chase, who earned $11.5 million, compared with $23 million a year earlier.

Mr. Handler got a significant raise from 2011, when he earned $14 million. That year, he declined to accept a bonus after a period in which investors feare! d for the firm’s health.

But those issues, which emerged in the wake of MF Global‘s collapse, appear to have largely receded. The firm’s shares rose more than 35 percent in 2012 and were virtually flat on Tuesday.

Smog, Fraud and Diplomacy

Smog is blanketing a total area of 1.3 million square kilometers across China, and Beijing is again choking with dangerously polluted air. The pictures of the city are almost enough to induce a coughing fit and the Beijing government has told residents to stay inside.

Some companies have told their employees to work from home while at least a handful of Beijing office workers are wearing gas masks at their desks. Pan Shiyi, a real estate magnate who has more than 14 million followers on Sina Weibo and who was instrumental in an earlier social media campaignto force the government to release more air pollution data, began a Weibo poll this morning asking if China needed a “Clean Air Act.”

As of this writing, more than 30,000 people have voted and all but a few hundred were in support of the proposal. Mr. Pan has promised to deliver the results in a report to the Beijing municipal legislature, to which he is a representative.

Next week Beijing will enact a tighter emissions standard for new cars, matching the strictest European Union standards, but this pollution catastrophe will take many years and a huge amount of political will to fix. Professor Minxin Pei is one of many who believe that left unchecked China’s environmental crisis may ultimately threaten the Communist Party’s rule:

The Chinese middle-class, which is particularly conscious of quality-of-life issues, could very well become a powerful source of opposition to the party if it concludes that the one-party state is responsible for their daily miseries: poisonous air, toxic water, and unsafe food.

The case for decisive and quick action is compelling. The question is whether China’s ruling party will actually act, both for the long-term survival of the country and itself.

When faced with a true crisis, the Chinese Communist Party usually acts resolutely,but there is no quick fix for the environmental problems that have been building for decades.

Last week’s column discussed Caterpillar’s huge write-down of its acquisition of 2012 ERA Mining Machinery after discovering “multiyear, coordinated accounting misconduct.” Emory Williams, the former chairman of ERA, issued a statement on Monday in which he declared he was “shocked” that there was fraud at his former company.

THE ERA DEAL LOOKED EXPENSIVE at the time given its deteriorating financials. Ernst & Young and Deloitte, a firm with extensive experience with China frauds, were the auditors on the transaction. The Economic Observer, a well-regarded Chinese newspaper known for its investigative reporting, claimed in an article last week that:

One person who took part in the initial negotiations to acquire Siwei told the EO that he believed that someone working for Caterpillar’s acquisition team accepted bribes from Siwei, noting that “it happened inside a high-end entertainment center in Zhengzhou”.

Caterpillar appears to have bought itself a very large Chinese hairball, one that
will keep many lawyes busy for a long time.

Last week’s China Insider also discussed the tensions between Japan and China over the disputed Diaoyu/Senkaku Islands in the East China Sea. There were small signs of progress towards dialogue with Xi Jinping’s Friday afternoon meeting with Natsuo Yamaguchi, the leader of a junior party in the coalition government.

Mr. Yamaguchi delivered a letter from Japanese Prime Shinzo Abe and during the discussion Mr. Xi referenced a previous generation of leaders who at least the Chinese believe had agreed to shelve the dispute. There is now some talk of a possible summit but that may be too hopeful as neither side has given any indication it thinks the other even has any grounds for a dispute.

In symbolism that would not have been lost on the Japanese, Mr. Xi met with Mr. Yamaguchi in a room adorned with a large painting of the Xifengkou Pass on the Great Wall, site of a brief Chinese victory in a 1933 skirmish that was seen in Japan as a shameful defeat for the Imperial Army.

In a Jan. 25 interview with a Japanese newspaper Prime Minister Abe said that

“the idea of “shelving” the Senkaku Islands territorial dispute floated recently by a high-ranking Chinese Communist Party official “is not applicable, as the Senkakus have long been a part of Japan.”"There is no room for diplomaticdiscussion,” he said, reaffirming that from Japan’s perspective, there is no territorial dispute.

