Stephen Friedman to Retire From Goldman Board

Manny Ceneta/Agence France-PresseStephen Friedman, left, after President Bush announced his appointment as a top White House economic adviser in December 2002.

Stephen Friedman, a director of Goldman Sachs and chairman of the board’s risk committee, plans to retire, the firm announced on Thursday.

A onetime leader of Goldman who worked at the firm for nearly 30 years, Mr. Friedman is stepping down on May 22, the day before Goldman’s annual shareholder meeting. He will be replaced by Adebayo O. Ogunlesi, a well-known figure on Wall Street who joined the board last fall.

Mr. Friedman, 75, is required to retire by Goldman’s corporate governance guidelines, which set 75 as the maximum age for directors. The board accepted his retirement on April 2.

He joined Goldman’s board in April 2005. Since 2005, he has also been chairman of Stone Point Capital, a private equity firm. Mr. Friedman also worked in the White House under President George W. Bush, serving as assistant to the president for economic policy and as director of the National Economic Council.

As senior partner and chairman of Goldman, Mr. Friedman ran the firm with Robert E. Rubin until his colleague became Treasury secretary in 1992. Mr. Friedman left two  years later. A lawyer by training, he  joined Goldman in 1966.

Mr. Friedman was well compensated as a director of Goldman, earning $503,287 in 2011, according to Equilar , a compensation data firm.

His successor, Mr. Ogunlesi, is an independent director who once ran the investment bank at Credit Suisse and, since 2006, has run the private equity firm Global Infrastructure Partners. He once said he was not a typical investment banker, telling The New York Times in 2002, “I don’t wear suspenders, and when I had hair I didn’t slick it back.”

Currently a member of the risk committee of Goldman’s board, Mr. Ogunlesi is set to become the new chair of the risk committee upon Mr. Friedman’s retirement.

Mr. Friedman generated some controversy as chairman of the Federal Reserve Bank of New York during the financial crisis, when the Fed was helping put together a rescue plan for Wall Street. He stepped down from that role in 2009, after questions arose about his ties to Goldman.

As leader of Goldman, Mr. Friedman was an avid jogger, wearing a Timex Ironman digital watch and logging three or more miles a day. In addition to running, his hobbies included chess.

Upon stepping down from the helm of Goldman in 1994, Mr. Friedman dismissed rumors that he was in poor health.

“Only on Wall Street,” he told The New York Times at the time, “do people think it bizarre that I don’t want to spend half of my day on the telephone and the other half on an airplane.”

Columbia Professor Is Chosen Dean of N.Y.U.’s Law School

Trevor W. Morrison, a Columbia Law School professor and constitutional law scholar, will be the next dean of New York University Law School, the president of N.Y.U. announced on Thursday. Mr. Morrison will succeed Richard L. Revesz, whose 11-year tenure will end on May 31.

“N.Y.U. Law School has snared a prize,” Supreme Court Justice Ruth Bader Ginsburg, for whom Mr. Morrison served as a law clerk, said in an e-mail. “Trevor possesses in abundance all the qualities needed to make a great dean.”

In recruiting Mr. Morrison for its top job, N.Y.U. Law continues a string of hires from Columbia, stoking the competition between the two schools.

N.Y.U. Law made waves in 2006 when it hired three Columbia professors, including the law and philosophy scholar Jeremy Waldron. And in 2010, a Columbia international law professor, José Enrique Alvarez, decamped to N.Y.U.

Mr. Morrison, 41, has been teaching at Columbia, where he also earned his law degree, since 2008. He took a one-year leave from the school to serve in the Obama White House as associate counsel to the president. Earlier in his career, he taught at Cornell Law School and served short stints in Washington at the Justice Department and in private practice at WilmerHale.

The appointment of Mr. Morrison, however, comes during a turbulent period at N.Y.U. Last month, the faculty at the school’s largest college approved a note of no confidence in John E. Sexton, the university’s president, handing him a humbling defeat at a time when he had embarked on an aggressive expansion. The vote, a nonbinding resolution, has no immediate effect.

Mr. Sexton is a popular figure at N.Y.U.’s law school, where he served as a professor, and then dean, from 1988 to 2001. He is widely credited with helping make N.Y.U. Law one of the top law schools in the country, largely by aggressively recruiting star professors and developing new programs.

He passed the baton to Mr. Revesz, who continued to solidify N.Y.U. Law’s elite standing, continuing to hire new faculty and spearheading successful fund-raising drives. He recently announced a revamping of the school’s third-year curriculum, which includes a focus on foreign study, specialized concentrations and enhanced hands-on clinical training.

