Blackstone Studying Dell, but Said to Be Unlikely to Bid

The private equity giant Blackstone Group is weighing whether to make an offer for all or part of Dell as a Friday deadline looms, people briefed on the matter said Thursday.

But some people close to Blackstone are skeptical that any offer will materialize.

Rivals to the proposed $24 billion buyout of the computer maker by its founder, Michael S. Dell, and the private equity firm Silver Lake have until midnight Friday to submit their alternative bids, under a process being run by a special committee of the Dell board.

Among the companies that have taken a look at Dell’s books under that “go-shop process,” Blackstone is regarded as the likeliest to make an offer, the people briefed on the matter said.

The private equity firm, which has spent a surprising amount of time and effort examining Dell’s books, has the firepower to organize a rival bid.

And it has an important tie: Blackstone hired Dell’s chief in-house deal maker, David Johnson, who has previously worked at I.B.M., earlier this year. Mr. Johnson is seen as one of the primary advocates behind Blackstone’s interest, according to the people briefed on the process.

As of late Thursday, Blackstone was still considering its next move, these people said. A variety of options have been on the table, including making a bid for some or all of Dell.

The firm has talked to Southeastern Asset Management, a large shareholder in Dell, about the possibility of contributing its 8.4 percent stake toward a rival deal, the people briefed on the matter said. Southeastern has argued publicly and privately that it would favor a proposal that would allow all shareholders to continue being investors in Dell.

And Blackstone has sounded out potential leaders for Dell should the company’s founder decide to step down from an active managerial role.

The firm has asked Mark V. Hurd, Oracle’s president and the former chief executive of Hewlett-Packard, according to a person briefed on the matter, although he did not appear to be interested.

Hopes for a rival bid from Blackstone have buoyed Dell’s stock in recent weeks, with its price trading above the $13.65 a share that Mr. Dell and Silver Lake are offering.

Several shareholders, including some of Dell’s biggest outside investors, have proclaimed for more than a month that the current offer by Mr. Dell and Silver Lake is too low. Shareholders like Southeastern and the billionaire Carl C. Icahn have demanded that the Dell board consider alternatives, or risk having the bid defeated in a shareholder vote.

The emergence of an alternative, potentially higher bid could prod Mr. Dell and Silver Lake into sweetening their offer.

Yet there is also a good chance that no other suitor emerges. Others that have looked at Dell’s books, including Hewlett-Packard and Lenovo, are not considered serious bidders, instead using the go-shop to examine the confidential financial information of a competitor.

If there is no rival bid, next week, Dell is expected to begin trying to persuade shareholders that the buyout offer on the table represents the highest price the company could fetch for its rapidly declining business.

Blackstone may also use other strategies. It spoke to General Electric’s giant finance arm, GE Capital, some time ago about potentially buying Dell’s financial services division, one of these people said. The division lends money to customers of the computer company. But it is unclear whether GE Capital, which has been selling assets as part of its recovery from the financial crisis, would be interested in pursuing a deal, this person said.

Blackstone has participated in big technology buyouts in the past, including the $17.5 billion deal for Freescale Semiconductor in 2006 and the $10.8 billion deal for SunGard Data Systems in 2005. Still, any move by Blackstone on Dell would be unusual. Private equity firms have rarely jumped another’s deals, a phenomenon that has drawn scrutiny recently in an antitrust lawsuit filed in Boston.

Behind the Derivatives Gibberish, Risks Run Amok

Can anyone manage a big bank these days Should anyone try

Or should we simply conclude that playing in the modern world of derivatives is best left to those whose survival is not critical to the nation’s economy, and who do not benefit from government-backed deposit insurance

That question is brought to mind by a reading of the fascinating â€" well, to me, anyway â€" story of how JPMorgan Chase got into the mess of the London whale trades that dominated the financial news last year, as told in a report by the Senate Permanent Subcommittee on Investigations that was released last week.

Much of the attention has focused on what Jamie Dimon, the chief executive, knew and when he knew it, and the extent to which the bank intentionally deceived regulators and investors as the investment strategy was blowing up.

I, on the other hand, was struck by the sheer incompetence and stupidity documented in the report.

Consider the following presentation written by Bruno Iksil, the whale himself, on Jan. 26, 2012, as the losses were growing. He called for executing “the trades that make sense.”

He proposed to “sell the forward spread and buy protection on the tightening move,” “use indices and add to existing position,” “go long risk on some belly tranches especially where defaults may realize” and “buy protection on HY and Xover in rallies and turn the position over to monetize volatility.”

That presentation was made to a JPMorgan group called the International Senior Management Group of the Chief Investment Office, which seems to have approved it.

If the proposal does not make sense to you, don’t despair. It is largely gibberish.

“This proposal,” the Senate report states, “encompassed multiple, complex credit trading strategies, using jargon that even the relevant actors and regulators could not understand.” The subcommittee asked officials of both JPMorgan’s Chief Investment Office, or C.I.O. and its regulator, the Office of the Comptroller of the Currency, just what that meant. Nobody seemed to know. (Mr. Iksil, safely overseas, chose not to talk to the subcommittee staff.)

Ina Drew, the bank’s chief investment officer at the time, who supervised the group, said she did not know. One risk officer at the bank said he thought Mr. Iksil was simply proposing a strategy of buying low and selling high. Of course, that is a fine strategy if markets cooperate. But anyone who simply proposed that would have been seen to be blowing smoke. Use all that jargon, and some people will assume you are actually saying something.

The comptroller’s office was able to explain some of what was said, but no one seemed to be sure just what a “belly tranch” might be. The subcommittee speculated it might refer to a security with less credit risk than the safest ones, but more risk than the riskiest ones.

In any case, after the meeting Mr. Iksil embarked on a disastrous strategy that led to larger and larger losses. The portfolio he was running â€" which the bank initially said was a hedge to reduce the bank’s exposure to a general deterioration of credit conditions â€" became one that would benefit from credit conditions improving.