A resolution to this dispute still seems far away while the risk of a mishap around the islands remains. Meanwhile, patriotic shoppers in Shanghai are eagerly buying fish labeled as caught in the unpolluted waters around the Diaoyu Islands.

R.B.S. Stock Drops Amid Concerns of Potential Guilty Plea in Libor Case

Shares of the Royal Bank of Scotland stumbled on Tuesday after it emerged that federal authorities are pursuing a guilty plea against an Asian subsidiary at the center of an interest rate manipulation scandal.

Following a template developed in last year’s rare-rigging case against UBS, the Justice Department is pushing for the criminal action against the Royal Bank of Scotland, along with fines and penalties, according to two people with knowledge of the matter. The case could come as soon as next week.

The R.B.S. settlement is likely to include more than $650 million in fines levied by the American and British authorities, according to two other people with direct knowledge of the matter. At that level, the penalties would be the second largest settlement in the rate manipulation case after a $1.5 billion agreement with the Swiss bank UBS last month. Barclays paid $450 million last summer.

The Justice Department’s criminal division, which is pushing for a guilty plea with the Asian ubsidiary of the Royal Bank of Scotland, could also strike a nonprosecution agreement with the parent company.

The threat of charges against the subsidiary weighed on the stock. After the Wall Street Journal published a story about the potential guilty plea, the bank’s stock dropped 6 percent by the close of trading in London on Tuesday.

The settlement terms are not yet final. In particular, the Royal Bank of Scotland â€" which is 82 percent owned by British taxpayers after receiving a multibillion-dollar government bailout during the financial crisis â€" is resisting the guilty plea for the Asian subsidiary, fearful of the potential fallout. The bank, however, lacks leverage with the Justice Department, which can indict the subsidiary if it resists the guilty plea. An indictment would deliver a harsher blow to the bank and potentially set up a protracted legal battle.

“Discussions with various authorities” in the case “are ongoing,” said an RBS spokesman, adding that “w! e continue to cooperate fully with their investigations.”

The bank, which is based in Edinburgh, is also expected to cut its bonus pool by up to one third, or around $240 million, as it claws back funds to pay for the pending Libor settlement, according to a person with direct knowledge of the matter. A decision on bonuses has not been made, and the final figure will be released on Feb. 28 when the bank reports its next earnings.

“There is a legitimate concern that British taxpayers, who already have bailed out the bank, will be asked to pay for past mistakes at R.B.S.,” said Pat McFadden, a British politician who is a member of the British parliament’s treasury select committee that oversees the country’s finance industry. “Steps should be taken to minimize the exposure for taxpayers.”

Several senior RBS executives, including John Hourican, who runs the firm’s investment banking unit where the alleged illegal activity took place, are expected to step down amid the Libor scndal, though they have not been directly implicated in the matter, according to another person with direct knowledge of the matter.

The negotiations between R.B.S. and the regulators reflect the Justice Department’s aggressive new posture, as they look to hold banks responsible for wrongdoing in the rate rigging case. The wave of action has centered on the London interbank offered rate, or Libor, and other key international benchmark rates, which are central to determining the borrowing costs for trillions of dollars of financial products like corporate loans and credit cards. Banks are suspected of reporting false rates to squeeze out an extra profit and, in some cases, to deflect concerns about their financial health during the financial crisis.

Last month, the Justice Department secured a guilty plea against the Japanese subsidiary of UBS in a rate manipulation case. UBS also paid $1.5 billion in fines to the Justice Department, the Commodity Futures Trading Commission, the Financia! l Service! s Authority, the British regulator and Swiss authorities.

The deal with UBS sent a strong signal that authorities wanted to hold banks responsible for their wrongdoing. But it also limited the potential damage to the Swiss bank. By securing a guilty plea against a subsidiary, it sheltered the parent company from losing its charter to operate or other major repercussions.