A 10-person search committee was charged with finding a successor to Mr. Revesz after he announced his intention last October to step down at the end of the academic year. He will remain on the faculty. The committee chose Mr. Morrison over three other finalists, according to people with direct knowledge of the search. The other candidates were Anne-Marie Slaughter, a Princeton University professor who was named on Wednesday the next president of the New America Foundation; Sujit Choudhry, a constitutional law professor at N.Y.U.; and Jennifer H. Arlen, an N.Y.U. business law professor.

Born in Port Alberni, a small logging town on Vancouver Island, Canada, Mr. Morrison earned his undergraduate degree at the University of British Columbia and then came to Columbia to pursue a dual degree in law and doctorate in Japanese history. After a year focused on his Japan studies, he started at the law school and became hooked.

“I came to love the law and my focus shifted away from interesting but fairly narrow questions of Japanese intellectual history and toward a range of broader questions of public law and government,” said Mr. Morrison, who did not finish his studies for a doctorate.

After law school, Mr. Morrison clerked for two judges whom he described as major influences and mentors: Judge Betty Binns Fletcher, a federal appeals court judge in Seattle who died last year; and Justice Ginsburg.

It appears that a Supreme Court clerkship might be a prerequisite to becoming the N.Y.U. Law dean. Mr. Revesz was a clerk for Justice Thurgood Marshall and Mr. Sexton clerked for Justice Warren E. Burger.

Mr. Morrison served on President Obama’s transition team after the 2008 election, helping to draft executive orders related to the future of the Guantánamo Bay prison and interrogation policy. Based on that work, the then-White House counsel, Gregory B. Craig, offered him an administration post, and Columbia accommodated a one-year leave.

At Columbia, Mr. Morrison was one of the school’s most popular professors, and in 2011 won the school’s top teaching prize. He said that he planned to continue teaching at N.Y.U., but would reduce his overall course load because of his responsibilities as dean. He also said that he and his wife, Beth Katzoff, an archivist and librarian at Columbia’s C. V. Starr East Asian Library, would move from Morningside Heights to Greenwich Village with their two young daughters to be nearer his new employer.

The N.Y.U. Law deanship is changing hands at a tumultuous time in the legal academy and profession. An oversupply of graduates and an undersupply of jobs, along with soaring tuition costs, have created a crisis. Law school applications have fallen to a 30-year low. The drop, some critics say, is partly the result of law schools’ overly academic training and their failure to teach students how to actually practice law.

Mr. Morrison said that it was crucial for N.Y.U. and other law schools to adapt and respond to the shifting landscape, citing cost pressures facing law firms, which inhibits hiring, and the chronic lack of legal services to the poor. But he also emphasized that they must be mindful of preserving the intellectual rigor of a traditional law school curriculum.

“What sometimes frustrates me in discussions about the crisis in legal education is that phrases like ‘critical thinking,’ ‘analytical reasoning,’ and ‘problem solving’ often get caricatured or treated as clichés,” Mr. Morrison said. “Great law schools like N.Y.U. must be attentive to the changing demands of a legal marketplace, but need not give up on the more enduring values of a legal education.”

Tesla’s C.F.O. Reaps Healthy Profit on Stock Options

Some investors will have booked nice profits in shares of Tesla Motors this week. One of them is the company’s chief financial officer, Deepak Ahuja, who made over half a million dollars as part of a pre-determined sales plan.

On Monday, Tesla, which makes electric cars, revised its profits forecast for the first quarter, which helped its stock rise 16 percent on the day. On that day, Mr. Ahuja pocketed profits of around $573,000 on Tesla stock.

The executive converted 20,000 options on Tesla shares into stock, which he then immediately sold. He received the options as part of his compensation.

Shanna Hendriks, a Tesla spokeswoman, said the selling plan began in March last year. The sale was not timed, she said, to coincide with the company’s announcement on Monday. “There’s no way in 2012 there’d be that kind of visibility into 2013,” said Ms. Hendriks. Under the plan, “sales are managed by a third party broker and no feedback is permitted from the plan participant on the timing of the sale.”

At 20,000 shares, the sale was larger than recent transactions, which have taken place in batches of 5,000 or 10,000 shares. Ms. Hendriks said, “The reason the sale was higher, is because the formula for his sales is set at a pre-determined strike price, with an additional number of shares set to sell as the stock price goes higher.”

