A Database of Names and How They Connect

It sounds like a Rolodex for the 1 percent: two million deal makers, power brokers and business executives â€" not only their names, but in many cases the names of their spouses and children and associates, their political donations, their charity work and more â€" all at a banker’s fingertips.

Such is the promise of a new company called Relationship Science.

Never heard of it Until recently, neither had I. But a few months ago, whispers began that this young company was assembling a vast trove of information about big names in corporate America. What really piqued my interest was that bankrolling this start-up were some Wall Street heavyweights, including Henry R. Kravis, Ronald O. Pearlman, Kenneth G. Langone, Joseph R. Perella, Stanley F. Druckenmiller and Andrew Tisch.

It turns out that over the last two years, with a staff of more than 800 people, mostly in India, Relationship Science has been quietly building what it hopes will be the ultimate business Who’s Who. If it succeeds, it could radically change the way Wall Street does business.

That’s a big if, of course. There are plenty of other databases out there. And there’s always Google. Normally I wouldn’t write about a technology company, but I kept hearing chatter about it from people on Wall Street.

Then I got a glimpse of this new system. Forget six degrees of Kevin Bacon. This is six degrees of Henry Kravis.

Here’s how it works: Let’s say a banker wants to get in touch with Mr. Kravis, the private equity deal maker, but doesn’t know him personally. The banker can type Mr. Kravis’s name into a Relationship Science search bar, and the system will scan personal contacts for people the banker knows who also know Mr. Kravis, or perhaps secondary or tertiary connections.

The system shows how the searcher is connected â€" perhaps a friend, or a friend of a friend, is on a charitable board â€" and also grades the quality of those connections by identifying them as “strong,” “average” or “weak.” You will be surprised at the many ways the database finds connections.

The major innovation is that, unlike Facebook or LinkedIn, it doesn’t matter if people have signed up for the service. Many business leaders aren’t on Facebook or LinkedIn, but Relationship Science doesn’t rely on user-generated content. It just scrapes the Web.

Relationship Science is the brainchild of Neal Goldman, a co-founder of CapitalIQ, a financial database service that is used by many Wall Street firms. Mr. Goldman sold CapitalIQ, which has 4,200 clients worldwide, to McGraw-Hill in 2004 for more than $200 million. That may explain why he was able to easily round up about $60 million in funds for! Relation! ship Science from many boldface names in finance. He raised the first $6 million in three days.

“I knew there had to be a better way,” Mr. Goldman said about the way people search out others. Most people use Google to learn about people and ask friends and colleagues if they or someone they know can provide an introduction.

Relationship Science essentially does this automatically. It will even show you every connection you have to a specific company or organization.

“We live in a service economy,” Mr. Goldman said. “Building relationships is the most important part for selling and growing.”

Kenneth Langone, a financier and co-founder in Home Depot, said that when he saw a demonstration of the system he nearly fell off his chair. He used an unprintable four-letter word.

“My life is all about networking,” said Mr. Lagone, who was so enthusiastic he became an investor and recently joined the board of Relationship Science. “How many times do I say, ‘How do I get to this guy’ It is scary how much it helps.”

Mr. Goldman’s version of networking isn’t for everyone. His company charges $3,000 a year for a person to have access to the site. (That might sound expensive, but by Wall Street standards, it’s not.)

Price aside, the possibility that this system could lead to a deal or to a new wealth management client means it just might pay for itself.

“If you get one extra deal, the price is irrelevant,” Mr. Goldman said.

Apparently, his sales pitch is working. Already, some big financial firms have signed up for the service, which is still in a test phase. Investment bankers, wealth managers, private equity and venture capital investors have been trying to arrange meetings to see it, egged on, no doubt, by many of Mr. Goldman’s well-heeled investors. Even some development offices ! of charit! ies have taken an interest.

The system I had a peek at was still a bit buggy. In some cases, it was missing information; in other cases the information was outdated. In still other instances, the program missed connections. For example, it didn’t seem to notice that Lloyd C. Blankfein, the chief executive of Goldman Sachs, should obviously know a certain senior partner at Goldman.

But the promise is there, if the initial kinks are worked out. I discovered I had paths I never knew existed to certain people or companies. (Mr. Goldman should market his product to reporters, too.)

One of the most vexing and perhaps unusual choices Mr. Goldman seems to hae made with Relationship Science is to omit what would be truly valuable information: phone numbers and e-mail addresses.

Mr. Goldman explained the decision. “This isn’t about spamming people.” He said supplying phone numbers wouldn’t offer any value because people don’t like being cold-called, which he said was the antithesis of the purpose of his database.

Ultimately, he said, as valuable as the technology can be in discovering the path to a relationship, an artful introduction is what really counts.

“We bring the science,” he said. “You bring the art.”

Mary Jo White Discloses Law Firm Wealth

It is no secret that the partners at the white-shoe law firms Debevoise & Plimpton and Cravath, Swaine & Moore make a decent living. The financial disclosure form of Mary Jo White, who was nominated by President Obama to be the next chairwoman of the Securities and Exchange Commission, reveals just how decent.

Ms. White and her husband, John, a Cravath partner, have amassed wealth of between $16 million and $47 million, according to the filing. Ms. White runs the white-collar criminal defense practice at Debevoise & Plimpton; Mr. White is a partner at Cravath, Swaine & Moore.

As part of her isclosures, Ms. White also explained how she would deal with potential conflicts of interest. In a surprise move, she disclosed that her husband would relinquish his partnership at Cravath, converting his interest in the firm from an equity to non-equity status.

While many large corporate law firms have non-equity partners, meaning they hold the title “partner” but have no ownership stake, Cravath’s 87 partners all have equity in the firm. As a non-equity partner, Mr. White will receive a fixed salary and an annual performance bonus, according to the letter.

Ms. White also said that, for the time she serves as chairwoman, Mr. White will not communicate with the S.E.C. on behalf of Cravath or any client in connection with a representation. Such a restriction is not immaterial for Cravath, as Mr. White has deep connections to the commission, having served as the director of the commission’s corporation finance unit from 2006 to 2008.