“We are holding those who did wrong accountable,” Lanny A. Breuer, the head of the Justice Department’s criminal division, said at a news conference in December on the UBS case. “We cannot, and we will not, tolerate misconduct on Wall Street.”

Hostess Said to Pick Apollo and Metropoulos as Lead Bidder for Twinkies

Twinkies have a reputation for being able to survive an apocalypse. At the very least, it appears that the cream-filled confections will survive bankruptcy.

Their maker, Hostess Brands, has named a pair of private equity firms, Apollo Global Management and C. Dean Metropoulos & Company, as the collective lead bidder for Twinkies and several other snack brands, a person briefed on the matter said on Tuesday.

Apollo and Metropoulos appear to have beaten out a sizable number of competitors for the iconic snack brand, including Grupo Bimbo of Mexico, the maker of Arnolds bread. But as the “stalking horse” bidder, the pair will have largely set a floor for a court-supervised auction that is expected to take place within weeks.

Hostess has named a number of preliminary buyers for its snack and bread brands after deciding to liquiate last year. It has already named lead bidders for its Wonder Bread and Drake’s cake brands.

But Twinkies have long been regarded as the bankrupt baker’s crown jewel, having drawn scores of potential buyers over the last two months. News that Hostess was shutting down its factories prompted a burst of nostalgia for the cakes.

News of the selection of the private equity firms was reported earlier by Bloomberg News and The Wall Street Journal.

Hostess Said to Pick Apollo and Metropoulos as Lead Bidder for Twinkies

Twinkies have a reputation for being able to survive an apocalypse. At the very least, it appears that the cream-filled confections will survive bankruptcy.

Their maker, Hostess Brands, has named a pair of private equity firms, Apollo Global Management and C. Dean Metropoulos & Company, as the collective lead bidder for Twinkies and several other snack brands, a person briefed on the matter said on Tuesday.

Apollo and Metropoulos appear to have beaten out a sizable number of competitors for the iconic snack brand, including Grupo Bimbo of Mexico, the maker of Arnolds bread. But as the “stalking horse” bidder, the pair will have largely set a floor for a court-supervised auction that is expected to take place within weeks.

Hostess has named a number of preliminary buyers for its snack and bread brands after deciding to liquiate last year. It has already named lead bidders for its Wonder Bread and Drake’s cake brands.

But Twinkies have long been regarded as the bankrupt baker’s crown jewel, having drawn scores of potential buyers over the last two months. News that Hostess was shutting down its factories prompted a burst of nostalgia for the cakes.

News of the selection of the private equity firms was reported earlier by Bloomberg News and The Wall Street Journal.

Anglo American Takes $4 Billion Charge on Mining Deal

LONDON - Anglo American took a $4 billion charge on Tuesday on an iron ore project bought at the top of the market.

The company said it would take a post-tax charge on its Minas-Rio iron ore project in Brazil because production costs at the site had skyrocketed.

A rival, Rio Tinto, announced a $14 billion charge this month against some aluminum and coal mining assets for similar reasons. Rio Tinto’s chief executive, Tom Albanese, resigned on the same day.

The charges show how mining companies are facing up to increasing costs for labor and infrastructure that started to weigh on the profitability of assets acquired during the takeover frenzy about five years ago. Rising commodity prices, spurred largely by a construction boom in China and other emerging economies, had tempted mining executives to pay ever larger sums for production sites

“Over the past 12 months there was a shift from aggressive growth to capital efficiency,” said Sam Catalano, an analyst at Nomura. He added that there could be more write-downs to come as mining industry executives take a more conservative approach and review the value of past acquisitions.

Shares of Anglo American rose 2.3 percent in London on Tuesday.

Like Rio Tinto, Anglo American appointed a new chief executive this year. Mark Cutifani, the chief executive of AngloGold Ashanti, will succeed Cynthia Carroll in April. Mr. Cutifani is expected to focus on streamlining operations and returning money to shareholders.

