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Geithner to Write Book on Financial Crisis

Timothy F. Geithner, the former Treasury secretary who managed the Obama administration’s response to the global financial crisis of 2008 and the recession that followed, will publish a book recounting that harrowing time, his publisher said Thursday.

Crown Books, an imprint of Random House, said the as-yet-untitled book would have behind-the-scenes details about the strategy that policymakers devised, and how decisions were made. The books is scheduled for publication in 2014.

In a news release, Crown said that “Secretary Geithner will aim to answer the most important - and to many the most troubling - questions about the choices he and his colleagues made.”

There have already been numerous books on the financial crisis, including best sellers like “Too Big to Fail,” (2009) by Andrew Ross Sorkin, a columnist for The New York Times, and “The Big Short” (2010) by Michael Lewis.

Still, there is little doubt that Mr. Geithner, who ran Treasury from 2009 until earlier thi year and was president and chief executive of the Federal Reserve Bank of New York before that, is uniquely situated to provide inside information on decision making.

Mr. Geithner continues to receive intense criticism from Republicans who have called the bailout he engineered a waste of government funds. The news release hinted that Mr. Geithner will answer his many critics as well as admit to mistakes that will be a guidepost for future leaders.



The Things Bankers Say, The London Whale Edition

Another Wall Street investigation. Another trove of e-mails, instant messages and telephone conversations capturing executives, bankers, and traders discussing their compromising positions.

First, it was the evidence that depicted questionable behavior at Barclays, UBS and the Royal Bank of Scotland, where traders discussed their rate-rigging activities. Then, it was the Justice Department’s complaint against Standard & Poor’s over toxic mortgage securities, which included an employee’s subprime version of the Talking Heads song, “Burning Down the House.”

Now, JPMorgan Chase finds its communications in the cross-hairs, as a Senate subcommittee released its finding on the bank’s multi-billion dollar trading loss last year. Buried with the 300-plus document are choice e-mails, instant messages and phone recordings that demonstrate how traders hid “substantial losses for months at a time,” according to the report by the Permanent Subcommittee on Investigations.

The bulk of te evidence centers on a little-known unit, the chief investment office, at the center of the trading blowup. After initially brushing aside media reports about the troubled bets in the London-based group, JPMorgan disclosed a multi-billion dollar loss in May 2012. The losses ultimately swelled to more than $6 billion.

In the report, the congressional committee details the last-ditch efforts by the group to salvage the bets and the increasing concerns that the losses were insurmountable.

Months before JPMorgan disclosed the trading blowup, one of the top traders in the group, Bruno Iksil, worried about the mounting losses on the positions, and the strategy to essentially double down on the bet rather than pare back. In an e-mail on January 30, 2012, Mr. Iksil, who earned the nickname the London Whale for his outsize bets, wrote to his manger, Javier Martin-Artajo, that the strategy had “become scary,” and the “upside is limited unless we have really unexpected scenarios.”

Ach! illes Macris, the executive in charge of the international chief investment office, wrote the same day to Mr. Martin-Artajo, expressing similar doubts. “The current strategy doesn’t seem to work-out. The intention was to be more bullish, but the book doesn’t behave as intended,” Mr. Macris wrote in an e-mail. “The financial [p]erformance is worrisome.”

While Mr. Iksil and others continued to trade in the weeks that followed, the doubts persisted. On Feb. 28, Mr. Iksil commented on a document that there was “more bleeding.” A few days later, Mr. Macris wrote in an e-mail to Mr. Martin-Artajo that he was “worried” that the strategy was “too aggressive,” adding that “if we need to [a]ctually reduce the book, we will not [be] able to defend our positions.”

With the size of the bet increasing dramatically, Ina Drew, the head of the C.I.O., said in an e-mail on March 22 that she “was confused” by the strategy. The comments prompted one risk manager in the group to e-mai another, saying “Ina is freaking â€" really! Call me.” A day later, Ms. Drew told the traders to “put phones down,” and stop trading, according to the report.

Despite the problems, the losses â€" at least on paper â€" still didn’t look that bad. All along, the traders were able to mask the losses by pricing the derivatives in favorable manner, according to the report.

In mid March, a low-level trader, Julien Grout, who worked for Mr. Iksil and was responsible for marking the trading book, started tracking on a spreadsheet the difference between the bank’s favorable valuations on the derivatives and the midpoint prices.

In doing so, the traders, according to the subcommittee, were able to hide losses. On March 16, Mr. Iksil told Mr. Martin-Artajo via instant message that the “divergence” between the midpoint and the bank’s valuations “has increased to 300 now,” meaning $300 million.

Mr. Iksil later added that it could grow to “1000″ or $1 billion by t! he end of! the month.” One colleague responded “ouch,” to which Mr. Iksil replied “well that is the pace.”

The reported losses didn’t appear all that bad. On March 19, Mr. Iksil discussed that the portfolio had millions of dollars of losses. That day, though, the C.I.O. only reported a daily loss of $3 million, according to the report.

The traders quickly started to realize the losses â€" and the mismarking of the book â€" were unsustainable. “I can’t keep this going,” Mr. Iksil told Mr. Grout over the phone. “I think what he’s expecting is a remarking at the end of the month,” Mr. Iksil said, referring to his boss Mr. Martin-Artajo. “I don’t know where he wants to stop, but it’s getting.”

“Now it’s worse than before…there’s nothing that can be done, absolutely nothing that can be done, there’s no hope…The book continues to grow, more and more monstrous.”