The form has a number of other disclosures.! Mr. White also has investments in a three hedge funds, including a vehicle managed by Och-Ziff, a large publicly traded investment firm started by a former Goldman Sachs partner. He will initiate the process of divesting his interest in all three of the funds upon her confirmation.

As for Ms. White, Debevoise paid her more than $2.4 million last year. And the disclosure also highlights Debevoise’s lucrative retirement plan. Ms. White said that she plans to retire from the Debevoise partnership upon her confirmation, and the filing said that she will receive a monthly lifetime retirement payment of $42,500, amounting to $510,000 annually.

However, instead of making a monthly retirement payment for the next four years while she runs the S.E.C., Debevoise will make a lump-sum payment within 60 days of her appointment, the disclosure said.

The wide range of the Whites’ net worth is a function of the disclosure form, which requires only placing investments within a range of numbers. For instance, Mr. White’s capital account at Cravath is valued at more than $1 million, but it is surely worth well in excess of that.

Alternatives to Dell Deal Come With Too Little Certainty

Objectors to the founder’s $24.4 billion leveraged buyout of Dell are in a tight corner. The likes of Southeastern Asset Management are right that Michael S. Dell and Silver Lake Partners have made a lowball offer. Yet it’s at a respectable 25 percent premium, and the company’s shares haven’t topped the $13.65 per share deal price in months or Southeastern’s $23.72 per share valuation in years.

Dell’s net cash, its finance business at book value and the cost of recent acquisitions, which Dell says are doing well, add up to almost $13 a share, as Southeastern points out. That’s practically the whole of the buyout price, yet it ignores the value of Dell’s server and PC business and most of its IT consulting. Those businesses may be in decline, but they are not worthless.

Or look at it this way. Analysts xpect Dell to generate $4.6 billion of earnings before interest, taxes, depreciation and amortization, or Ebitda, in the coming year. After capital expenditure, estimated interest costs following the buyout and taxes, the company will probably churn out more than $2 billion in free cash flow. That’s an impressive return on the buyers’ roughly $6 billion of equity - much more than sufficient to compensate for the risk of a continued slide in the PC business.

Southeastern is justified in worrying that the role of the founder and largest shareholder will deter rival bids, despite the board’s efforts to use independent advisers and allow a period to find a buyer at a higher price. Industry rivals might want to pick off some Dell units, but most likely not the whole. And without Mr. Dell’s willing involvement, it is probably too big a bite for private equity funds. Moreover, short-term investors betting on the sale - who perhaps now hold a quarter of all Dell’s shares - will mostly vote for the bird in hand if the alternative is the stock returning to earth with a thud.

Southeastern’s other ideas require patience. For instance, a big special dividend financed by debt would still leave shareholders with a period of high leverage and potential earnings volatility before they have as much in their pockets as the buyout price. Yet returning about $4 billion to investors over the past two years via buybacks and a recent dividend has not done anything to persuade public investors of Dell’s charms.

Investors have had time to understand Mr. Dell’s turnaround plan, but Dell’s shares traded at no more than about $11 apiece in the months before buyout rumors surfaced in early January. Not enough shareholders seem to be persuaded it’s worth waiting around. More optimistic owners like Southeastern, with its 8.5 percent stke, could be in a position to force the price higher. But barring a major surprise, it looks as though alternatives to the buyout provide too little certainty to match up.

Robert Cyran is a columnist and Richard Beales is assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

R.B.S. Executives Testify Over Rate-Rigging Case

LONDON - British politicians grilled current and former executives of the Royal Bank of Scotland on Monday about the management failures that led to the rate-manipulation scandal.

Over more than three hours of testimony, the British bank’s chief executive, Stephen Hester, the former head of the firm’s investment banking division, John Hourican, and other senior executives faced questions about why traders were able to report false rates.

Royal Bank of Scotland, which is 82 percent owned by British taxpayers after receiving a multi-billion dollar government bailout during the financial crisis, agreed on Feb. 6 to pay a $612 million fine to American and British regulators over rate rigging. As part of the settlement, the Justice Department forced the firm’s Japanese unit to plead guilty.

It is the latest case to emerge from the global investigation into rate manipulation, which centers on major benchmarks like the London interbank offered rate or Libor. Such rates underpin trillionsof dollars of financial products.

Barclays and UBS previously reached settlements with British and American authorities. Other institutions, including several American banks, are still under investigation in a number of jurisdictions.

During the testimony on Monday, British politicians accused the Royal Bank of Scotland executives of prioritizing short-term profit and fostering a culture that prompted 21 traders to manipulate Libor for financial gain.

“It has brought shame against the bank,” said Rory Phillips, a lawyer questioning the bank’s executives on behalf of the British parliament’s commission on banking standards. “There’s been a loss of trust and confidence on behalf of the public.”

According to regulatory filings, the Royal Bank of Scotland failed to monitor the submissions of benchmark rates. And employees continued to report false rates even after authorities began to investigate the wrongdoing.

The senior executives said they had not been awa! re of the rate-rigging activities that occurred between 2006 and 2010. Senior executives in testimony said that Libor was not been considered a priority for Royal Bank of Scotland, which almost collapsed in 2008 after an ill-advised deal to buy the Dutch financial giant ABN Amro. After the subsequent bailout by the British government, senior managers instead focused on reviving the bank by selling off assets, reducing its workforce and curbing exposure to risky trading activity.

“When we took control of the bank, it had had a cardiac arrest,” said Mr. Hourican, who resigned last week, forgoing past and current bonuses totaling around $14 million in response to the scandal. “We had to prioritize dealing with the existential threat to the bank.”

After the government bailout, Mr. Hourican said Royal Bank of Scotland’s operations had become overly stretched across too many countries and business units.

“The bank was doing too many things in too many countries with too little capita,” Mr. Hourican said.

In testimony, former and current executives said they also didn’t fully understand the extent to which Libor and other benchmarks could be manipulated.