Over the next two months, as the losses grew, neither senior bank officials nor regulators seem to have had a good understanding of what was happening.

The bank officials were preoccupied with making the mess seem less messy. That involved what they called defensive trading â€" buying what they already owned to keep market values from falling further â€" and, when that did not work, fudging the valuations. It involved changing risk models to make what was going on seem to be less risky than it was, and coming up with creative ways to calculate how much capital was really needed.

The regulators seem to have been in their own “see no evil, hear no evil” world. When they eventually had to pay attention, the comptroller’s officials were not bothered by the bank’s withholding of information from them. Instead, one top official dismissed the entire problem as little more than “an embarrassing incident.” Comptroller’s officials immediately said the trades were perfectly proper hedges, something that turned out to be untrue.

Under Pressure, Burkle Is Said to Forgo Investment Firm’s Fees

Score one for private equity investors.

After suffering steep losses in one fund, the Yucaipa Companies, the money management firm run by the billionaire Ronald W. Burkle, has cut fees for investors in the portfolio. As part of the deal, Mr. Burkle agreed to forgo the firm’s annual management fee until the fund’s investors recoup their money, according to several people with knowledge of the matter.

Such concessions reflect the broader pressure in the industry.

During the boom years, institutional investors flocked to private equity funds in search of high-octane returns. But they have been more cautious since the financial crisis damped the buyout market. Pensions are now investing money in private equity at half the rate that prevailed from 2006 to 2008, said Andrew Junkin, a consultant at Wilshire Associates.

Faced with weaker returns, some big investors have been pushing private equity firms to lower their fees or make other concessions. In 2010, Apollo Global Management lowered some expenses for one of its biggest clients, the California Public Employees’ Retirement System, known as Calpers.

“It’s tough to justify the fees” on a money-losing fund, said Howard H. Pohl, an investment consultant to pension funds and endowments at Becker, Burke Associates in Chicago, adding that managers might cut expenses “to keep everybody happy.”

Mr. Burkle, a former grocery chain owner who made his name buying and selling food companies, is feeling the heat from investors in a social impact fund.

Started in 2008, Yucaipa Corporate Initiatives Fund II, a partnership with the former pro basketball star Magic Johnson, looked to help underserved, urban areas by investing in companies that support such locales. The effort attracted some of the nation’s biggest investors, raising $450 million. The New York City Employees Retirement System and Calpers each committed $100 million to the fund, while the California State Teachers’ Retirement System, known as Calstrs, agreed to invest $50 million.

Mr. Burkle, a strong Democratic contributor with ties to Hollywood and labor unions, put much of the money to work. Over the next few years, he bought stakes in about 10 companies, including Inner City Broadcasting, the Aspire TV network and Vibe Holding, parent of Vibe magazine and the TV show “Soul Train.”

In one of the fund’s biggest moves, Yucaipa invested $100 million in AFA Foods, a Pennsylvania-based ground beef processor, which had operations and employees in lower-income areas. At the time, Mr. Johnson was also a longtime franchisee for Burger King, then a customer of AFA.

But AFA Foods soon ran into trouble. Profits at the company sank in the face of rising commodity prices and an industrywide “pink slime” scare over the use of boneless lean beef trimmings. In April 2012, the company filed for Chapter 11 bankruptcy protection.

The problems have roiled the fund. By the end of 2011, the fund showed losses of 40 percent, and was still down by 19 percent at the end of 2012, according to public pension reports and people familiar with the fund. Representatives of Mr. Johnson didn’t return calls for comment.

The fund’s woes also mirror issues in the broader sector of social impact investing, which has estimated assets of $12 billion, according to Tessa Hebb, an adjunct professor at Carleton University in Ottawa, Canada. She noted that some pensions had been disappointed. Calpers, one of the largest investors in this segment, concluded in a report last August that its social initiative had not met “investment return expectations.”

After the Yucaipa fund showed early losses, big investors pushed back and Yucaipa proposed some initial concessions. In November 2011, Mr. Burkle said he proactively offered to reduce fees “until the fund returned to profitability.”

The fee cut wasn’t enough. Last fall, some of the pension investors raised the possibility of ousting Mr. Burkle as the fund’s manager, according to two people with knowledge of the fund. Yucaipa says no such threat was made directly to the firm, a spokesman said.

In November, representatives from several investors including Calstrs, Calpers and the New York pension fund met with Mr. Burkle at the Manhattan headquarters of Bank of America Merrill Lynch, which serves as a consultant to the California teachers’ pension fund. In the three-hour meeting, the investors conveyed their disappointment in the fund and lack of confidence in its future, according to people with knowledge of the discussions.

Amid the grumbling, Mr. Burkle offered a broader set of concessions. Along with forgoing his annual management fees of just under 2 percent, Yucaipa would not invest most of the remaining commitments, about $50 million. And the firm would not recover any of its own money in the fund until the investors got their money back.

Some issues remain unresolved. Investors complained that Mr. Johnson was receiving compensation from the Gospel Channel, another fund holding. They urged that the proceeds â€" estimated at more than $3 million over multiple years â€" be used to help repay investors.

Mr. Burkle seems confident that the portfolio will get back on track. He said the early AFA loss “immediately put the fund in a hole.” But he added that other investments “candidly look very good,” citing holdings in Inner City Broadcasting, the Aspire Network and the union-owned Amalgamated Bank.

Other Yucaipa funds have fared better, too. One of the firm’s flagship funds, Yucaipa American Alliance Fund I, has reported annualized gains of 7.9 percent since its inception in 2002, and another, Yucaipa American Alliance Fund II, has annualized gains of 17.7 percent since its founding in 2008, according to a mid-2012 report by Calpers. But an earlier corporate initiatives fund is down by about 5.7 percent annually since 2001, the same report says.