JPMorgan Faulted on Controls and Disclosure in Trading Loss

JPMorgan Chase ignored internal controls and manipulated documents, while its influential chief executive, Jamie Dimon, withheld some information from regulators as the nation’s biggest bank racked up trading losses last year, a new Senate report says.

The findings by Senate investigators shed new light on the multi-billion-dollar trading blunder, which has claimed the jobs of some top executives and prompted investigations by authorities. The 300-page report, released a day before a Senate subcommittee plans to question bank executives and regulators in a hearing, will escalate the debate in Washington over regulating Wall Street.

Mr. Dimon, whose reputation as anastute manger of risk has so far been only dented by the trading losses, comes under much harsher criticism from the Senate investigators. The chief executive blessed changes to an internal alarm system that underestimated losses, seemingly contradicting his earlier statements to lawmakers, according to the report. Mr. Dimon is also accused of withholding from regulators details about the bank’s daily losses â€" and then raising “his voice in anger” at a deputy who later turned over the information.

While some people briefed on the matter whether the outburst actually happened, the alleged incident illustrates a broader problem at JPMorgan: After emerging from the financial crisis in far better shape than rivals, the bank saw itself as being above its regulators. The bank was so filled with hubris, Senate investigators said, that an executive once screamed at its examiners and called them “stupid.”

The report, citing some of the same private documents that F.B.I. agents are now poring over, highlighted how JPMorgan managers “pressured” traders to low ball losses by $660 million, a previously undisclosed figure, and then played down the problems to authorities.

The trader known as the London Whale, who carried out the derivatives trades at the center of the bank’s losses told a colleague last year that the bank’s estimated losses were “getting idiotic,” according to a transcript of their phone conversation cited by the subcommittee. The trader, Bruno Iksil, added that “I can’t keep this going” and he didn’t know where his boss “wants to stop.”
Federal investigators, seeking Mr. Iksil’s side of the story, now expect to visit the trader in his native France, according to people briefed on the investigation.

The breakowns â€" at both the bank and at its regulators like the Office of the Comptroller of the Currency ¬ could galvanize support for new curbs on Wall Street trading. Using its investigation to take a broad swipe at financial risk-taking, the subcommittee depicted JPMorgan’s losses as emblematic of a dark market desperate for sunlight.

“Our investigation opens a window into the hidden world of high stakes derivatives trading by a major bank,” said Senator Carl Levin, the Michigan Democrat who runs the subcommittee. Calling the bank’s trading strategy a “runaway train that barreled through every risk warning,” he ! argued th! at the bank “exposed daunting vulnerabilities” in the financial system.

A spokeswoman for the bank said on Thursday: “While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone.”

In outlining possible policy fixes to prevent another blowup, Mr. Levin on Thursday called for new rules that would force banks to strengthen their methods for valuing their trades. He also urged regulators to finalize the so-called Volcker rule, which would prevent banks from making such bets with their own money.

JPMorgan, the subcommittee noted, “mischaracterized high risk trading as hedging,” or mitigating risk, a strategy that is allowed under the Volcker rule. The bank’s chief financial officer, Douglas Braunstein, told analyss in April that the position “is consistent” with a proposed version of the Volcker rule, a conclusion that the subcommittee dismissed as false. One regulator wrote in a May 2012 internal e-mail that the position was a “make believe voodoo magic ‘composite hedge.’”

As traders within the chief investment office assembled increasingly complex
bets, JPMorgan ignored its own risk alarms according to the subcommittee. In the first four months of 2012 alone, the report found, the chief investment office breached five of its critical risk controls more than 330 times. .

Instead of scaling back the risk, though, JPMorgan altered its value-at-risk measure in January 2012, enabling the traders to continue building the outsize wagers, the subcommittee found. Trading that would have exceeded risk controls “continuously” under the old model was permitted, the report said. The more generous model, though, showed “no breach at all from January 30 until May 2012, the report said.

The ! subcommittee’s report provides further detail about what Mr. Dimon knew about the changed alarm system. Mr. Dimon told the subcommittee he couldn’t “recall any details in connection with approving the VaR limit increase,” the report said. But, Mr. Dimon personally authorized JPMorgan to temporarily increase its value-at-risk metric, writing in a January 2012 email, “I approve.”



Regulators Question Goldman and JPMorgan’s Capital Plans

Goldman Sachs and JPMorgan Chase, the Wall Street giants that emerged from the financial crisis in a position of strength, are now facing questions about their ability to withstand future market shocks.

On Thursday, the Federal Reserve said Goldman and JPMorgan would need to resubmit their proposals to pay out billions of dollars to shareholders, citing “weaknesses” in their capital plans. In contrast, two of the nation’s most troubled banks during the crisis, Citigroup and Bank of America, got a green light from regulators for their plans to reward shareholders.

The Fed’s rebuke to Goldman and JPMorgan highlights the growing tension as regulators try make sure banks are better prepared for the next market shock. With profits improving, financial institutions want to enrich investors by increasing their dividends and buying back shares. But regulators want banks to be cautious with their capital, in case they face future losses.

Regulators are trying to prevent a repeat of 2008, hen the banking industry brought the financial system to the brink and many institutions had to be bailed out by taxpayers. To guard against future problems, Congress mandated that regulators annually test the financial strength of large banks. As part of that effort, regulators can now stop banks from paying out capital, which lenders could previously do with little oversight.