“As captain on the bridge, we have to take responsibility for those events,” said Johnny Cameron, the former chairman of global banking and markets at Royal Bank of Scotland who left the bank in 2008. “No one envisaged Libor could be fiddled by a cartel of traders at a number of banks.”

Lawmakers repeatedly asked executives why the British bank did not have appropriate controls in place to catch the traders’ wrongdoing.

In 2011, the Royal Bank of Scotland told regulators in a letter that systems had been created to monitor Libor submissions. But American and British authorities discovered in their investigations that these controls had not been established, according to the recent settlement. Authorities
said the firm did not deliberately mislead regulators.

“At the very least, t! here was ! a wholesale failure of systems and controls of the rate process,” Mr. Phillips, the lawyer, said. “Somebody in management more senior in the structure should have known what was going on and put a stop to it.”

Mr. Hester acknowledged that the bank had failed to respond quickly to the rate-rigging, and had not improved internal compliance structures.

“The behavior was the disgraceful failure of individuals,” said the chief executive, who is in line for a bonus of up to $3.8 million on top of his annual salary of $1.9 million for last year. “We were slow to recognize that behavior and catch it.”

“During the period of extraordinary boom, hubris set in in this industry,” Mr Hester told lawmakers. the banking sector developed an “excessively selfish and self-centered culture.”

The British bank said last week that it would claw bank past, current and future bankers’ bonuses totaling around $470 million to pay the Libor settlement. The majority of the money will be ued to pay the fines levied by American regulators. As Royal Bank of Scotland is majority-owned by local taxpayers, the penalty from the Financial Services Authorities, the British regulator, will be recycled back into the government’s coffers.

Still, lawmakers remained concerned that the British public was still on the line for the illegal activity of some of the bank’s employees.

“There would be enormous anger if U.K. taxpayers pick up the tab for the individual sins of traders who were trying to rig Libor rates,” said Pat McFadden, a Labour politician who sits on the Parliamentary commission.

Royal Bank of Scotland has fired six employees for their role in the rate-rigging scheme, while another individual was dismissed for an unrelated matter. Eight other people left the bank before the manipulation was discovered, and another six employees have been disciplined, but remain at the firm.

Even so, British politicians demanded to know why Mr. Hourican’s deputy, Peter ! Nielsen, ! had not lost his job despite his role as global head of rates when some of the manipulation had occurred. Mr. Nielsen, who will now co-head of firm’s investment banking operations, said he had discussed resigning with Mr. Hourican, but decided to stay on.

“I was not aware that derivatives traders were making these requests,” Mr. Nielsen told British politicians, in reference to the rate-rigging. “We had very serious issues. Senior management felt that it was a mathematical impossibility to alter the rates.”

The Temptation to Trade on Confidential Information

Everyone loves a sure thing. And in the case of insider trading, the profits may be just too tempting.

Two cases filed last week by the Securities and Exchange Commission epitomize just how quickly some have jumped at the opportunity to profit from confidential information, despite the risks of being discovered and the subsequent costs.

In one case, two information technology workers learned that their company was involved in merger negotiations when one helped the chief executive figure out how to attach confidential deal documents to an e-mail. The other involved a husband learning about a confidential acquisition fro his wife, who is a lawyer, after an event with a client’s general counsel was canceled on short notice.

In both situations, the defendants bought stock in the companies involved in the deals the day after learning the confidential information, showing virtually no compunction about violating the law. Nor does it appear they did much to conceal their actions - they used accounts in their own names to buy and sell shares.

Did the desire for quick profits simply cloud their better judgment, or is insider trading something people do not consider to be wrongful

The S.E.C. noted that the two technology workers, Blake R. Wellington and Daniel J. Vance, went to great lengths to finance their trades. Mr. Wellington took out a $25,000 loan from an online lending site, an expensive transaction given the high interest rates charged by these lenders. Mr. Vance borrowed from his 401(k) account, and sold personal computer equipment and his truck to raise the money for his stock purchase.

The merger was announced two weeks after their purchases, producing a total profit of about $72,000. Under their settlement with the S.E.C., they were required to return all their gains and had to pay an additional $79,000 in penalties and prejudgment interest. Whatever vehicle Mr. Vance bought to replace his truck is probably gone now, too.

In the second case, the S.E.C. charged James Balchan with insider trading when he bought shares in National Semiconductor. He learned confidential information about a merger involving the firm after his wife told him that a law firm event involving the company’s general counsel had been canceled because he was tied up in negotiations with Texas Instruments.

The next morning, Mr. Balchan bought 2,000 shares of National Semiconductor, and another 1,000 shares a few days later, reaping a profit of aout $29,000 when the acquisition was announced.

Mr. Balchan’s wife is a partner in the Houston office of a national law firm that did work for National Semiconductor, so any information she had about the deal was confidential.

Whether Mr. Balchan had the same duty of confidentiality is a different question, however, because he was not an employee of the law firm. In its complaint, the S.E.C. contends that Mr. Balchan breached a duty of trust and confidence to his wife because he was aware of her obligation to a client of the firm.

That theory of insider trading may be a bit of a stretch under the law. The United States Court of Appeals for the Second Circuit held in United States v. Chestman that “marriage does not, without more, create a fiduciary relationship.” In that case, the court overturned an insider trading conviction when a husband traded on information he leaned from his wife a! bout a ta! keover of her family’s company.

The S.E.C. adopted Rule 10b5-2 in 2000 to address family situations, taking the exact opposite approach of the Chestman decision. The rule provides that there is a duty of trust and confidence “whenever a person receives or obtains material nonpublic information from his or her spouse, parent, child or sibling.”

Mr. Balchan settled with the S.E.C., agreeing to disgorge his profit and pay a penalty plus interest of $30,615. So the question of whether it was a violation of securities law for the husband to trade based on confidential information received from his wife will not be tested in this case.

The two cases raise questions about our society’s attitudes toward insider trading. Why are citizens so eager to trade on information to make a quick, if rather modest, profit when the prohibition against insier trading is fairly clear and widely known Unlike hedge fund managers who face pressure to produce profits on a daily basis, these defendants were handed an opportunity to trade and did so almost immediately.