Yucaipa said the firm, which currently manages $11 billion, has an overall return of 25 percent a year since 1986. Yucaipa said all the concessions on its Corporate Initiatives Fund II were voluntary.

But the clash with investors comes at a sensitive time for Mr. Burkle. The firm is trying to raise a new $1.5 billion fund.

Addressing Fears About LED Light Bulbs

In my Times column Thursday, I reviewed a new generation of LED light bulbs. They last 25 times as long as regular bulbs, use maybe one-eighth the electricity, work with dimmers, turn on instantly to full brightness and remain cool to the touch. A big drawback has always been cost, but now, I noted, the prices have fallen.

This column generated a lot of reader e-mail, probably because LED represents change. And change is always scary. Here are some excerpts, with my responses.

* For LED bulbs, the biggest issue that most consumers will notice is the color. You correctly point out that you can get different colors, and also different shades of white, from warm white, to cool white, to daylight. However, not all white is the same. Two bulbs, both of which measure 2700K (warm white) color may create a completely different impression in the room.

The difference is C.R.I. (Color Rendering Index). Incandescent bulbs have a C.R.I. of 100. Really bad LEDs have a C.R.I. of 50; average ones (most of them) have a C.R.I. of 80 to 85. The really good ones have C.R.I.’s above 90.

C.R.I. is a way of expressing how many colors in the rainbow are actually contained in the white light. Incandescent bulbs contain every color in the rainbow, all in equal measure.

With LED bulbs that have low C.R.I.’s, the color of objects looks wrong, and everything “feels” ghostly. It is not a subtle effect.

Wow. Well, I’d never heard of C.R.I., and it certainly isn’t listed on the package.

I can say only that I’m completely happy with the light color of the Cree bulbs. They look nothing like the weak, diluted light of the compact fluorescents they’re going to replace. I don’t perceive anything ghostly or wrong about them.

But if you’re worried about C.R.I, maybe try out one bulb at home before you replace the whole house’s bulbs.

* Why I don’t have LED bulbs: I have yet to see one that puts out close to the same lumens of an incandescent bulb rated at 75 or 100 watts offered for sale in my area.

Many of you made this point: that the 40- and 60-watt bulbs I reviewed are not bright enough for aging eyes, reading, detail work and so on.

That really is a good point. You can buy 75- and 100-watt-equivalent LED bulbs â€" online, they’re plentiful â€" but they’re still expensive ($30 to $45 each).

* At my home, CFLs don’t last half as long as stated on the box, and when CFL electronics flame out, they leave that nasty burnt electronics smell, strongly disliked by my wife. A few friends have reported CFL flame outs that have set things on fire.

Sorry to hear that! However, my column was about LED lights, not compact fluorescent light bulbs. Compact fluorescents are basically curlicue tubes filled with gas that lights up. LED bulbs use tiny light-emitting diodes, of the type you have seen in some flashlights and the “flashes” of smartphones.

* Why didn’t you write up the LIFX bulbs on Kickstarter Are you some kind of paid shill for the light-bulb industry

Mainly, because I hadn’t heard about LIFX bulbs. Now I have!

Looks like it’s a lot like the Philips Hue kit I reviewed, in that these are LED bulbs you can control from a phone app: brightness, timing and color. The beauty of LIFX, though, is that there’s no router box required. The networking electronics are right in the bulb.

And the LIFX does more, too: changes color in time to the music, for example, or notifies you when you have new e-mail.

These bulbs did super-well on Kickstarter, so they’ve obviously captured the public’s imagination. I’m in touch with the creators, and they’ve promised to send me one to try out when it becomes available!

* You have done what many before have done: Praise LED light bulbs â€" without touching on the quality of light.

It doesn’t matter whether the light bulb is $200 or 50 cents. If the light is ugly, and it hurts your eyes to read, then why should I buy it

Compact fluorescent lights have an austere blue tinge. Some give a “warmer” shade of yellow. But the quality of light they produce is atrocious.

I did, in fact, mention the quality of light; in my opinion, it’s wonderful. You can choose “daylight” (whiter) or “warmer” (yellower). With some, like the Philips, you can dial up any color you like: white with a touch of blue or yellow, say.

But I’m not sure why we keep talking about compact fluorescent lights. LED technology is completely different. There is zero relationship between a compact fluorescent light bulb’s light quality and LED’s light quality.

* You neglected an important point: because of heat issues, you’re not supposed to put LED bulbs into enclosed fixtures, like ceiling “cans.”

Actually, I asked Cree specifically about this. The representative says the bulbs are fine in ceiling cans. “The Cree LED bulb can be used in any application that would use an incandescent bulb. As long as there is an opportunity for air to circulate, the bulb is designed to work properly.”

I’m aware that not all bulbs meet this criterion; I’ve seen warnings on 3M and Philips bulbs, for example, not to use them in ceiling cans.

* Is there a potential issue with RF (radio frequency) interference from the circuitry I know someone who put the LED bulbs in his garage door opener and then had trouble with the remote control.

I didn’t experience any in my testing. And I do have garage-door openers.

* Not meaning to be a total Luddite, I must ask: transmitter, to plug into my network router Really Is it REALLY necessary to waste time and expense to plug a LIGHT BULB in to the Internet

I understand that both incandescent light bulbs and candles are still available at many fine housewares retailers.

Sweetening the Deal

M.&A. bankers and lawyers telling a P.R. firm that specializes in deals they expect to see more merger activity makes for sweet echo-chamber music. The survey released by Brunswick Group to coincide with an annual U.S. deal maker powwow found three out of four practitioners expecting more mergers and acquisitions globally this year than last. They’re more bullish than ever about North America, with 97 percent anticipating growth in the region. A discount needs to be applied to all the optimism.

It’s a known fact that deal pipelines are almost always backlogged, no matter how bleak the environment. In the dark days of early 2008, nearly 60 percent of those polled either said the market had hit a trough and would turn around in 12 to 18 months or it was just a short-term blip. As it turned out, the trough was two years away. Merger volume tumbled 30 percent, to $2.9 trillion that year â€" and another 30 percent in 2009, to $2 trillion.