Last week, the Fed released the results of this year’s so-called stress tests, which assess the ability of the banks to withstand severe financial and economic shocks. The test showed that banks have substantially increased their capital levels since the financial crisis, although JPMorgan and Goldman Sachs lagged many of their peers under various scenarios.

Still, analysts expected both banks to gain outright approval for their plans to distribute capital to shareholders through dividend payments and stock buy backs. Both firms have shown an ability to generate solid profits since the crisis, though JPMorgan stu! mbled badly last year when it suffered big trading losses.

While the Fed has allowed to JPMorgan and Goldman to move forward with their capital plans, the regulators said the proposals “exhibited weaknesses” that were “significant enough to require immediate attention.” The banks will now have to address the shortcomings and resubmit them by the end of September.

If they aren’t fixed by then, the Fed may block their capital plans. The Fed already objected to the capital plans proposed by, Ally Financial and BB&T, two smaller banks.

Bank of America and Citigroup will see the approval of their plans as an important milestone in their efforts to heal themselves. The Fed in previous years objected to their plans.



The Pay Quandary for Banks

Andrea Orcel’s signing-on package shows the scale of the pay pickle facing banks.

UBS paid $26 million to woo its investment bank head from Bank of America Merrill Lynch last year, making a mockery of so-called retention packages created to stop employees from jumping ship. True, Mr. Orcel received no new cash or shares for joining his Swiss rival: the award simply replaces three years’ worth of pay he forfeited for leaving Bank of America Merrill Lynch. And the award can still be clawed back. But it shows how aggressive behavior by just one bank can reinforce the industry’s pay problem.

The public relations impact is terrible. Here is an accident-prone bank paying to entice an outside executive who advised on the doomed carve-up of ABN Amro. Just a few months earlier, UBS had suffered a $2.3 billion rogue-trading loss. Later in 2012, the bank was hit with for a further $1.5 billion in fines to settle charges of rate manipulation.

But UBS’s action also shows the pointlessness of ammoth retention awards. Bank of America’s retainer simply didn’t work. As long as there is always one bank out there willing to bid high, existing pay structures will be hard to change.

UBS has come up with some interesting and welcome ways to reform pay. Executives will from now on be entitled to a bonus pool worth a maximum 2.5 percent of adjusted pretax profit. Employees will be paid in contingent capital, aligning stakeholder interests. And average deferral periods for bonuses are rising significantly for top earners.

Still, UBS is also trying to rebuild its franchise. And with a relatively strong capital position, it doubtless feels it can and indeed should pay whatever it takes to stay in the game. It has already unveiled a big shrinkage plan. UBS needs to excel in the investment banking businesses it is keeping.

Swiss citizens have granted shareholders binding votes on pay. The European Union is restricting variable pay to a maximum of two-and-a-half times base salaries.! Banks are slowly reducing compensation to revenue ratios. But the trend toward longer deferral periods means paying people to move firms will be more expensive. Orcel-style buyouts will persist.

Dominic Elliott is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.



Reselling E-Books and the One-Penny Problem

There’s so much to love about e-books. They weigh nothing, they remember your place, you can make the type larger.

But as I’ve written over and over, they are also a rip-off in one big way: Although e-books cost nearly the same as printed books, you can’t sell or donate them when you’re finished reading. So my eyebrows nearly shot off my face when I read an article in The Times indicating that both Amazon and Apple have filed for patents to make reselling e-books possible. These patents would cover not just e-books but music, movies and computer programs.

I took to Twitter.

To my surprise, my followers weren’t so much jubilant as concerned. Their questions ran along these lines:

(In the Times article, Scott Turow, president of the Authors Guild, puts it another way: “Who would want to be the sucker who buys the book at full price when a week later everyone else can buy it for a penny”)

Well, obviously, no plan to resell e-books would work unless the books were copy-protected. Reselling an e-book would work only if there were only one of it, ju! st as with physical books. Once you sell it, you no longer have it.

Both Amazon’s proposal and Apple’s take care of that problem. Each ensures that only one person can have a particular e-book copy at a time.

You know how it works in the physical book world. Publishers and authors get money from the first sale of the book; after that the owner can sell it to other people.

Look, I’m the author of 50 books. I’d be delighted to get a cut of secondhand book sales. But I never have, and the world hasn’t come to an end.

Funny. This Twitterite is imagining that with each new owner, the e-book becomes a little more worn, a little rattier, exactly as with printed books. Very cute. Next

Another person restated the same concern in different words.

This finally stopped me in my tracks.

So let’s see. Bob buys an e-book from Amazon for $10. After reading, he sells it to a ! new perso! n for $8.. After a couple more transactions the used e-book is going for $1. But the reading experience is as pristine and clean as the first one.

In this world, you could buy any e-book for $1 or less if you’re willing to wait long enough. For best sellers, you wouldn’t have to wait long at all.

Turns out material degradation isn’t just a fond side effect of book resales. It’s essential. It’s what ensures that the resale price matches the diminishing value of the product. If every copy is perfect, the whole thing breaks down. With unlimited e-book sales, every book’s price would eventually drop to a penny.

I couldn’t believe that Apple and Amazon would be so naïve. Surely they’d thought of this nightmare situation. I decided to read the actual patents.