The recent crackdown on insider trading has certainly been hard to miss in the news media.

While some have questioned the scope of the insider trading prohibition, there is a general public perception that it is wrongful. Stuart P. Green, a Rutgers law professor, and Matthew B. Kugler, a psychologist, conducted a survey about when trading on confidential information should be punished. Their article in The Fordham Urban Law Journal concluded that it was “only when the trader obtained the confidential information in some presumably illicit manner, such as by appropriating it from his employer or client, that our subjects regarded it as clearly worthy of prohibition and censure.”

Insid! er trading is a violation that involves cheating by taking advantage of access to confidential information along with a strong dose of greed to overcome the usual moral constraint against engaging in illegal conduct. There is no easily identifiable victim in insider trading, so it can be easy to justify it to oneself because no individual is actually losing money in the process, just the faceless mass of traders in the market.

The fact that some people appear to be willing, and even eager, to trade on confidential information when presented the opportunity shows that sometimes any constraints on acting illegally can be easily overcome.

Is it worth it That question hardly seems to matter.

The Temptation to Trade on Confidential Information

Everyone loves a sure thing. And in the case of insider trading, the profits may be just too tempting.

Two cases filed last week by the Securities and Exchange Commission epitomize just how quickly some have jumped at the opportunity to profit from confidential information, despite the risks of being discovered and the subsequent costs.

In one case, two information technology workers learned that their company was involved in merger negotiations when one helped the chief executive figure out how to attach confidential deal documents to an e-mail. The other involved a husband learning about a confidential acquisition fro his wife, who is a lawyer, after an event with a client’s general counsel was canceled on short notice.

In both situations, the defendants bought stock in the companies involved in the deals the day after learning the confidential information, showing virtually no compunction about violating the law. Nor does it appear they did much to conceal their actions - they used accounts in their own names to buy and sell shares.

Did the desire for quick profits simply cloud their better judgment, or is insider trading something people do not consider to be wrongful

The S.E.C. noted that the two technology workers, Blake R. Wellington and Daniel J. Vance, went to great lengths to finance their trades. Mr. Wellington took out a $25,000 loan from an online lending site, an expensive transaction given the high interest rates charged by these lenders. Mr. Vance borrowed from his 401(k) account, and sold personal computer equipment and his truck to raise the money for his stock purchase.

The merger was announced two weeks after their purchases, producing a total profit of about $72,000. Under their settlement with the S.E.C., they were required to return all their gains and had to pay an additional $79,000 in penalties and prejudgment interest. Whatever vehicle Mr. Vance bought to replace his truck is probably gone now, too.

In the second case, the S.E.C. charged James Balchan with insider trading when he bought shares in National Semiconductor. He learned confidential information about a merger involving the firm after his wife told him that a law firm event involving the company’s general counsel had been canceled because he was tied up in negotiations with Texas Instruments.

The next morning, Mr. Balchan bought 2,000 shares of National Semiconductor, and another 1,000 shares a few days later, reaping a profit of aout $29,000 when the acquisition was announced.

Mr. Balchan’s wife is a partner in the Houston office of a national law firm that did work for National Semiconductor, so any information she had about the deal was confidential.

Whether Mr. Balchan had the same duty of confidentiality is a different question, however, because he was not an employee of the law firm. In its complaint, the S.E.C. contends that Mr. Balchan breached a duty of trust and confidence to his wife because he was aware of her obligation to a client of the firm.

That theory of insider trading may be a bit of a stretch under the law. The United States Court of Appeals for the Second Circuit held in United States v. Chestman that “marriage does not, without more, create a fiduciary relationship.” In that case, the court overturned an insider trading conviction when a husband traded on information he leaned from his wife a! bout a ta! keover of her family’s company.

The S.E.C. adopted Rule 10b5-2 in 2000 to address family situations, taking the exact opposite approach of the Chestman decision. The rule provides that there is a duty of trust and confidence “whenever a person receives or obtains material nonpublic information from his or her spouse, parent, child or sibling.”

Mr. Balchan settled with the S.E.C., agreeing to disgorge his profit and pay a penalty plus interest of $30,615. So the question of whether it was a violation of securities law for the husband to trade based on confidential information received from his wife will not be tested in this case.

The two cases raise questions about our society’s attitudes toward insider trading. Why are citizens so eager to trade on information to make a quick, if rather modest, profit when the prohibition against insier trading is fairly clear and widely known Unlike hedge fund managers who face pressure to produce profits on a daily basis, these defendants were handed an opportunity to trade and did so almost immediately.

The recent crackdown on insider trading has certainly been hard to miss in the news media.

While some have questioned the scope of the insider trading prohibition, there is a general public perception that it is wrongful. Stuart P. Green, a Rutgers law professor, and Matthew B. Kugler, a psychologist, conducted a survey about when trading on confidential information should be punished. Their article in The Fordham Urban Law Journal concluded that it was “only when the trader obtained the confidential information in some presumably illicit manner, such as by appropriating it from his employer or client, that our subjects regarded it as clearly worthy of prohibition and censure.”

Insid! er trading is a violation that involves cheating by taking advantage of access to confidential information along with a strong dose of greed to overcome the usual moral constraint against engaging in illegal conduct. There is no easily identifiable victim in insider trading, so it can be easy to justify it to oneself because no individual is actually losing money in the process, just the faceless mass of traders in the market.

The fact that some people appear to be willing, and even eager, to trade on confidential information when presented the opportunity shows that sometimes any constraints on acting illegally can be easily overcome.

Is it worth it That question hardly seems to matter.

S.&P. Lawsuit Draws New Line in the Sand

David Zaring is assistant professor of legal studies at the Wharton School of Business.

The United States government’s lawsuit against Standard & Poor’s proves that there is still life in the effort to hold financial institutions responsible for the financial crisis, for at least a little while longer. Three aspects of the suit are particularly interesting.

The first relates to the government’s insistence on an admission of guilt from S.&P. Such admissions are costly to extract, and often viewed as unnecessary - ordinary people do not admit guilt when they get divorced, or pay up after auto accidents, after all, even where the fault is clear.