Even pessimistic M.&A. advisers have proven to be overly cheerful. Five years ago, four out of 10 respondents â€" and seven out of 10 in 2009 â€" told Brunswick they reckoned it would take five years to get back to the 2007 peak level of $4.1 trillion. That would be a neat trick. The announced volume in 2012 was $2.5 trillion, roughly where it has been for the last three years, according to Thomson Reuters data. It would take a spurt of over 60 percent to get there.

A recent spate of multi-billion-dollar deals last month involving Dell, Heinz, American Airlines and Comcast undoubtedly will have inspired some of the rosy attitudes evident in this year’s poll, conducted from Feb. 25 to March 4. And yet only at the 11th hour did last week narrowly avoid being the first in over 11 years without a $1 billion transaction. Year-to-date activity is up just 3 percent from 2012, after dipping 1 percent last year.

In the world of M.&A., a premium of 30 percent is often layered onto the observable value. The same is probably true of what deal makers say about their business.

Jeffrey Goldfarb is an assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

To Boaz Weinstein, Betting Against JPMorgan’s Trade Was ‘Easy’

JPMorgan Chase has been in an uncomfortable spotlight over the last week, after the release of a scathing Senate report related to its multibillion-dollar trading loss last year.

On Thursday, the hedge fund manager on the other side of that bet took an opportunity to reflect.

“That was a fairly easy and obvious trade to do,” said Boaz Weinstein, the founder of Saba Capital Management, who was among a group of investors betting against JPMorgan’s trader known as the London Whale. While the trade caused losses of at least $6 billion for JPMorgan, it was enormously profitable for Mr. Weinstein.

Speaking to an audience of industry professionals at the Absolute Return Symposium in Manhattan on Thursday, Mr. Weinstein recalled how the investment opportunity arose when he noticed anomalies in a particular credit index. He discussed that idea at an industry conference in February last year, before the extent of JPMorgan’s losses had become public.

At the time, he said, he didn’t realize it was JPMorgan on the other side of the transaction. But by May, the trade was making headlines, as JPMorgan announced losses that seemed startling for a bank that had such a strong record of managing risk.

“It’s less about the money that was made â€" although it was substantial â€" and more about the historical significance of one entity being on the other side of this trade,” Mr. Weinstein said.

JPMorgan and its chief executive, Jamie Dimon, came under intense criticism in the report released last week by the Senate Permanent Subcommittee on Investigations, which also subjected current and former executives to a public grilling.

Beyond the financial losses, the trade caused significant reputational damage for JPMorgan, which said last year that the loss-making position was intended as a hedge against risk.

“I think it’s pretty clear from the Senate paper that it was not a hedge, it was a bet,” Mr. Weinstein said.

The hedge fund manager, an expert in credit, spoke about the trade during a question-and-answer session at the Absolute Return event, after a discussion about Japanese corporate bonds.

To Mr. Weinstein, the trade fit with his strategy of identifying a technical mispricing in credit markets. But it had larger ramifications for the financial industry.

“That whole story,” Mr. Weinstein said, “was worth the attention that the media gave it.”

Citi Banker: Too Early to Celebrate Revival in M.&.A.

NEW ORLEANS â€" While many of the lawyers gathered here may be ready to clink to an upswing in deals, one prominent mergers banker thinks that it’s too early to plan a party.

In kicking off the Corporate Law Institute conference, Mark Shafir, the co-head of global mergers and acquisitions at Citigroup, laid out a view of the deal world still trying to find its feet after the financial crisis.

Many of the factors that should lead to an enormous recovery in deals are in place, he said. But there are enough potential problems that the market is lagging behind where it should be.

“We’re not in the midst of a major recovery,” Mr. Shafir â€" who jokingly dubbed himself the “sacrificial banker” of the conference â€" told the assembled lawyers. “I’d like to be wrong, and I think everyone in this room would like this to be wrong.”

Many of the potential problems that Mr. Shafir outlined have become common refrains by this point. Western Europe continues to be an extreme laggard, leaving a hole in the market that has yet to be filled. And one of his presentation’s slides listed a host of other issues: sovereign debt crises, “Eurogeddon,” a hangover from the financial crisis.

By one measure, the deal environment hasn’t markedly improved from last year. The number of deals whose value surpassed $1 billion disclosed so far this year is 95, just one more than the same time last year. That’s even after the announced sales of Dell Inc., H.J. Heinz and Virgin Media.

All that has contributed to a recovery that he said has lagged behind previous upswings, following crashes in the late eighties and the dotcom boom.

But the seeds for a recovery also abound. A strong fourth quarter last year and first quarter this year could help provide a comfortable foundation for even more deals.

Low-cost financing abounds, which is enticing potential buyers on both the corporate and private equity side. Valuations, by Mr. Shafir’s reckoning, remain below historical norms. Companies in areas outside the United States, including China and Russia, are proving highly acquisitive. Activists are making moves in greater numbers, potentially spurring companies to consider mergers.

And investors are rewarding deals more and more, Mr. Shafir said. Shares of acquirers rose on average about 3.2 percent in the four weeks after announcing a transaction last year, he noted, compared with just 0.2 percent in 2011.

Even still, Mr. Shafir noted that some of these conditions won’t last forever. An eventual, unavoidable rise in interest rates could shock the markets, at least temporarily arresting any improvement.

All this translates into an environment that will yield some improvement, but not an unbroken run of success.

“We’re still in a high uncertainty period where we get fits and starts,” he said. “While we are doing a bit better, it’s still not great.”

Prosecutors Weigh Insider Trading Charges Against Raj Rajaratnam’s Brother

Prosecutors are readying insider-trading charges against Rajarengan Rajaratnam, the younger brother of the imprisoned hedge fund manager Raj Rajaratnam, according to a person briefed on the case.