Patents are pretty hard for nonlawyers to puzzle through. (Typical verbiage from Apple’s patent: “Storing threshold data that indicates that the digital content item is associated the specified usage amount and that a second digital content item that is different than the digital content item is associated with a second specified usage amount that is different than the specified usage amount.”)

Both Apple’s patent and Amazon’s are incredibly broad. And they give the publisher and bookstore a lot of control over what would happen â€" including, possibly, providing for a cut of each resale.

But what about the one-penny problem These patents also give the publisher or bookstore the right to impose a minimum price for reselling an e-book. That limit could drop over time, as Apple’s patent makes clear: “As another example, all digital movies must be sold for a minimum of $10 until six months after their respective original purchase date. After the six month ! period, al! l digital movies must be sold for a minimum of $5.”

Both proposals suggest that publishers could also limit the number of times a digital item can be resold: “A threshold may limit how many times a used digital object may be permissibly moved to another personalized data store, how many downloads (if any) may occur before transfer is restricted, etc.,” says Amazon’s patent. “These thresholds help to maintain scarcity of digital objects in the marketplace.”

Clearly, it’s much too soon for anybody to panic. Systems like this will take a long time to discuss and develop. Publishers will be given the final say and there will be so many variations and permutations it won’t look anything even remotely like a used bookstore. The greatest worry isn’t that authors will go out of business. It is that the resultng used e-bookstores will be so complex and saddled with restrictions, they’ll be ruined before they even open.

Here’s hoping that all four parties â€" authors, publishers, bookstores and consumers â€" will demonstrate good will, a love of reading and a minimum of greed and paranoia.



Anschutz Calls Off Sale of Entertainment Arm

The investment company owned by the billionaire Philip Anschutz said on Thursday that it had decided to call off efforts to sell the Anschutz Entertainment Group, a sports and live entertainment juggernaut that owns stakes in the Los Angeles Lakers and the Los Angeles Kings.

The company’s chief executive of 17 years, Tim Leiweke, will step down and will be replaced by Dan Beckerman.

When Mr. Anschutz’s company put the entertainment group up for sale in September, a crop of potential bidders emerged. Among them: Guggenheim Partners, the investment firm that owns the Los Angeles Dodgers; Colony Capital, a private equity firm with a focus on real estate assets; and Patrick Soon-Shiong, a biotechnology investor.

Though only a part of Mr. Anschutz’s vast empire â€" one that has encompassed railroads, oil drilling and movie theters â€" the entertainment unit has been perhaps the highest-profile asset in recent years. Anschutz Entertainment combined real estate, entertainment and event promotion to become a unique corporate animal.

Among its holdings are LA Live in Los Angeles, which includes the Staples Center and sells tickets through the company’s AEG Live subsidiary. It has a similar all-inclusive structure in London, the O2 complex.

But for weeks, a sale appeared increasingly doubtful, with the Anschutz Company seeking a price tag north of about $8 billion, people briefed on the matter have said.

“From the very beginning of the sales process, we have made it clear to our employees and partners throughout the world that unless the right buyer came forward with a transaction on acceptable terms we would not sell the company,” Mr. Anschutz said in a statement.

The billionaire will instead take on a more active management role, becoming part of an “office of the chairman” alongside Mr. Bec! kerman and other senior executives.



Sexual Harassment Lawsuit Filed Against Prominent Plaintiffs’ Lawyer

In recent years, the plaintiffs’ law firm Faruqi & Faruqi has given corporate America big headaches, filing a steady stream of shareholder lawsuits against companies related to executive pay as well as mergers and acquisitions.

Now, Faruqi & Faruqi has a headache of its own.

A former junior lawyer at the firm filed a lawsuit against the firm on Wednesday, accusing one of its most prominent partners of sexually harassment. She says in the case that the firm doing nothing to stop the inappropriate behavior.

In a lawsuit filed in Federal District Court in Manhattan, the young lawyer, Alexandra Marchuk, described in titillating and excruciating detail how the partner, Juan Monteverde, repeatedly made improper comments and unwanted sexual advances toward her. In one instance, she said, he forcibly had sex with her in the firm’s offices.

“These claims are completely without merit, brought by a disgruntled former employee,” said Lubna M. Faruqi, managing partner of Faruqi & Faruqi in a statement. “We look forward to aggressively defending our reputation in court and have every confidence we will be vindicated.”

Mr. Monteverde has made a name for himself by pioneering a relatively new type of plaintiffs’ lawsuits called “say on pay” cases. In 2010, the Dodd-Frank law gave shareholders a voice in dictating how much a company decides to pay its executives. Led by Mr. Monteverde, Faruqi & Faruqi has extracted settlements from corporations by suing them over their decisions related to executive pay. The lawsuits accuse the companies of not providing shareholders with enough information to make informed decisions about compensation issues.

Lawyers at Faruqi & Faruqi have said that these settlement benefit shareholders by making executive pay issues more transparent. But defense lawyers for corporations argue that the lawsuits provide nothing of any substance to shareholders and are the plaintiffs’ bar’s latest cottage industry. “It’s a shakedown for a ! quick buck,” Boris Feldman, a lawyer at Wilson Sonsini Goodrich & Rosati, told Reuters last November.

Mr. Monteverde has also been at the forefront of another fast-growing type of shareholders’ litigation â€" merger-related plaintiffs’ lawsuits. Today, virtually every large merger deal is followed by a barrage of lawsuits brought by shareholders that argue that the price of the takeover is too low and shortchanges shareholders. The cases are almost all settled so the merger can close, and the plaintiffs’ lawyers often walk away with lucrative fees.