Perhaps for this reason, the Securities and Exchange Commission has not required such admissions in the past, much to the consternation of some observers, and at least one judge. Jed S. Rakoff of Federal District Court in Manhattan reacted with horror to the S.E.C.’s nonadmission settlements with Citigroup and Merrill Lynch over wrongdoing related to the financial crisis.

The S.&P. suit shows that at least part of the government has come around to Judge Rakoff’s way of thinking. If so, we should expect to see fewer settlements and more court cases in the future.

A second aspect of the litigation offers context. It is always difficult to know whether the multimillion-dollar fines imposed on financial institutions are a hardship or a slap on the wrist, with the costs quickly passed on to the customers.

In this case, the government apparently asked S.&P. to pay $1 billion, which was too high a price for peace for the credit rating agency. The company apparently protested that that the sum amounted to its parent company’s yearly profit, a ratio that it could not abide. It provides some evidence of h! ow much will strike a defendant - even a well-heeled financial defendant - as too much.

The final interesting aspect of the lawsuit is constitutional. S.&P. will likely defend its ratings as protected by the First Amendment’s right to free expression. The First Amendment does not give anyone a right to commit fraud, as Steven M. Davidoff and Peter J. Henning have observed, and the sort of commercial speech that covers credit ratings is entitled to somewhat less protection than is core political speech.

But S.&P., founded by a journalist offering information to investors about railroads, has successfully invoked a “reporter’s privilege” to fend off lawsuits claiming that its ratings were issued negligently.

To be sure, that privilege has always been an uncertain one. Federal courts in Calfornia, where the suit has been filed, have not always recognized the reporter’s privilege even for newspaper and television reporters involved in criminal investigations, and plenty of other courts have dismissed its extension to credit ratings agencies.

Still, if S.&P. is singled out for ratings that were matched by the other ratings agencies, the government’s case might look like an exercise favoring certain speakers over others, and that might be a problem. It might even encourage the government to file lawsuits against other ratings agencies.

Goldman Names Lemkau as New Co-Head of M.&A.

Goldman Sachs on Monday named Gregg R. Lemkau as a new co-head of global mergers and acquisitions, according to an internal memorandum reviewed by DealBook.

Mr. Lemkau, who has been based in London since 2008, will hold that title along with Gene T. Sykes, who has served as the sole co-head since the departure of Yoël Zaoui last April.

“Gregg will work closely together with Gene, as well as with Michael Carr, head of Americas M.&A., to lead this important client franchise which is core to our investment banking business,” Goldman’s three heads of investment banking, Richard J. Gnodde, David Solomon and John S. Weinberg, wrote in the memo.

Mr. Lemkau is currently the head of mergers for Europe, the Middle East, Africa and Asia Pacific, and was previously a global co-head of the tehnology, media and telecommunications group. He was previously the chief operating officer of the firm’s investment bank and co-head of its health care banking group.

(He also comes from a banking family of sorts: His brother Curt, known as Chip, is a wealth management executive at Goldman, according to Finra records. And a sister, Kristin, is a senior media relations executive at JPMorgan Chase.)

He will be replaced as the head of mergers for Europe by Gilberto Pozzi, who currently is a co-head of Goldman’s global consumer retail group. Mr. Pozzi will in turn be replaced by F. X. de Mallmann.

Here’s the memo for Mr. Lemkau:

We are pleased to announce that Gregg Lemkau will become co-head of Global Mergers & Acquisitions alongside Gene Sykes. Gregg will work closely together with Gene, as well as with Michael Carr, head of Americas M&A, to lead this important client franchise which is core to our investment banking business.

Gregg has been head of Mergers & Acquisitions for EMEA and Asia Pacific since 2011. Prior to this, he was global co-head of the Technology, Media and Telecom Group and served as chief operating officer for the Investment Banking Division. Gregg serves as co-chair of the Firmwide Commitments Committee and is a member of the Partnership Committee and the Investment Banking Division Operating Committee. He joined Goldman Sachs as an analyst in the Mergers & Acquisitions Department in 1992 and was named managing director in 2001 and partner in 2002.

Please join us in congratulating Gregg and wishing him continued success in his new role.

Richard J. Gnodde
David Solomon
John S. Weinberg

And here’s the one for Mr. Pozzi:

We are pleased to announce that Gilberto Pozzi will become head of EMEA Mergers & Acquisitions. In his new role, Gilberto will strive to further deepen the dialogue with our clients on their M&A strategic objectives, continue to ehance our execution standards and share best practices across industry and country teams. Gilberto will retain responsibilities for many of his clients in the consumer and retail sector while sourcing and executing M&A transactions across various countries and industry groups in EMEA.

Gilberto has been co-head of the Global Consumer Retail Group since 2010. Previously, he was head of the Consumer Retail Group for EMEA. Gilberto joined Goldman Sachs as an associate in London in 1995 and was named managing director in 2003 and partner in 2008.

Please join us in congratulating Gilberto and wishing him continued success in his new role.

Richard J. Gnodde
David Solomon
John S. Weinberg

And here’s the one for Mr. de Mallmann:

We are pleased to announce that FX de Mallmann will become co-head of the Global Consumer Retail Group alongside Kathy Elsesser. In addition to his new role, FX will continue to be responsible for Investment Banking Se! rvices (I! BS) in EMEA.

FX has been head of IBS in EMEA since January 2012. Prior to this, he was head of the Financing Group in EMEA from 2008 to 2011. Before that, FX served as chief operating officer for the Investment Banking Division. From 2002 to 2007, he served as head of Investment Banking for Switzerland. FX joined Goldman Sachs as an analyst in London in 1993 and was named managing director in 2003 and partner in 2004.

Please join us in congratulating FX and wishing him continued success in his new role.

Richard J. Gnodde
David Solomon
John S. Weinberg

British Regulators to Investigate Accounting at Autonomy

LONDON - British accounting regulators said Monday that they would investigate the financial reporting at the British software maker Autonomy before its $11.1 billion acquisition by Hewlett-Packard in 2011.