During Mr. Rajaratnam’s trial in 2011, Rajarengan Rajaratnam, who worked for his brother at the Galleon Group hedge fund, was heard on several wiretaps of incriminating conversations that were played for the jury. Prosecutors identified him as an unindicted co-conspirator in the case.

Charges could be filed in the next month, this person said. There is an urgency to bringing an indictment against Rajarengan Rajaratnam, who goes by Rengan, because the five-year deadline for bringing securities-fraud charges on certain trades that expires in the coming weeks.

He now lives in Brazil. If prosecutors charge Rengan Rajaratnam, they would have to use extradition laws to return him to the United States.

David C. Tobin, a lawyer for Rengan Rajaratnam did not immediately return a request for comment. A spokeswoman for the United States attorney’s office declined to comment. The news of a possible indictment against Rengan Rajaratnam was earlier reported by The Wall Street Journal

Though he was a much smaller player on Wall Street than his billionaire older brother, Rengan Rajaratnam is seen an important figure in the government’s broad inquiry into insider trading at hedge funds.

The origins of the insider trading investigation, which has led to more than 75 prosecutions of hedge fund employees and corporate executives, stretch back more than a decade. But a key breakthrough came in 2006 during an inquiry into Sedna Capital, a fund run by Rengan Rajaratnam. While reviewing e-mails and instant messages, securities regulators discovered damning communications between Rengan and Raj Rajaratnam.

Rengan Rajaratnam, a graduate of the University of Pennsylvania and Stanford University’s business school, did brief stints early in his career at Morgan Stanley and, for eight months, at the hedge fund SAC Capital Advisors. Prosecutors are investigating illegal trading at SAC, and have brought criminal charges against several former SAC traders. Steven A. Cohen, the owner of SAC has not been charged with any wrongdoing.

Rengan Rajaratnam started Sedna in 2004. By mid-2006, Sedna was a small fund managing about $80 million. But its uncanny timing on several trades was brought to the government’s attention by an executive at the Swiss bank UBS, which provided hedge-fund services to Sedna.

In December 2006, lawyers at the Securities and Exchange Commission took Rengan Rajaratnam’s deposition. Sedna closed around that same time, and Rengan Rajaratnam joined his brother at Galleon.

Jurors at the Raj Rajaratnam trial heard Rengan Rajaratnam on several calls, including one from August 2008 during which he told his brother about his efforts to press his friend, a consultant at McKinsey & Company,
for confidential information. Rengan Rajaratnam called the consultant “a little dirty” and boasted that he “finally spilled his beans” by sharing secrets about a corporate client.

Another former Galleon employee, Adam Smith, also testified that the day of Raj Raratnam’s arrest in October 2009, Rengan Rajaratnam went into his office at Galleon and and took his brother’s notebooks.

Raj and Rengan Rajaratnam have another brother, Ragakanthan Rajaratnam, who goes by R.K. and also worked at Galleon. R.K.’s name emerged during testimony at the trial of Rajat K. Gupta, the former Goldman Sachs director found guilty last year of passing the bank’s secrets to Raj Rajaratnam.

R.K. Rajaratnam has not been charged with any crimes. Mr. Gupta is appealing his conviction. Raj Rajaratnam is serving the second year of an 11-year sentence at a federal prison in Ayer, Massachusetts.

T-Mobile Deal for MetroPCS Receives Final Regulatory Approval

2013-03-21 08:32:24

Bonn, Germany; Bellevue, WA; and Richardson, TX (March 21, 2013) - Deutsche Telekom AG (XETRA: DTE; “Deutsche Telekom”), T-Mobile USA, Inc. (“T-Mobile”) and MetroPCS Communications, Inc. (NYSE: PCS; “MetroPCS”) today announced that they have now received all regulatory approvals in connection with the proposed combination of T-Mobile USA, a wholly-owned subsidiary of Deutsche Telekom, and MetroPCS.

On March 20, 2013, the Committee on Foreign Investment in the United States advised Deutsche Telekom and MetroPCS that it has determined that there are no unresolved national security concerns with respect to the transaction and that it has therefore concluded its review. This concludes all regulatory approval the parties were seeking prior to closing the proposed combination, which remains subject to the approval of MetroPCS stockholders.

A Special Meeting of MetroPCS stockholders to vote on matters relating to the proposed combination of MetroPCS with T-Mobile has been scheduled for April 12, 2013. MetroPCS stockholders of record as of the close of business on March 11, 2013 are entitled to vote at the Special Meeting. The combination is expected to close shortly after the Special Meeting.   

The MetroPCS board unanimously recommends that stockholders vote their shares FOR all of the proposals relating to the proposed combination with T-Mobile by returning the GREEN proxy card they will receive in due course with a "FOR" vote for all proposals. The failure to vote or an abstention has the same effect as a vote against the proposed combination. Because some of the proposals required to close the proposed combination require at least an affirmative vote of a majority of all outstanding shares, MetroPCS stockholders’ votes are important. If stockholders vote against the proposed combination, there is no assurance that MetroPCS will be able to deliver the same or better stockholder value.

The Company urges stockholders to discard any white proxy cards, which were sent by a dissident stockholder. If a stockholder previously submitted a white proxy card, the Company urges them to cast their vote as instructed on the GREEN proxy card, which will revoke any earlier dated proxy card that was submitted, including any white proxy card.

Stockholders who have questions or need assistance voting their shares should contact the Company’s proxy solicitor, MacKenzie Partners, Inc. toll-free at (800) 322-2885 or call collect at (212) 929-5500.

About T-Mobile USA Inc.

Based in Bellevue, Wash., T-Mobile USA, Inc. is the U.S. wireless operation of Deutsche Telekom AG (XETRA: DTE; OTCQX: DTEGY). By the end of the fourth quarter of 2012, approximately 132.3 million mobile customers were served by the mobile communication segments of the Deutsche Telekom group â€" 33.4 million by T-Mobile USA â€" all via a common technology platform based on GSM and UMTS and additionally HSPA+ 21/HSPA+ 42. T-Mobile USA’s innovative wireless products and services help empower people to connect to those who matter most.