Given Mr. Monteverde’s recent ubiquity on the securities class-action scene, the lawsuit filed against him ricocheted around the offices of corporate defense firms on Wednesday. Above the Law, a popular legal blog, devoted 3,400 words to the case and compared its details to “Tess of the d’Ubervilles,” the late-19th century novel about sexual mores in Victoria England.

Ms Marchuk contends that Mr. Monteverde began to sexually harass her as soon as she started at the firm as a summer intern in 2010. She said hoping his behavior during the summer was “an isolated incident,” she took a job there beginning in September 2011, earning an annual salary of $75,000.

Upon joining Faruqi & Faruqi, she learned that Mr. Monteverde has arranged for her to work for him exclusively. His misconduct resumed as soon as she started working there full-time, according to the lawsuit. She said she was afraid to report his behavior because she “had (and still has) crushing student loans, and was reluctant to be seen as overly resistant, or a troublemaker.”

The 24-page complaint highlights an incident, during Ms. Marchuk’s second week on the job, where Mr. Monteverde asked her to accompany him to Wilmington for a hearing at the Delaware Court of Chancery, the nation’s most influential business court. He said that he needed her in Delaware, according to the lawsuit, th! at the pr! esiding judge in the case, Vice Chancellor Travis Laster, was “partial to good-looking female lawyers, but Faruqi & Faruqi’s female local counsel was ugly.” Ms. Marchuk claims that Mr. Monteverde instructed her to dress alluringly for the proceeding.

She said that she eventually complained about his behavior, but the firm did nothing to address her concerns. The situation then rapidly deteriorated, according to the lawsuit, culminating in an late-night incident in the firm’s offices after its holiday party where Mr. Monteverde “quickly and forcefully had sex with her.” Mr. Marchuk said she met with an employment lawyer, and quit in December, less than four months after she started.

Ms. Marchuk now lives in Omaha, where she is working in a legal position at an insurance company. The lawsuit, which was filed by Ms. Marchuk’s lawyer, Harry Lipman of Rottenberg Lipman Rich, seeks compensation of $2 million, along with punitive damages.



Sexual Harassment Lawsuit Filed Against Prominent Plaintiffs’ Lawyer

In recent years, the plaintiffs’ law firm Faruqi & Faruqi has given corporate America big headaches, filing a steady stream of shareholder lawsuits against companies related to executive pay as well as mergers and acquisitions.

Now, Faruqi & Faruqi has a headache of its own.

A former junior lawyer at the firm filed a lawsuit against the firm on Wednesday, accusing one of its most prominent partners of sexually harassment. She says in the case that the firm doing nothing to stop the inappropriate behavior.

In a lawsuit filed in Federal District Court in Manhattan, the young lawyer, Alexandra Marchuk, described in titillating and excruciating detail how the partner, Juan Monteverde, repeatedly made improper comments and unwanted sexual advances toward her. In one instance, she said, he forcibly had sex with her in the firm’s offices.

“These claims are completely without merit, brought by a disgruntled former employee,” said Lubna M. Faruqi, managing partner of Faruqi & Faruqi in a statement. “We look forward to aggressively defending our reputation in court and have every confidence we will be vindicated.”

Mr. Monteverde has made a name for himself by pioneering a relatively new type of plaintiffs’ lawsuits called “say on pay” cases. In 2010, the Dodd-Frank law gave shareholders a voice in dictating how much a company decides to pay its executives. Led by Mr. Monteverde, Faruqi & Faruqi has extracted settlements from corporations by suing them over their decisions related to executive pay. The lawsuits accuse the companies of not providing shareholders with enough information to make informed decisions about compensation issues.

Lawyers at Faruqi & Faruqi have said that these settlement benefit shareholders by making executive pay issues more transparent. But defense lawyers for corporations argue that the lawsuits provide nothing of any substance to shareholders and are the plaintiffs’ bar’s latest cottage industry. “It’s a shakedown for a ! quick buck,” Boris Feldman, a lawyer at Wilson Sonsini Goodrich & Rosati, told Reuters last November.

Mr. Monteverde has also been at the forefront of another fast-growing type of shareholders’ litigation â€" merger-related plaintiffs’ lawsuits. Today, virtually every large merger deal is followed by a barrage of lawsuits brought by shareholders that argue that the price of the takeover is too low and shortchanges shareholders. The cases are almost all settled so the merger can close, and the plaintiffs’ lawyers often walk away with lucrative fees.

Given Mr. Monteverde’s recent ubiquity on the securities class-action scene, the lawsuit filed against him ricocheted around the offices of corporate defense firms on Wednesday. Above the Law, a popular legal blog, devoted 3,400 words to the case and compared its details to “Tess of the d’Ubervilles,” the late-19th century novel about sexual mores in Victoria England.

Ms Marchuk contends that Mr. Monteverde began to sexually harass her as soon as she started at the firm as a summer intern in 2010. She said hoping his behavior during the summer was “an isolated incident,” she took a job there beginning in September 2011, earning an annual salary of $75,000.

Upon joining Faruqi & Faruqi, she learned that Mr. Monteverde has arranged for her to work for him exclusively. His misconduct resumed as soon as she started working there full-time, according to the lawsuit. She said she was afraid to report his behavior because she “had (and still has) crushing student loans, and was reluctant to be seen as overly resistant, or a troublemaker.”