The announcement follows accusations from H.P. that Autonomy inflated its sales and carried out improper accounting practices that misled the American technology giant ahead of the multibillion-dollar takeover.

In November, H.P. took a charge of $8.8 billion after it wrote down the acquisition of the British software maker. The figure included around $5 billion related to what it said were accounting and disclosure abuses at Autonomy.

Following investigations begun by American authorities, including the Justice Department, Financial Reporting Council, the British accounting watchdog, said it also would examine Autonomy’s finacial accounts from the beginning of 2009 to the middle of 2011.

The investigation may take around a year to reach disciplinary proceedings if wrongdoing is discovered, according to a spokeswoman for the Financial Reporting Council.

Mike Lynch, the founder of Autonomy who has denied the allegations of accounting misconduct brought by H.P., said he welcomed the investigation by the British regulator.

“We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the F.R.C.,” he said in a statement on behalf of the former management team of Autonomy.

Challenging the Deal for Dell

The deal to take Dell private faces a major roadblock. Southeastern Asset Management, the company’s largest outside shareholder with an 8.5 percent stake, said on Friday that it would oppose the buyout plan, contending in a letter to the board that the offer of $24.4 billion, or $13.65 a share, was too low. Saying the company was worth closer to $24 a share, Southeastern laid out a range of possible tactics, including a proxy fight and lawsuits, to block the “ill-advised transaction,” DealBook’s Michael J. de la Merced reports.

Though the deal was initially treated as a near certainty on Wall Street, opposition may grow, Andrew Bary of Barron’s writes. Another shareholder, Pzena Investmnt Management, is calling the current offer unfair. “There’s no logic for this deal other than greed,” Richard Pzena, the firm’s chief investment officer, said. “If Michael Dell wants a bigger ownership stake, let Dell make a tender offer for the stock. Why does he have to force out everyone else” The company has agreed to a 45-day go-shop period, to allow any rival bidders to submit offers, but “it is highly unlikely that another bidder will emerge,” Steven M. Davidoff writes in the Deal Professor column.

If the deal does succeed, Michael S. Dell, the founder, would face an array of challenges, Jeff Sommer, a columnist for The New York Times, writes. “Dell now faces lean Asian competitors like Lenovo, Asus and Acer that make PCs more cheaply and accept lower profit ! margins,” and in addition, “the entire PC industry is stagnant at best.” The company’s best hope, said Toni Sacconaghi, an analyst at Sanford C. Bernstein, might be to “hold PC profits flat or, worst case, down 5 percent a year, while they grow the rest of the business to more than offset that.”

AIRLINE MERGER MAY COME THIS WEEK  |  Months of negotiations may culminate this week in an announcement that American Airlines and US Airways plan to merge, creating the nation’s biggest airline, Jad Mouawad reports in The New York Times. “A merger would expand American’s domestic network, particularly in the Northeast and the Southwest, and create a more formidable competitor internationally. The combined airline would jump ahead of UnitedAirlines and Delta Air Lines, both of which have grown through mergers of their own in recent years.” American’s parent has been in bankruptcy since November 2011.

“The boards of both carriers are expected to meet some time this week to approve the combination, which then needs to be approved by a bankruptcy judge in New York. A deal could be struck this week or possibly next week, as talks are continuing. A union also requires the approval of federal regulators and antitrust authorities. But analysts expect regulators to approve the deal since there is little overlap between the two networks and no hubs in the same cities.”

NEW APPROACH AT BARCLAYS  |  The British bank Barclays plans to announce an overhaul of its business units on Tuesday, after its reputation was tarnished last year in a rate-manipulation scandal. Antony P. Jenkins, the chief executive, writes in an opinion essay in The Sunday Telegraph that “there is a deeply-held skepticism about the desire for fundamental change within banking. Such skepticism is understandable. The bad news about banking shows little sign of abating. The headlines may be about past behavior but they expose just how badly our industry lost its way. A pursuit of short-term profits saw banking become too aggressive and disconnected from the needs of our customers, clients and wider society.”

But the shift at Barclays may not be as pronounced as some are expecting. The new plan will “leave the bank’s strategy largely intact, according to people briefed on the matter,” The Wall Street Journal reports. “The presentation, at the imposing redbrick headquarters of London’sRoyal Horticultural Society, will be Barclays’s latest attempt to recast itself as a kinder, gentler institution that also happens to be profitable.”

ON THE AGENDA  |  The Group of 30, a private body that brings together business leaders and policy makers, releases a report in London on global finance. John Bogle, founder of the Vanguard Group, is on CNBC at 3:10 p.m. Ralph Schlosstein, chief executive of Evercore Partners, is on CNBC at 4:30 p.m.

FOR SAVERS, RISKY INVESTMENTS TURN SOUR  |  Americans whose stock portfolios lost money in the financial crisis have turned to speculative investments promoted by aggressive financial advisers â€" leading to steep losses and accusations of fraud. “Those alternative investments have now had time to go sour in big numbers, state and federa! l securit! ies regulators say, and are making up a majority of complaints and prosecutions,” Nathaniel Popper reports in The New York Times. “Last Wednesday, Mr. Galvin’s office ordered one of the nation’s largest brokerage firms, LPL Financial, to pay $2.5 million for improperly selling the real estate bundles, known as nontraded REITs, or real estate investment trusts, to hundreds of state residents from 2006 to 2009, in some cases overloading clients’ accounts with them.”

“Brokers promoting bad investments to unsophisticated investors is nothing new. But while the easy prey used to be people looking to get rich quick, the pool has widened to include savers looking for ways to earn the kind of income once reliably available from traditional investments. Regulators are warning investors that the dangers are unlikely to recede, given the Federal Reserve’s pledg to keep interest rates near zero and the push among financial firms to earn more revenue from so-called alternative investments marketed to retail investors.”