For more information, please visit http://www.T-Mobile.com. T-Mobile is a federally registered trademark of Deutsche Telekom AG. For further information on Deutsche Telekom, please visit www.telekom.de/investor-relations.

About Deutsche Telekom

Deutsche Telekom is one of the world’s leading integrated telecommunications companies with more than 132 million mobile customers, over 32 million fixed-network lines and 17 million broadband lines (as of December 31, 2012). The Group provides products and services for the fixed network, mobile communications, the Internet and IPTV for consumers, and ICT solutions for business customers and corporate customers. Deutsche Telekom is present in around 50 countries and has 230,000 employees worldwide. The Group generated revenues of EUR 58.2 billion in the 2012 financial year - more than half of it outside Germany (as of December 31, 2012).

 

About MetroPCS Communications, Inc.

Dallas-based MetroPCS Communications, Inc. (NYSE: PCS) is a provider of no annual contract, unlimited wireless communications service for a flat-rate. MetroPCS is the fifth largest facilities-based wireless carrier in the United States based on number of subscribers served. With Metro USA(SM), MetroPCS customers can use their service in areas throughout the United States covering a population of over 280 million people. As of December 31, 2012, MetroPCS had approximately 8.9 million subscribers. For more information please visit www.metropcs.com.

Additional Information and Where to Find It  

This document relates to a proposed transaction between MetroPCS and Deutsche Telekom. In connection with the proposed transaction, MetroPCS has filed with the Securities and Exchange Commission (the “SEC”) an amended definitive proxy statement. Security holders are urged to read carefully the amended definitive proxy statement and all other relevant documents filed with the SEC or sent to stockholders as they become available because they will contain important information about the proposed transaction. All documents are, and when filed will be, available free of charge at the SEC's website (www.sec.gov). You may also obtain these documents by contacting MetroPCS' Investor Relations department at 214-570-4641, or via e-mail at investor_relations@metropcs.com. This communication does not constitute a solicitation of any vote or approval.

 

Participants in the Solicitation

MetroPCS and its directors and executive officers will be deemed to be participants in any solicitation of proxies in connection with the proposed transaction. Information about MetroPCS' directors and executive officers is available in MetroPCS' annual report on Form 10-K filed with the SEC on March 1, 2013. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the amended definitive proxy statement and other relevant materials filed with the SEC regarding the proposed transaction. Investors should read the amended definitive proxy statement carefully before making any voting or investment decisions.

 

Cautionary Statement Regarding Forward-Looking Statements

This document includes “forward-looking statements” for the purpose of the “safe harbor” provisions within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Any statements made in this document that are not statements of historical fact, and statements about our beliefs, opinions, projections, strategies, and expectations, are forward-looking statements and should be evaluated as such. These forward-looking statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “views,” “projects,” “should,” “would,” “could,” “may,” “become,” “forecast,” and other similar expressions. Forward looking statements include statements regarding the anticipated closing date for the transaction, the value of the proposed combination, and any statements made regarding our strategy, prospects or future performance.

 

All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of MetroPCS, Deutsche Telekom and T-Mobile and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to, the possibility that the proposed transaction is delayed or does not close, including due to the failure to receive the required stockholder approvals, the taking of governmental action (including the passage of legislation) to block the proposed transaction, the failure to satisfy other closing conditions, the possibility that the expected synergies will not be realized, or will not be realized within the expected time period, the significant capital commitments of MetroPCS and T-Mobile, global economic conditions, fluctuations in exchange rates, competitive actions taken by other companies, natural disasters, difficulies in integrating the two companies, disruption from the transaction making it more difficult to maintain business and operational relationships, actions taken or conditions imposed by governmental or other regulatory authorities and the exposure to litigation. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in MetroPCS' annual report on Form 10-K, filed March 1, 2013, and other filings with the SEC available at the SEC's website (www.sec.gov).  The results for any prior period may not be indicative of results for any future period.

 

The forward-looking statements speak only as to the date made, are based on current assumptions and expectations, and are subject to the factors above, among others, and involve risks, uncertainties and assumptions, many of which are beyond our ability to control or ability to predict. You should not place undue reliance on these forward-looking statements. MetroPCS, Deutsche Telekom and T-Mobile do not undertake a duty to update any forward-looking statement to reflect events after the date of this document, except as required by law.

 

For MetroPCS Communications, Inc. 

Investor Relations Contacts:                                         

Keith Terreri, Vice President - Finance & Treasurer

Jim Mathias, Director - Investor Relations

214-570-4641                              

investor_relations@metropcs.com          

 

For Deutsche Telekom

+49 228 181 4949

media@telekom.de

or

+49 228 181 888 80

investor.relations@telekom.de

Standard Chartered Chairman Retracts Comments on Sanctions Settlement

LONDON - John Peace, the chairman of Standard Chartered, was forced to retract statements on Thursday connected to the British bank’s recent settlement with American authorities over violations of sanction laws.

Last year, Standard Chartered, which has large operations in the emerging markets, agreed to a combined $667 million fine as part of a settlement with federal and state authorities, a deal that included a deferred prosecution agreement with the Justice Department and the Manhattan District Attorney’s Office. Authorities claimed that Standard Chartered had illegally processed millions of dollars of dollars of transactions for Iranian and Sudanese clients, and the bank admitted to “falsifying records” and “making false statements.”

But in a conference call at the bank’s annual earnings report on March 5, Mr. Peace referred to the transactions as “clerical errors,” adding that “we had no willful act to avoid sanctions.”

In a brief statement on Thursday, Standard Chartered’s chairman retracted his comments, and reiterated the bank’s responsibility for the criminal activity related to the illegal money transactions.