The 24-page complaint highlights an incident, during Ms. Marchuk’s second week on the job, where Mr. Monteverde asked her to accompany him to Wilmington for a hearing at the Delaware Court of Chancery, the nation’s most influential business court. He said that he needed her in Delaware, according to the lawsuit, th! at the pr! esiding judge in the case, Vice Chancellor Travis Laster, was “partial to good-looking female lawyers, but Faruqi & Faruqi’s female local counsel was ugly.” Ms. Marchuk claims that Mr. Monteverde instructed her to dress alluringly for the proceeding.

She said that she eventually complained about his behavior, but the firm did nothing to address her concerns. The situation then rapidly deteriorated, according to the lawsuit, culminating in an late-night incident in the firm’s offices after its holiday party where Mr. Monteverde “quickly and forcefully had sex with her.” Mr. Marchuk said she met with an employment lawyer, and quit in December, less than four months after she started.

Ms. Marchuk now lives in Omaha, where she is working in a legal position at an insurance company. The lawsuit, which was filed by Ms. Marchuk’s lawyer, Harry Lipman of Rottenberg Lipman Rich, seeks compensation of $2 million, along with punitive damages.



At This Conference, Gensler Is Strictly Ballroom

BOCA RATON, Fla. â€" MF Global’s collapse put Wall Street on high alert at last year’s futures trading bash here. In earlier years, the financial crisis similarly consumed the junketgoers.

This year, Wall Street had other things to fill its dance card: Gary Gensler’s moves.

The regulator lit up the dance floor on Tuesday night, onlookers said, shaking loose with a former colleague.

Mr. Gensler, chairman of the Commodity Futures Trading Commission, later explained that he simply liked to dance. Others speculated that he was savoring his last trip to Boca Raton as chairman, noting that Mr. Gensler could leave the agency by the end of the year.

Either way, the performance at the Futures Industry Association’s annual conference drew rare praise and collective amusement from Wall Street executives accustomed to Mr. Gensler’s no-nonsense style.

“He actually looked good up there,” one onlooker later remarked.

By Wednesday, Mr. Gensler had returned to form. He deivered forceful remarks about interest rate manipulation across the banking industry and called for action to overhaul the rate-setting process.

But it was too late. Word of his performance had already ripped through the oceanfront resort, fitting neatly into a conference light on news and heavy on gossip.

It did not help that a Wall Street Journal reporter captured the moment on video, fueling the fascination. Some at the conference took to refreshing YouTube over and over, eager for a peek at Mr. Gensler’s performance.

“We need to get that video,” one attendee was overheard saying. As of Thursday morning, the video had yet to surface online.



Private Equity Antitrust Lawsuit Goes Forward

A federal judge refused to dismiss a lawsuit accusing private equity firms of colluding to lower the prices of deals during the buyout boom, paving the way for a possible trial, DealBook’s Peter Lattman reports. At the same time, though, Judge Edward F. Harrington of Federal District Court in Boston narrowed the lawsuit in his ruling on Wednesday, suggesting that the case was too broad and had serious flaws.

Both sides found a reason to celebrate the decision. “We are pleased the court has decided that there is no evidence of the overarching conspiracy plaintiffs have pursued for five years,” said Kristi Huller, a spokeswoman for Kohlberg Kravis Roberts, one of the firms named in the suit. A lawyer for the plaintiffs, who are former shareholders of the businesses acquired by the buyout firms, had another view. “Th plaintiffs are very gratified that the court has found that there is clear evidence of the overarching conspiracy,” said the lawyer, K. Craig Wildfang.

The plaintiffs claim that 11 big private equity firms participated in a plot to rig the market for more than two dozen multibillion-dollar takeovers, shortchanging shareholders. The accusations center on “club deals,” in which buyout firms pooled their money to buy companies together. The complaint was filed in 2007 after the Justice Department, which has not brought any charges, began investigating possible price-fixing.

While the judge decided there was enough evidence for the case to survive the private equity firms’ motion to throw it out, he essentially agreed with the thrust of the private equity firms’ argument. “Even where the evidence suggests misconduct related to a single transaction, there is largely no indication that all the transactions were, in turn, connected to a market-wide agreement,” Judge Harrington wro! te. “Rather, the evidence shows a kaleidoscope of interactions among an ever-rotating, overlapping cast of defendants as they reacted to the spontaneous events of the market.”

SQUEEZING OUT CASH AFTER AN EXIT  |  “When the Berry Plastics Group, a container and packaging company, went public last October, it generated up to $350 million in tax savings. But the company won’t collect the bulk of the benefits. Rather, Berry Plastics will hand over 85 percent of the savings, in cash, to its former private equity owners,” Lynnley Browning reports in DealBook. “The obscure tax strategy is the latest technique that private equity firms are using to extract money from their companies, in this case long after the initial public offering.”

“Buyout specialists are increasingly ollecting continuing payouts from their former portfolio companies. The strategy, known as an income tax receivable agreement, has been quietly employed in dozens of recent offerings backed by private equity, including those involving PBF Energy, Vantiv and Dynavox. While relatively rare, the strategy, referred to as a supercharged I.P.O., has proved to be controversial. To some tax experts, the technique amounts to financial engineering, depriving the companies of cash. Berry Plastics, for example, has to make payments to its one-time private equity owners, Apollo Global Management and Graham Partners, through 2016.”