Ms. Carroll, who announced her resignatio! n in October, led the initiative to acquire Minas-Rio from the Brazilian billionaire Eike Batista for about $5.15 billion in cash between 2007 and 2008. The deal was supposed to help Anglo catch up with rivals and give it a significant share of the iron ore market. But costs to develop the project have been climbing ever since, turning the asset into a major headache for management.

Total capital expenditure for Minas-Rio is now expected to reach $8.8 billion instead of the $2.6 billion the company had initially expected, Anglo American said on Tuesday. The company had to increase the spending estimate several times before, once when the discovery of caves at the site needed special geological expertise and there were delays in obtaining some permits. Anglo American said the most recent cost increase related to gaining access to additional land, more expensive license conditions and a one-year delay in shipping the first ore from the new site.

“We are clearly disappointed that the diversity ofchallenges that our Minas-Rio project has faced has contributed to a significant increase in capital expenditure,” leading to the charge, Ms. Carroll said in a statement.

Anglo American had warned investors about spiraling costs at the site two months ago. But even though the charge on Minas-Rio was expected, it is “still a big number,” Ben Davis, an analyst at Liberum Capital, wrote in a note to clients.

Anglo American will book the charge as part of its 2012 full-year results, which it is scheduled to announce next month.

Fischer to Leave Bank of Israel

​

The Governor of the Bank of Israel, Stanley Fischer, today informed the Prime Minister, Mr. Benjamin Netanyahu, of his intention to step down on June 30, 2013, after more than eight years as Governor.

The Governor noted that in addition to the goal of advancing the Israeli economy, one of his  primary goals he had set himself was passing a new Bank of Israel law.  That was done in May 2010. Since then, the Bank has operated successfully within the framework of the new law,   especially through the  work with the  Monetary Committee and the Supervisory Council.

The Governor said that in the coming months he will continue to deal fully with all matters pertaining to the Bank.

Prof .  Fischer added that he is extremely grateful for the opportunity he has been granted by the Governmen of Israel to fulfill the task of Governor, especially during a challenging period that included the global economic crisis, a complex geo-political reality, and domestic social issues.

The Governor thanks the Prime Minister, the Minister of Finance, the Chairman of the Finance Committee of the Knesset, the Members of the Monetary Policy Committee, the Supervisory Council and the management and staff of the Bank of Israel for the privilege of working with them during his term as Governor.

The Governor will hold a press conference tomorrow, Wednesday, January 30th, at 11:00 AM, at the Bank of Israel.

Elliott Management Calls for Board Shake-Up at Hess

Elliott Management is calling for a board shake-up at Hess Corporation.

On Tuesday, the activist hedge fund, run by Paul Singer, pushed investors at Hess to vote for a slate of five independent directors, as part of broader effort to bolster the share price.

Elliott outlined five candidates for the board, including Rodney F. Chase, the former deputy chief executive of BP; Harvey Golub, the former chief executive of American Express; Karl F. Kurz, the former chief operating officer of Anadarko Petroleum; David McManus, a former executive at Pioneer Natural Resources; and Marshall D. Smith, the chief financial officer of Ultra Petroleum. The hedge fund, which own

Elliott’s letter to shareholders comes just a day after Hess said that it planned to sell a network of terminals. It has hired Goldman Sachs to lead the process.

“By closing the Port Reading refinery and selling our terminal network, Hess will complete its transformation from an integrated oil and gas company to one thatis predominantly an exploration and production company and be able to redeploy substantial additional capital to fund its future growth opportunities,” John Hess, the company’s chairman and chief executive, said in a statement.

Elliott, which owns 4 percent of Hess, has unveiled a wide-ranging strategy for oil company, which includes selling off assets and spinning off the Bakken assets. Hess said it first heard from Elliott last week, when the hedge fund outlined plans to buy shares and potentially nominate directors.

“If managed appropriately, we believe the equity value of Hess could be up to $126 per share - a massive premium to where the shares currently trade in the market,” Elliott wrote in the letter. “But reclaiming this shareholder value requires substantial strategic change.”