Mergers & Acquisitions Â'

Hakon Invest to Buy Stake in Nordic Retailer for $3.1 Billion  |  The Swedish company Hakon Invest has agreed to buy the remaining stake in the Nordic retailer ICA that it does not already own for $3.1 billion. DealBook Â'

Google’s Schmidt to Sell Part of Stake  |  Eric Schmidt, Google’s executive chairman, “is sell! ing rough! ly 42 percent of his stake in the Internet search company, a move that could potentially net the former chief executive a $2.51 billion windfall,” Reuters reports. REUTERS

Deal-Making Shows Signs of a Revival  | 
FINANCIAL TIMES

A Healthy Challenge to Brewery Deal  |  The New York Times editorial board writes: “Consumers will benefit from the Justice Department’s antitrust suit to block Anheuser-Busch InBev, the country’s largest brewing company, from acquiring one of its competitors. This kind of action was seen less frequently in the Bush administration.€ NEW YORK TIMES

CIT Said to Have Considered a Sale  |  The CIT Group “had preliminary talks over the past year and a half to sell itself to banks, including Toronto-Dominion Bank and Wells Fargo & Company, but nothing came of the conversations, according to three people familiar with the specialty finance company,” Reuters reports. REUTERS

INVESTMENT BANKING Â'

Longtime Wall Street Deal Maker Expands Advisory Firm  |  Robert Wolf, a for! mer chair! man of UBS, was expected to formally announce on Monday the hiring of several executives for his firm, 32 Advisors, including former members of the Obama administration. DealBook Â'

Why Wall Street Analysts Bungled a Call on Apple  |  Professional stock analysts can suffer from a range of conflicts, and they also “fall into the same pitfalls that afflict most investors,” James B. Stewart, a columnist for The New York Times, writes. NEW YORK TIMES

At Lew’s Confirmation Hearing, a Fund May Be in the Spotlight  |  Jack Lew, President Obam’s nominee to be Treasury secretary, had $56,000 invested in a Citigroup venture capital fund based in the Cayman Islands as recently as 2010, an issue that was expected to come up at his confirmation hearing on Wednesday, The Caucus blog writes. NEW YORK TIMES CAUCUS

PRIVATE EQUITY Â'

In Emerging Markets, Private Equity’s Growing Pains  |  In emerging markets, “private equity fund-raising and investment soared pre-2008 on the back of the credit bubble, plunged in the bust, and then … it gets complicated,” The Financial Times writes in a blog post. FINANCIAL TIMES

Apollo’s Profit Nearly Doubles on Investment Gains  |  Apollo Global Management reported on Friday a $697 million profit for the fourth quarter, as improvements in its private equity holdings offset weaker performance in other operations. DealBook Â'

HEDGE FUNDS Â'

Activist Investors Turn to Financial Institutions  |  The Financial Times reports: “Financial institutions face fresh attention from aggressive activist and hedge fund investors, adding another distraction to alist of troubles that already includes increased regulation and diminished profits. Some of the biggest names in finance are already in the cross hairs.” FINANCIAL TIMES

Former Analyst Tries Hand at Activist Investing  | 
REUTERS

I.P.O./OFFERINGS Â'

Money Transfer Business Prepares to Go Public  |  Xoom, which operates a service that lets immigrants in the United States send money home, “is looking to raise as much as $86.3 million” and re! cord a st! arting market value as high as $468 million, The Wall Street Journal writes. WALL STREET JOURNAL

VENTURE CAPITAL Â'

For a Growing App, Impermanence Has Value  |  Snapchat, an app that lets people send images that disappear after a few seconds, “recently raised $13.5 million in venture financing, led by Benchmark Capital, which values the company at $60 million to $70 million even without an established revenue stream,” The New York Times reports. NEW YORK TIMES

Apple Developing a Wristwatch-Like Device  |  Apple “is experimenting with wristwatchlike devices made of curved glass, according to people familiar with the company’s explorations,” and such a device could “be used to make mobile payments, with Apple’s Passbook payment software,” Nick Bilton writes on the Bits blog. NEW YORK TIMES BITS

A Less-Than-Smooth Journey in Tesla’s Sedan  |  The New York Times describes a test drive in Tesla’s Model S sedan. NEW YORK TIMES

LEGAL/REGULATORY Â'

S.E.C.’s Revolving Door Hurts Its Effectiveness, Report Says  |  A watchdog group’s study pointed to cases where companies hired former agency employees to wage successful fights against the commission’s enforcement and policy efforts. DealBook Â'

Appeals Court Hears Arguments Over Rejected Citigroup Settlement  |  Lawyers for the S.E.C. and Citigroup argued that Judge Jed S. Rakoff exceeded his authority when he rejected a settlement that allowed Citigroup to avoid an admission of wrongdoing. DealBook Â'

Macmillan Agrees to Settle Suit Over E-Book Pricing  |  The Media Decoder blog reports: “Macmillan said on Friday that it had agreed to settle a lawsuit brought by the Justice Department over the pricing of e-books, asserting that the potential costs of continuing to fight the action were too high.” NEW YORK TIMES MEDIA DECODER

Breaking Into Credit-Rating Club Proves Difficult  |  An upstart credit-rating firm, R&R Consulting, “has been trying to get recognition as a credit-rating agency since 2011. Frustrated by what it perceives as roadblocks erected by the S.E.C.! , its exe! cutives are beginning to wonder if the commission really wants increased competition,” Gretchen Morgenson writes in The New York Times. NEW YORK TIMES

Trying to Shut Down the Consumer Agency  |  The Consumer Financial Protection Bureau’s apparent effort to police the financial industry is “what worries Republicans. They can’t prevent the bureau from regulating their financial supporters,” the editorial board of The New York Times writes. NEW YORK TIMES

Barclays Chief Says Banks Were Too Aggressive

'I know we still have significant legacy issues to address and we have put in place a robust approach to dealing with them. But I believe the plans I will set out on Tuesday will show a clear path to a stronger Barclays with a sharper focus and a greater ability to generate sustainable returns.' Photo: REUTERS

American and US Airways May Announce a Merger This Week

After months of negotiations, American Airlines and US Airways appeared likely to announce a merger this week, which would create the nation’s biggest airline and concentrate even further a once-fragmented industry.