VICTORY FOR INVESTOR IN SANDRIDGE FIGHT  |  SandRidge Energy reached a settlement deal with TPG-Axon Capital Management, a hedge fund that had been pushing for the removal of the oil company’s chairman and chief executive, Tom L. Ward, DealBook’s Michael J. de la Merced reports. SandRidge said it would expand its board by four seats determined by the hedge fund, adding that it would decide by June 30 whether to remove Mr. Ward. If SandRidge does not fire the chief executive, three of the existing directors will step down and TPG-Axon will name an additional board member, giving the investor majority representation on the board. “Wednesday’s announcements represent a striking victory for TPG-Axon, which had questioned a series of land deals that SandRidge had made with Mr. Ward and his family,” Mr. de la Merced writes. “The hedge fund had also criticized SandRidge for a series of strategic mistakes, leading to a nearly 29 percent decline in the company’s stock price over the last 12 months.”

ON THE AGENDA  |  The Federal Reserve is expected to announce at 4:30 p.m. which banks have the abilit to return money to shareholders. A House Financial Services subcommittee conducts a hearing at 10 a.m. about an assessment by the Government Accountability Office of the Financial Stability Oversight Council and the Office of Financial Research. The producer price index for February is out at 8:30 a.m. Sallie L. Krawcheck, former head of Bank of America’s wealth management division, is on Bloomberg TV at 8 a.m. Jeffrey C. Sprecher, chief executive of IntercontinentalExchange, is on CNBC at 3 p.m. Jacob L. Lew, the Treasury secretary, is on Bloomberg TV at 4:15 p.m. Sheila C. Bair, former chairman of the Federal Deposit Insurance Corporation, is on CNBC at 4:30 p.m.

DIMON AT THE WHITE HOUSE  |  Are hackers playing a role in healing Jamie Dimon’s relati! onship wi! th President Obama The JPMorgan Chase chief executive, who turned in recent years from being an ally of the Obama administration to a vocal critic, was among 13 chief executives who visited the White House on Wednesday to discuss cybersecurity, the Bits blog writes. JPMorgan had been attacked by foreign hackers as recently as Tuesday. Brian T. Moynihan of Bank of America was also among the invitees.

SPINOFF OF TIME INC. UNNERVES EMPLOYEES  |  Richard Stengel, Time Magazine’s managing editor, acknowledged that it was “sort of put up or shut up time” for Time Inc., which is set to split off from its Time Warner after talks with the Meredith Corporation fell apart. “I think great, let’s really test that hypothesis that people will pay for great content and great journalism. We can now invest our own apital,” he said, Christine Haughney reports in The New York Times. The new company faces some challenges, as circulation and advertising revenue have declined. It is expected to start with $500 million to $1 billion in debt.

Several current and former employees spoke of unease at the magazines, Ms. Haughney writes. “Morale dipped dramatically when the layoffs occurred just a couple of months ago,” a former company executive who is still in touch with many employees said.

Mergers & Acquisitions »

In Industrial Deals, Barclays Advances in the Rankings  |  So far this year, Barclays ! is ranked! second in the global league tables for advising on deals in manufacturing, aerospace, defense and related fields, Reuters reports. REUTERS

The Case for Shaking Up Hewlett’s Board  |  Replacing several directors responsible for H.P.’s past missteps would bring some accountability to the board and ensure an uncomfortable breakup of the company is not pushed aside, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Outdoor Channel Agrees to Higher Bid From Kroenke  |  Outdoor Channel Holdings has accepted a $220.7 million takeover bid from Kroenke Spors and Entertainment, turning down an earlier offer from the media investor Leo Hindery Jr. DealBook »

More Companies Holding Annual Board Elections, Group Reports  |  After prompting by shareholders, 46 companies in the Standard & Poor’s 500-stock index have agreed to hold annual elections for all their directors, a corporate governance initiative run out of Harvard Law School said on Wednesday. DealBook »

A $60 Million Pay Package for Nabors Chief  | 
WALL STREET JOURNAL

INVESTMENT BANKING »

UBS Pays Investment Bank Chief $26 Million  |  UBS said on Thursday that it had awarded its new investment bank chief, Andrea Orcel, almost 25 million Swiss francs in deferred cash and shares to compensate him for pay he forfeited when leaving Bank of America Merrill Lynch. The amount dwarfs the 8.87 million francs that the bank paid its chief executive, Sergio P. Ermotti, in 2012. DEALBOOK

Goldman to Hold Annual Meeting in Salt Lake City  |  Goldman Sachs said its annual meting this year would be in Salt Lake City â€" where the firm has its second-largest office in the United States â€" marking the first time the meeting has been held outside the New York metropolitan area, Reuters reports. REUTERS

Financiers Line Up Behind Candidate for Mayor  |  Joseph J. Lhota, a former deputy in the Giuliani administration who is running for New York City mayor, has some well-known Wall Street names among his donors, including Richard D. Parsons, a former Citigroup chairman, and Martin Lipton, a veteran lawyer, Michael Barbaro reports in The New York Times. NEW YORK TIMES

Citi Executive’s Lonely Support of Derivatives Regulation  |  Brian Leach, the head of risk at Citigroup, has called for derivatives trading to move to exchanges. “I think I’m the lone voice,” he told The Financial Times. FINANCIAL TIMES

BATS Chief Executive Keeps Calm  |  Joe Ratterman, the chief executive officer of BATS Global Markets, is “dedicated to an extreme level of transparency that’s helped BATS do more than survive disaster under his leadership; it’s prospered,” Bloomberg Businessweek writes. BLOOMBERG BUSINESSWEEK