Gleacher to Leave His Investment Bank

Eric J. Gleacher, the veteran deal maker who participated in the fight over RJR Nabisco, said on Tuesday that he would leave the investment bank he founded about 23 years ago.

The departure of Mr. Gleacher comes months after his struggling firm hired Credit Suisse to explore a sale.

Gleacher & Company disclosed last month that the Nasdaq stock market had initiated a move to delist the investment bank, after its stock price lingered below $1 for months. The firm is appealing the decision.

<>A former Marine and long one of Wall Street’s top golfers, Mr. Gleacher founded his company after having become one of the top deals bankers on Wall Street during the 1980s. He founded the mergers department at Lehman Brothers in 1978, and then led Morgan Stanley‘s deal team from 1985 to 1990.

“I simply decided that it was time for me to focus my attention and energy on some exciting business opportunities outside of the firm,” Mr. Gleacher said in a statement. “I wish my talented colleagues at Gleacher & Company all the best as they pursue their careers, compete in the marketplace and grow.”

Philips to Sell Home Audio and Video Unit for $201 Million

Royal Philips Electronic agreed on Tuesday to sell its home audio and video business to Funai Electric of Japan for 150 million euros, or $201.5 million, and a brand licensing fee as the consumer electronics pioneer continues a shift into more profitable industrial products.

OpenTable to Acquire Foodspotting for $10 Million

Booking a restaurant reservation on the Internet is more convenient than calling a hostess or jotting your name down on a waiting list, but it can feel impersonal. OpenTable, the online reservation business, says it is acquiring a start-up to make booking a table a bit more intimate and social.

The company on Tuesday said it had agreed to buy Foodspotting, the San Francisco social media start-up, for $10 million. On Foodspotting, a user can search for a restaurant or a type of dish, and the search results will display user-uploaded pictures of food at certain restaurants.

How would this fit in with OpenTable Matt Roberts, chief executive of OpenTable, said that when you book a reservation at a restaurant, you may receive a confirmation e-mail that includes a menu, accompanied with photos of entrees that people recommendeating there.

“If you can have a rich menu with images instead of just words and recommendations of dishes you may like, it really just broadens the experience and helps diners get the most of their evening out,” Mr. Roberts said in an interview.

The purchase of Foodspotting is one of OpenTable’s first steps to use customer data to make dining more personalized. Mr. Roberts imagined a waiter carrying around a tablet loaded with the OpenTable app, which would display a patron’s dining history and show his food preferences or cocktail of choice.

The $10 million purchase of Foodspotting will include hiring 10 of the start-up’s staff members, including its chief executive, Alexa Andrzejewski, who will serve as an interface designer. The start-up had raised $3 million in funding in 2011.

Soraya Darabi, a founder of Foodspotting who is no longer at the company, and previously worked at The New York Times, said the start-up’s database now had three million photos of dishe! s from all around the world, and users are adding a few hundred thousand photos every month.

Not all restaurant owners will be thrilled about the idea of customer-taken photos showing up alongside their menus. Some restaurateurs have prohibited photography of their dishes because it can be distracting to other diners and chefs.

Mr. Roberts said he didn’t think this would be a problem. He said users of Foodspotting typically voted for photos that are of the highest quality, which gives them more weight.

“We think restaurants will be broadly enthusiastic and appreciate the way their brand and dishes can be shared,” he said, adding that OpenTable could also give restaurants the tools to share their own photos of their dishes.

Is S.E.C. Nominee Too Connected

In choosing Mary Jo White, a former prosecutor, to lead the Securities and Exchange Commission, President Obama seemed to signal a resolve to get tough on Wall Street. But the other section of Ms. White’s résumé â€" her years representing Wall Street names as a rainmaking partner at Debevoise & Plimpton â€" could prove troublesome. “How conflicted is Ms. White Let’s count the ways,” Andrew Ross Sorkin writes in his DealBook column. Her clients from finance have included JPMorgan Chase, the board of Morgan Stanley and Kenneth D. Lewis, a former Bank of America chief executive.