A merger would expand American’s domestic network, particularly in the Northeast and the Southwest, and create a more formidable competitor internationally. The combined airline would jump ahead of United Airlines and Delta Air Lines, both of which have grown through mergers of their own in recent years.

The combination would probably bring to an end the wave of consolidation that has swept the industry. Since 2001 there have been five large mergers, reducing the number of airlines to three main carriers, along with a handful of low-cost carriers like Southwest Airlines and JetBlue, and regional carriers.

These mergers have led to cuts in service to many smaller cities around the country. But they have also created healthier and more profitable airlines that are able to invest in new planes and products. Faced with rising fuel costs, and losing tens of billions of dollars in the last decade, airline executives argued that the only way to survive was to consolidate capacity.

American, which has been in bankruptcy protection since November 2011, is currently the nation’s third-largest airline with domestic and international flights; US Airways is the fourth.

The boards of both carriers are expected to meet some time this week to approve the combination, which then needs to be approved by a bankruptcy judge in New York. A deal could be struck this week or possibly next week, as talks are continuing. A union also requires the approval of federal regulators and antitrust authorities. But analysts expect regulators to approve the deal since there is little overlap between the two networks and no hubs in the same cities.

Even if the deal clears all these hurdles, the merged airline still faces a range of challenges. Airline mergers are often rocky â€" involving complex technological systems, big reservation networks as well as large labor groups with different corporate cultures that all need to be combined seamlessly. United angered passengers last year after a series of merger-related computer and reservation mistakes, and late and delayed flights.

A deal would be a major victory for Doug Parker, the chairman of US Airways, who began pursuing a merger with the bigger carrier soon after American filed for bankruptcy. His argument â€" that American could succeed against bigger airlines only if it combined networks with US Airways â€" swayed American’s creditors, who have a critical say in the company’s future.

The carriers have been discussing a deal for months. In recent days, both sides have moved much closer, but were still trying to figure out how much the merged carrier would be worth and how management positions would be split.

Tom Horton, American’s chairman, who was opposed to a merger for much of the last year, was offered a position as chairman, said a person familiar with the matter but who asked not to be identified because the talks were still under way. US Airways shareholders could end up with about 28 percent of the new airline, and American’s creditors would have 72, this person said.

A merger could be structured to take effect as American exits bankruptcy. The airlines are working for a deal before Feb. 15, when some nondisclosure agreements with American bondholders are set to expire. The timing of a possible deal, however, remains flexible.

The merged company would be called American Airlines and be based in Fort Worth. It would have a combined 94,000 employees, 950 planes, 6,500 daily flights, nine major hubs, and total sales of nearly $39 billion. It would be the market leader on the East Coast, the Southwest and South America. But it would remain a smaller player in the Pacific and Europe, where United and Delta are stronger.

A version of this article appeared in print on February 11, 2013, on page B1 of the New York edition with the headline: American and US Airways May Announce a Merger This Week.

Hakon Invest to Buy Stake in Nordic Retailer for $3.1 Billion

LONDON - The Swedish investment company Hakon Invest agreed on Monday to buy the remaining stake in the Nordic retailer ICA that it does not already own for 20 billion Swedish kronor, or $3.1 billion.

Under the terms of the deal, Hakon Invest will acquire a 60 percent stake in ICA, which operates supermarkets in Sweden, Norway and the Baltic countries, from the Dutch retailer Ahold, which owns the Giant retail chain in the United States.

In September, Ahold announced that it was considering the sale of its holding in ICA to focus on businesses in which it retained full control. The Dutch retailer and Hakon Invest had shared equal control over the management of ICA, which runs more than 2,000 stores across the Nordic region.

“The deal strengthens the conditions for continued satisfactory ad stable dividends to our shareholders,” Hakon Invest’s chairman, Hannu Ryöppönen, said in a statement.

The Swedish investment company will use existing cash reserves and bank financing to fund the deal, according to a company statement. After completing the deal, Hakon Invest said it would repay the debt financing through a share issuance of 5 billion kronor to existing investors.

Shares in Ahold rose 4.3 percent Monday in early morning trading in Amsterdam.

Hakon Invest’s stock price also jumped almost 17 percent in early morning trading in Stockholm on Monday. The Swedish investment company plans to change its name to ICA Gruppen after completing the deal.

The companies added that they had agreed to pay themselves a dividend totalling 2 billion kronor from ICA, of which Ahold would receive 1.2 billion kronor.

The deal for ICA is expected to close by the end of the second quarter of this year.

Hakon Invest to Buy Stake in Nordic Retailer for $3.1 Billion

LONDON - The Swedish investment company Hakon Invest agreed on Monday to buy the remaining stake in the Nordic retailer ICA that it does not already own for 20 billion Swedish kronor, or $3.1 billion.

Under the terms of the deal, Hakon Invest will acquire a 60 percent stake in ICA, which operates supermarkets in Sweden, Norway and the Baltic countries, from the Dutch retailer Ahold, which owns the Giant retail chain in the United States.

In September, Ahold announced that it was considering the sale of its holding in ICA to focus on businesses in which it retained full control. The Dutch retailer and Hakon Invest had shared equal control over the management of ICA, which runs more than 2,000 stores across the Nordic region.

“The deal strengthens the conditions for continued satisfactory ad stable dividends to our shareholders,” Hakon Invest’s chairman, Hannu Ryöppönen, said in a statement.

The Swedish investment company will use existing cash reserves and bank financing to fund the deal, according to a company statement. After completing the deal, Hakon Invest said it would repay the debt financing through a share issuance of 5 billion kronor to existing investors.

Shares in Ahold rose 4.3 percent Monday in early morning trading in Amsterdam.

Hakon Invest’s stock price also jumped almost 17 percent in early morning trading in Stockholm on Monday. The Swedish investment company plans to change its name to ICA Gruppen after completing the deal.

The companies added that they had agreed to pay themselves a dividend totalling 2 billion kronor from ICA, of which Ahold would receive 1.2 billion kronor.

The deal for ICA is expected to close by the end of the second quarter of this year.