Comerzbank to Raise Capital and Pay Back Bailout  |  The moves would reduce the German government’s influence over the bank, but would also dilute current shareholders. DealBook »

Macquarie Hires Executive in Financial Sponsors Group  |  The Macquarie Group hired Brian Sauvigne, who was recently head of corporate development at Morgan Stanley, as a managing director in its financial sponsors group, as the Australian firm continues to build that division. NEWS RELEASE

PRIVAT! E EQUITY ! »

Latin America Still Has Allure for Private Equity  |  The number of private equity firms in the Latin American market is higher than ever, even as the dollar value of commitments to the region has fallen, according to the data provider Preqin, The Wall Street Journal reports. WALL STREET JOURNAL

Cinven Raises $6.5 Billion Fund for European Buyouts  | 
REUTERS

HEDGE FUNDS »

Citadel to Sell Remaining Stake in E*Trade  |  The hedge fund Citadel plans to sell its entire 9.6 percent stake in E*Trade Financial, the brokerage company said on Wednesday, ending a five-year relationship. REUTERS

Vodafone Should Seek Sale of Company, Fund Manager Says  |  John Hempton of Bronte Capital argues that a sale of Vodafone to Verizon makes more sense than a sale of Vodafone’s stake in Verizon Wireless to Verizon. DealBook »

I.P.O./OFFERINGS »

Owner of German Publisher Said to Move Toward an Exit  |  The Swedish buyout firm EQT Partners is contemplating an exit from Springer Science & Business Media, a German academic publisher, with plans to either sell it or take it public, Bloomberg News reports. BLOOMBERG NEWS

Five Oaks Investment Seeks $85.5 Million I.P.O.  | 
REUTERS

VENTURE CAPITAL »/a>

Cybersecurity Company Raises $23 Million  |  Endgame Systems, which provides companies with tools to protect their computer systems in real time, raised $23 million in a financing round led by Paladin Capital, AllThingsD reports. ALLTHINGSD

LEGAL/REGULATORY »

Former Pimco Executive Files, Then Withdraws, Suit  |  A former high-yield bond portfolio manager at Pimco claimed that he had witnessed multiple instances of wrongdoing by the firm’s senior management from late 2008 to early 2009. DealBook »

Witness List Set for Senate Hearing on JPMorgan Trading Loss  |  Douglas Braunstein, who was the bank’s chief financial officer at the time of the losses, is scheduled to appear, as is Ina Drew. Jamie Dimon, the bank’s chief, will not testify. DealBook »

Gold Pricing Said to Come Under Scrutiny  |  The Commodity Futures Trading Commission is examining whether gold prices are being manipulated in London, according to The Wall Street Journal. WALL STREET JOURNAL

After Financial Crisis, Prosecutors Navigate Tricky Waters  |  The dearth of prosecutions since the financial crisis is again stirring controversy, but there is still time for political leaders to hold corporate executives responsible when a company engages in misconduct, Peter J. Henning writes in the White Collar Watch column. DealBook »

3 More Banks to Expand Clawback Policies  |  Banks including Citigroup are broadening their policies for clawing back compensation, after pressure from the New York City comptroller’s office, according to The Wall Street Journal. WALL STREET JOURNAL

Dallas Fed Chief Urges 100-Year Bond for Texas  |  Richard W. Fisher, president of the Federal Reserve Bank of Dallas, is calling for the state of Texas to take advantage of low interest rates and issue a 100-year bond to finance infrastructure in the state and save money on its debt payments. DealBook »



UBS Pays Investment Bank Chief $26 Million

LONDON - UBS said Thursday it awarded its new investment bank chief, Andrea Orcel, $26 million (24.9 million Swiss francs) in deferred cash and shares to compensate him for pay he forfeited when leaving Bank of America Merrill Lynch. The amount dwarfs the 8.87 million francs that the bank paid its chief executive, Sergio P. Ermotti, last year.

“In line with market practice, he received awards as a replacement for deferred compensation and benefits forfeited by his previous employer as a result of his joining UBS,” UBS wrote in its annual report published Thursday. Mr. Orcel’s cash and share awards will vest over the next three years.

Banks have come under pressure, especially in Switzerland, to curb lavish paychecks and better link pay with performance. Swiss voters two weeks ago approved changes to executive pay, including giving shareholders a vote on how much a company’s board and management can earn. The changes, which are scheduled to become law by next year, could also keep bank from paying executives before they start their jobs and once they leave a firm, so-called golden handshakes and golden parachutes.

Mr. Ermotti, who took over as chief executive at the end of 2011, hired Mr. Orcel to return the bank’s investment banking business to profit. Mr. Orcel left Bank of America Merrill Lynch after 20 years. He received 6.36 million francs in deferred cash and the rest in UBS shares valued at 18.5 million francs when they were awarded. UBS did not disclose his other compensation for 2012.

Mr. Ermotti replaced Robert J. McCann, the head of the wealth management operation for the Americas, as the best paid board member in 2012. Mr. McCann earned 8.55 million francs last year, down from 9.18 million francs in 2011.

The bank’s total bonus pool fell 7 percent to 2.5 billion francs from 2.7 billion francs a year earlier. UBS said it clawed back about 60 million francs in awarded compensation from staff linked to the interest rate manipulation scandal.


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