At the S.E.C., Ms. White may be required to recuse herself from certain important decisions. If that happens, ”it could raise the prospect of a 2-2 split along party lines among the other commissioners,” Peter J. Henning writes in the White Collar Watch column. “Currently, it’s a highly polarized group, so her recusal could effectively freeze the S.E.C. from moving on an issue.”

As a prosecutor, Ms. White had a long record of going after terrorism and financial fraud. But at the S.E.C., she would have to avoid “even an appearance of impropriety arising from a business or personal relationship,” Mr. Henning writes. “Ms. White brings a wealth of experience to her new job, in part deftly navigating the revolving door between Wall Street and Washington. But in this new role, she’ll have to walk a fine line, more cautiously than even before.”

FORMER JEFFERIES TRADER CHARGED WITH FRAUD  |  Federal prosecutors on Monday charged Jesse C. Litvak, a former senior trader at the Jefferies Group, with defrauding clients and t! he government while selling them mortgage-backed securities after the financial crisis, DealBook’s Peter Lattman reports. The purported violations â€" cheating brokerage clients by misrepresenting prices â€" would not typically rise to the level of a federal criminal prosecution. But the government was a victim in this case, prosecutors said, because Mr. Litvak’s clients, including some of the world’s biggest investment firms, were managing money that was part of the Troubled Asset Relief Program, the $700 billion bailout fund. Mr. Lattman writes: “The case demonstrates the aggressive prosecutorial stance of the special inspector general for TARP, or Sigtarp, which led the investigation. The office, now led by Christy Romero, has been responsible for criminal cases filed against 121 individuals.” Mr. Litvak is accused is generating more than $2 million in revenue though the trades in question.

Separately, Treasury’s Sigtarp released a report on Monday showing that executives at bailed-out firms continued to receive generous government-approved compensation packages. The report “found that 68 out of 69 executives at Ally Financial, the American International Group and General Motors received annual compensation of $1 million or more, with the Treasury’s signoff,” Annie Lowrey writes in The New York Times.

IN ITALY, BANK SCANDAL BECOMES POLITICAL FODDER  |  A scandal involving Monte dei Paschi di Siena, the old Italian bank, is reverberating through Italian politics and becoming an issue in the country’s national elections next month. The controversy centers on whether the bank hid losses it incurre! d after t! aking over the Italian bank Antonveneta in 2008 for 9 billion euros. “This is still a solid bank,” the chief executive, Fabrizio Viola, said on Monday. But the revelations in the unfolding scandal “have raised questions about the degree of scrutiny given Monte dei Paschi di Siena by Mario Draghi, who was still head of Italy’s central bank when the problems developed. Mr. Draghi, of course, is now president of the European Central Bank,” The New York Times writes. In addition, “the conservative former prime minister Silvio Berlusconi, who is trying to be a spoiler in next month’s elections, has been trying to lay blame for the scandal at the Democratic Party’s doorstep. Meanwhile, the current prime minister, Mario Monti, has had to defend his government’s decision to bail out the banks with loans granted last year.”

While the sandal will probably not be enough to get Mr. Berlusconi back as prime minister, it could prevent the current prime minister “from running the country with a solid majority in both houses of Parliament,” Hugo Dixon of Reuters Breakingviews writes. “If so, fears about Italian political risk could return to haunt the markets.”

ON THE AGENDA  |  The CIT Group, Ford Motor and Pfizer report earnings on Tuesday morning, and Amazon reports results in the evening. With home prices showing signs of recovering, the Standard & Poor’s/Case-Shiller housing price index for November is out at 9 a.m. Data on consumer confidenc! e in Janu! ary is released at 10 a.m. David Sze, a partner at Greylock Partners, is on CNBC at 10:40 a.m. Maurice R. Greenberg, A.I.G.’s former chief, is on CNBC at 3:30 p.m.