“My statement that Standard Chartered had no willful act to avoid sanctions was wrong,” Mr. Peace said. The comment “directly contradicts Standard Chartered’s acceptance of responsibility.”

Standard Chartered’s backtracking follows a series of scandals for Britain’s largest financial institutions.

HSBC, Europe’s largest bank, also agreed to a record $1.92 billion fine last year with U.S. authorities to settle similar money laundering allegations. Local rivals Barclays and Royal Bank of Scotland have reached settlements worth millions of dollars with both U.S. and British regulators over the manipulation of the London interbank offered rate, or Libor.

Despite the $667 million fine last year, Standard Chartered reported a $4.8 billion net profit for 2012, a slight rise on the previous year, mostly due to continued growth in fast-growing economies like China and across Africa.

Standard Chartered Chairman Retracts Comments on Sanctions Settlement

LONDON - John Peace, the chairman of Standard Chartered, was forced to retract statements on Thursday connected to the British bank’s recent settlement with American authorities over violations of sanction laws.

Last year, Standard Chartered, which has large operations in the emerging markets, agreed to a combined $667 million fine as part of a settlement with federal and state authorities, a deal that included a deferred prosecution agreement with the Justice Department and the Manhattan District Attorney’s Office. Authorities claimed that Standard Chartered had illegally processed millions of dollars of dollars of transactions for Iranian and Sudanese clients, and the bank admitted to “falsifying records” and “making false statements.”

But in a conference call at the bank’s annual earnings report on March 5, Mr. Peace referred to the transactions as “clerical errors,” adding that “we had no willful act to avoid sanctions.”

In a brief statement on Thursday, Standard Chartered’s chairman retracted his comments, and reiterated the bank’s responsibility for the criminal activity related to the illegal money transactions.

“My statement that Standard Chartered had no willful act to avoid sanctions was wrong,” Mr. Peace said. The comment “directly contradicts Standard Chartered’s acceptance of responsibility.”

Standard Chartered’s backtracking follows a series of scandals for Britain’s largest financial institutions.

HSBC, Europe’s largest bank, also agreed to a record $1.92 billion fine last year with U.S. authorities to settle similar money laundering allegations. Local rivals Barclays and Royal Bank of Scotland have reached settlements worth millions of dollars with both U.S. and British regulators over the manipulation of the London interbank offered rate, or Libor.

Despite the $667 million fine last year, Standard Chartered reported a $4.8 billion net profit for 2012, a slight rise on the previous year, mostly due to continued growth in fast-growing economies like China and across Africa.

Deals Like Lew’s Aren’t Uncommon

Jacob J. Lew, the new Treasury secretary, was asked pointed questions during his confirmation hearing about a deal with his former employer, Citigroup, that guaranteed him preferential financial treatment if he left for government service. But according to a new study, such arrangements are not so unusual on Wall Street, DealBook’s Susanne Craig reports.

Banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley all have provisions allowing acceleration of payments to senior executives if they take government jobs, said the study, to be released on Thursday by the Project on Government Oversight. In Mr. Lew’s case, he left Citigroup with stock that he could not immediately cash worth as much as $500,000. “These companies seem to be giving a special deal to executives who become government officials,” the study said. “In exchange, the companies may end up with friends in high places who understand their business, sympathize with it, and can craft policies in its favor.”

Firms that have such contracts typically say they are intended to encourage public service, not to curry favor. In addition, government workers are often required by law to sell shares in their former employer. A Citigroup spokeswoman said the bank “routinely accommodates individuals who wish to leave the firm to pursue a position in government or nonprofit sector.” Still, Ms. Craig noted, “the accelerated vesting of Mr. Lew’s shares is part of a larger debate on Wall Street and in Washington, where people frequently move back and forth.”

PRESSURE RISES IN CYPRUS  |  Cyprus is scrambling to find ways to finance its bailout, after a controversial levy on bank deposits was rejected by lawmakers. The government proposed nationalizing pension funds from state-run companies and conducting an emergency bond sale, while the finance minister was in Moscow trying to secure additional aid from Russia. “But even the revised plan contains a bank tax that, while much smaller than originally proposed, might still not be palatable to Parliament,” The New York Times writes. “At the same time, the Cypriot government decided to keep banks closed through the end of the week in an effort to prevent a run on Cyprus’s financial institutions.”

The situation is an example of how not to conduct a bailout, Stephen J. Lubben writes in the In Debt column. It also shows how a supposedly “safe” system “can be too big and quite dangerous. After all, the banks in Cyprus were noted for their reliance on deposits rather than other forms of dodgy short-term finance like repo and conduits and what not.”

What options does the country have at this point “There are broadly three: sell its soul to Russia, default and possibly quit the euro, or patch together a new deal with the euro zone,” Hugo Dixon of Reuters Breakingviews writes. “They are all bad, but the last one is the least bad, for both Cyprus and the rest of Europe.”

THE RETURN OF SYNTHETIC C.D.O.’S  |  They were at the heart of the credit crisis more than four years ago, but so-called synthetic collateralized debt obligations appear to be making a comeback. Citigroup “is among banks that have sold as much as $1 billion of synthetic collateralized debt obligations this year, following $2 billion in all of 2012, according to estimates from the New York-based lender,” Bloomberg News reports. The investments, which are derived from credit-default swaps, are attractive because they offer investors a higher yield than run-of-the-mill corporate credit, especially as demand for junk bonds grows.

EINHORN IN THE SPOTLIGHT  |  David Einhorn is on the cover of Bloomberg Businessweek on Friday. In an article titled “The Einhorn Effect,” Nick Summers looks at the Mr. Einhorn’s recent tangle with Apple. “Privately, some of Einhorn’s peers in the hedge fund ecosystem say they’re confused by his lawsuit â€" not its parsing of corporate governance rules, but the way it undercuts his virtuous reputation,” the story says.

ON THE AGENDA  |  After a rise in demand that took builders by surprise, data on existing home sales for February is out at 10 a.m. ConAgra Foods reports earnings before the market opens. Robert Wolf of 32 Advisors is on CNBC at 7:15 a.m. Mark Shafir, Citigroup’s global co-head of mergers and acquisitions, is on CNBC at 7:40 a.m. Ivanka Trump is on Bloomberg TV at 11:45 a.m.

START-UPS IN PURGATORY  |  They’re called “zombies” in Silicon Valley, start-ups that have enough capital to keep going but are not growing fast enough to raise more money to offer an exit to their investors. “Stuck in neutral, these ‘zombies’ are racing through their options, turning to restructuring firms to fix cash-management issues, using new services to pursue quick sales or teaming up with other young companies in trouble,” The Wall Street Journal writes. “Venture capitalists say the numbers of such firms are growing and some investors are targeting them with new services.”

Mergers & Acquisitions »

H.P. Shareholders Register Their Frustration  |  Shareholders of Hewlett-Packard re-elected the company’s board members, but by far narrower margins than last year, Reuters reports. REUTERS

A ‘Martin Lipton 2.0’  |  Corporate boards need a new defender updated for the modern era, Reynolds Holding of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Pinterest Buys a Recommendations Start-Up  |  Pinterest said it had acquired Livestar, with plans to shut down the start-up’s services, AllThingsD reports. Terms were not disclosed. ALLTHINGSD

American Realty Capital Offers to Buy Cole Credit for $5.7 Billion  |  American Realty Capital Properties has offered to buy Cole Credit Property Trust III for $5.7 billion, and in a letter it urged Cole Credit’s board to call off the proposed acquisition of its adviser, Cole Holdings. DealBook »

Oracle Results Fall Short of Expectations  | 
ASSOCIATED PRESS

For R.B.S. Branches, Narrower Field of Bidders  | 
BLOOMBERG NEWS

INVESTMENT BANKING »

Bonus Caps in Europe Are Set to Take Effect  |  Lawmakers in Europe “kept bonus restrictions unchanged, as they sealed a deal yesterday overhauling bank capital and liquidity rules,” Bloomberg News reports. BLOOMBERG NEWS

Costly Bank Payday Loans Criticized in Report  |  In a new report, the Center for Responsible Lending is condemning payday loans issued by big banks. DealBook »

Barclays Bankers Cash In on Past Bonuses  |  The British bank disclosed on Wednesday that its investment banking head, Rich Ricci, had cashed in $26 million of deferred shares. DealBook »

From Morgan Stanley, Investing in Women on Corporate Boards  |  A team within Morgan Stanley’s wealth management division is starting a new portfolio that seeks to invest in companies that have demonstrated a commitment to including women on their boards. DealBook »

PRIVATE EQUITY »

Circling Dell, Blackstone Said to Mull Candidates to Lead It  |  The Blackstone Group, which is said to be considering a bid for Dell, is interested in Mark V. Hurd, a former Hewlett-Packard chief executive, as a possible successor for Dell’s chief executive, Fortune reports, without citing sources. FORTUNE

For Dell Founder, a Delicate Dance  | 
WALL STREET JOURNAL

Macquarie to Ramp Up Private Equity Investments in U.S.  | 
FINANCIAL NEWS

HEDGE FUNDS »

In the Face of Legal Troubles, SAC’s Performance Is Strong  |  SAC Capital Advisors has gained about 4 percent this year, better than the average for the industry, Reuters reports. REUTERS

J.C. Penney Says Turnaround May Take More Time  |  “It may take longer than expected or planned to recover from our negative sales trends and operating results, and actual results may be materially less than planned,” J.C. Penney said in its annual report. REUTERS

I.P.O./OFFERINGS »

A Sly Reference to an Alibaba I.P.O.  |  Jack Ma, the founder of Alibaba Group Holding, made a joke about an I.P.O. for the company, a subject of longstanding speculation. WALL STREET JOURNAL

A Guide to the Moleskine I.P.O.  | 
QUARTZ

VENTURE CAPITAL »

Chinese Solar Panel Maker Collapses  |  “The main subsidiary of Suntech Power, one of the world’s largest makers of solar panels, collapsed into bankruptcy in a remarkable reversal for what had been part of a huge Chinese government effort to dominate renewable energy industries,” The New York Times writes. NEW YORK TIMES

LEGAL/REGULATORY »

Requiring Companies to Disclose Political Spending  |  Thomas P. DiNapoli, the New York State comptroller, and Bill de Blasio, the New York City public advocate, write in an opinion essay in The New York Times that the new leader of the Securities and Exchange Commission should push for a rule requiring publicly held companies to disclose political contributions. NEW YORK TIMES

With Freddie Mac Suit, Banks Face Billions More in Libor Claims  |  Unlike other plaintiffs, Freddie Mac looks to have a strong case because it dealt directly with many of the banks accused of manipulating the London interbank offered rate, Peter J. Henning writes in the White Collar Watch column. DealBook »

With JPMorgan Settlement, MF Global Clients Move Closer to Payout  |  MF Global customers moved a step closer to recouping their missing money when JPMorgan Chase released its claim to more than $500 million belonging to the bankrupt brokerage firm. DealBook »

Bernanke on Big Banks  |  “Too-big-to-fail is not solved and gone,” Ben S. Bernanke said at a news conference on Wednesday. “It’s still here.” HUFFINGTON POST

Fed Plans to Keep Going With Stimulus  |  “Employment has been increasing at a healthy clip for the last few months, but the Federal Reserve is not ready to relax just yet,” The New York Times writes. NEW YORK TIMES

U.K. Offers Additional Support for Economy  |  The New York Times reports: “The British government was forced on Wednesday to seek new ways to revive the sputtering economy after acknowledging for the second time in three months that it would take longer than expected to meet its debt-reduction target.” NEW YORK TIMES

2 Former Detroit Pension Officials Indicted on Corruption Charges  | 
REUTERS