HOSTESS NAMES MCKEE LEAD BIDDER FOR DRAKE’S BRAND  | 
Continuing its dismantling plan, Hostess Brands chose McKee Foods, the maker of Little Debbie snacks, as the lead bidder for its Drake’s brand. McKee, the “stalking horse” bidder in a court-supervised auction set for March 15, has agreed to pay $27.5 million for the Drake’s brand, giving it the rights to sugary treats like Ring Dings, Yodels and Devil Dogs. Separately, Hostess said it had picked United States Bakery as the stalking-horse bidder for four of its bread products, including Sweetheart and Eddy’s.

Mergers & Acquisitions Â'

Activist Investor Buys Stake in 3i Group  |  The activist investor Edward J. Bramson has been buying shares in the British private equity firm 3i Group, according to a statement from the company. Mr. Bramson’s Sherborne Investors, which recently raised around $325 million, started buying shares in 3i in early January, and 3i believes he has sold the holding to Jefferies International. DealBook Â'

Buffett Said to Have Weighed Deal for NYSE Euronext  |  Warren E. Buffett ultimately did not try to top IntercontinentalExchange’s $8.2 billion proposal. DealBook Â'

Yahoo’s Results Beat Expectations  |  On Monday, Yahoo reported that revenue in the fourth quarter rose 1.6 percent, to $1.35 billion, exceeding analysts’ expectations. “Marissa Mayer, just by being Marissa Mayer, has done more to move Yahoo forward in her first six months as chief executive than any of her five predecessors did over as many years,” The New York Times writes. NEW YORK TIMES

Hess Weighs Sale of Terminal Network  |  The Hess Corporation plans to sell 19 fuel terminals as part of a plan to refocus on higher-growth exploration and production. It also disclosed having received a letter from the hedge fund Elliott Management, which is seeking a big stake in Hess and a potential board fight. DealBook Â'

Dodgers to Start Regional Sports Network  | 
NEW YORK TIMES MEDIA DECODER

Anglo American Announces $4 Billion Write-Down on Mining Project  | 
REUTERS

Actian, a ‘Big Data’ Company, to Acquire Pervasive Software for $161.9 Million  | 
REUTERS

INVESTMENT BANKING Â'

Investors Warm to Bank Bonds  |  “For the first time since 2007, dollar-denominated bonds issued by banks from around the world are on the verge of yielding less than those of industrial companies,” The Wall Street Journal writes. WALL STREET JOURNAL

Bank of America’s Chief Urges Employees to Focus on Customers  |  Bank of America “must focus on improving customer service as it moves past its crisis-era problems, C.E.O. Brian Moynihan said in a letter sent to employees, signaling one of his strategies for boosting revenue at the bank,” Reuters reports. REUTERS

Indian Bank Looks to Raise $1 Billion in Share Sale  | 
FINANCIAL TIMES

PRIVATE EQUITY Â'

Private Equity Firms Take Control of Nine Entertainment  |  Apollo Global Management and the Oaktree Capital Group won control of the Nine Entertainment Company, Australia’s second-most-watched television network, as a federal judge gave final approval to a reorganization plan, Bloomberg News reports. BLOOMBERG NEWS

HEDGE FUNDS Â'

Trian Said to Reduce Stake in State Street  |  Trian Fund Management, the activist firm run by Nelson Peltz, has sold par of the stake in State Street that it disclosed in 2011, “at a per-share price far below what Mr. Peltz and the firm’s two other founding partners stated State Street would be worth if it followed their ‘action plan,’” The Wall Street Journal reports. WALL STREET JOURNAL

Hedge Funds Increase Holdings of Stocks in January  | 
FINANCIAL TIMES

I.P.O./OFFERINGS Â'

How Facebook Taught Its Computers to Communicate With People Â!  |  Before Facebook introduced a new search tool this month, “it assembled an eclectic team to scrutinize what users were searching for on the site â€" and how,” The New York Times reports. “The team included two linguists, a Ph.D. in psychology and statisticians, along with the usual cadre of programmers.” NEW YORK TIMES

Owners of Bausch & Lomb Said to Favor an I.P.O.  |  The Wall Street Journal reports: “Bausch & Lomb Inc.’s private equity owners are leaning toward launching an initial public offering of shares in the eye-health company after possible buyers of the business balked at the asking price of at least $10 billion, according to people familiar with the matter.” WALL STREET JOURNAL

VENTURE CAPITAL Â'

As Music Streaming Grows, Musicians Are Wary  |  Music-streaming services like Spotify, Pandora and YouTube “have been largely welcomed by an industry still buffeted by piracy. But as the companies behind these digital services swell into multibillion-dollar enterprises, the relative trickle of money that has made its way to artists is causing anxiety at every level of the business,” The New York Times reports. NEW YORK TIMES

LEGAL/REGULATORY Â'

U.S. Said to Push for Criminial Charges for R.B.S.  |  The Wall Street Journal reports: “U.S. authorities are pushing for a settlement of interest-rate-rigging allegations with Royal Bank of Scotland Group P.L.C. that would result in a unit of the big British bank pleading guilty to criminal charges in addition to paying a penalty, according to people briefed on the negotiations.” WALL STREET JOURNAL

R.B.S. Said to Be Cutting Bonuses in Advance of Libor Fine  |  Bloomberg News reports that the Royal Bank of Scotland, Britain’s biggest publicly owned lender, “may reduce the bonus pool at its investment bank by more tha a third as it prepares to pay fines to U.S. and U.K. regulators for Libor manipulation, a person with knowledge of the plan said.” BLOOMBERG NEWS

Judge Authorizes I.R.S. to Demand Data From UBS  |  A judge said the Internal Revenue Service could demand information from UBS about the American clients of Wegelin & Company, the Swiss bank that pleaded guilty to tax law violations, Bloomberg News reports. BLOOMBERG NEWS

Media Companies Said to Have Been the Focus of Trading Inquiry  | 
WALL STREET JOURNAL

Iceland Wins Major Case Involving Failed Bank  |  Iceland won a landmark court case in Europe on Monday over its refusal to immediately cover the losses of British and Dutch depositors who lost money in Icesave, a failed Icelandic bank. DealBook Â'

Federal Reserve to Release ‘Stress Test’ Results Over 2 Days  |  “By saying when and how it will disclose the results, the Fe is seeking to avoid a replay of the confusion that accompanied last year’s results, when some banks complained of miscommunication with the central bank,” The Wall Street Journal reports. WALL STREET JOURNAL

When Corruption Helps the Bottom Line  |  A recent study found that the most corrupt countries like Venezuela are actually better for investors than moderately corrupt countries like Morocco or Mexico, writes Michael S. Pagano, a professor at the Villanova School of Business.
DealBook Â'

Activist Investor Buys Stake in 3i Group

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3i Investments plc is authorised and regulated by the Financial Services Authority ('FSA') in respect of its activities carried on in or from the UK. The FSA does not otherwise regulate the investment activities carried on by 3i outside the UK.

US Residents

Special rules are applicable when US Residents and other US persons access the 3i Websites. For US regulatory reasons, US Residents are not permitted to access certain of the 3i Websites (www.3iGroup.com), unless they have express permission from 3i to do so (which may be granted by 3i in circumstances where such US Resident has given 3i certain undertakings). 3i is not offering any securities or services in the United States or to US residents through any 3i website. A "US Resident" includes any US person, as well as (i) any natural person who is only temporarily residing outside the United States, (ii) any account of a US person over which a non-US fiduciary has investment discretion or any entity, which, in either case, is being used to circumvent the registration requirements of the US Investment Company Act of 1940, and (iii) any employee benefit or pension plan that does not have as its participants or beneficiaries persons substantially all of whom are not US persons. In addition, for these purposs, if an entity either has been formed or is operated for the purpose of investing in a particular security or obtaining a particular service, or facilitates individual investment decisions, none of the beneficiaries or other interest holders of such entity may be US Residents. Terms used in this paragraph (including the term "US person") have the meanings given to them in Regulation S under the US Securities Act of 1933. 3i maintains a US Investors website where information contained has been provided solely for the purpose of meeting the company’s regulatory obligations under rule 12g3-2(b) of the Securities Exchange Act of the United States.