Tesla has become the subject of an increasingly intense stock market battle. It has doubters who are betting against its shares because they don’t believe there’s substantial demand for the high-end cars that Tesla makes. But in recent months, as the company has started to report sales numbers for its sedan, its shares have climbed.

Mr. Ahuja’s sale was fortunately timed for another reason: It shielded him from a stock price drop later in the week. After Tesla announced a leasing program that didn’t impress investors, the shares fell 7 percent. On Thursday, they closed up 2 percent.

A Veteran Activist Takes Helm of H.P.’s Board, Temporarily

As Ray Lane relinquishes the chairmanship of Hewlett-Packard’s board, the computer company is turning to a seasoned activist hedge fund manager to oversee temporarily the company’s directors.

Ralph V. Whitworth, who became H.P.’s interim chairman on Thursday, joined the company in late 2011 after amassing a sizable stake. Rather than risk a fight, H.P. elected to give him a seat and spots on its investment and compensation committees.

It was only the latest victory for Mr. Whitworth, who began his investing career as a top lieutenant to T. Boone Pickens. Since founding Relational Investors in 1996, he has established a reputation as a top-ranking activist hedge fund manager who often gains board seats.

Among his highest-profile investments to date are Genzyme, where he had a hand in arranging the biopharmaceutical company’s sale to Sanofi-Aventis; Waste Management, where he became acting chairman in 1999 after an accounting scandal; and Occidental Petroleum.

Last year, Relational disclosed that it owned a stake in PepsiCo. The two sides had what a Pepsi spokesman described at the time as “constructive meetings,” though investors speculated whether Mr. Whitworth had contemplated agitating for a break-up of the food giant.

At H.P., Mr. Whitworth was tasked with leading an independent investigation into the company’s disastrous acquisition of Autonomy, since he was the only director not on the board at the time of the deal.

After Stagnation, a Revival for Mexico’s Financial Sector

MEXICO CITY â€" When Banco Santander held the $4.13 billion public stock offering of its Mexico subsidiary here last September, a mariachi band and Mexican folk dancers set the festive mood for a media breakfast in a sun-filled dining room atop the stock exchange’s skyscraper.

The offering â€" the largest ever in Mexico and trailing only initial public offerings from Facebook and Japan Airlines in terms of size in 2012 â€" was just one sign of the strong revival of the nation’s financial services sector.

Both global and local banks are jostling to underwrite stock issues. Mexican companies are looking for financing to help expand and make acquisitions. New structured finance products are attracting billions from local pension funds.

And with the continuing crisis in Europe and lackluster growth hurting the United States and other economies, Mexico’s growth prospects are attracting investment banks and investors hunting for ways to gain greater exposure to international markets.

“It’s the coming of age of the Mexican market,” said Eduardo Cepeda, J.P. Morgan’s senior country officer.

It is a marked change from just a few years ago, when the loss of manufacturing jobs to China and recession in the United States had left the country’s economy stagnant for the better part of a decade.

The current atmosphere is not without risks. For one, the new government has yet to present a convincing plan for tackling organized crime and drug cartels, which carry out kidnappings and gruesome killings that still dominate headlines. And persistent low wages in Mexico also serve to tamp down domestic demand.

Still, changes have taken place to foster optimism in the financial services industry. The new government of President Enrique Peña Nieto, who took office in December, has managed to recast the country’s image by moving vigorously on legislation to attack problems that are a drag on growth.

Even before Mr. Peña Nieto took office, prudent policies had whittled away government debt, built up foreign reserves, controlled inflation and stabilized the peso. Growth of about 4 percent in 2011 and again in 2012 outpaced Brazil.

“Investment bankers benefit from upswings and downturns,” said Mauro Guillén, a professor of international management at the Wharton School at the University of Pennsylvania. “Everybody is expecting a lot of deals in Mexico.”

The financial services industry is making up for lost time, jumping back into an emerging market that had long been overlooked. The sector’s growth is also being helped by an important new player in the local market: Mexico’s pension funds, which manage nearly $160 billion in assets. That figure is expected to double over the next six years, according to Carlos Ramírez Fuentes, the president of Consar, the government’s pension fund regulator.

“The Mexican financial system is still relatively small,” Mr. Ramírez said. “The resources are growing fast, and you need different alternatives for investment.”

Mexico created a pension plan 15 years ago that channels a percentage of each worker’s salary into a private fund, run by a manager called an Afore, a Spanish acronym.

For the first decade, Afores were limited to buying government debt. As regulators began to relax the rules, the funds diversified into corporate debt, and then into the stock market and structured finance instruments.

The pension funds continue to “redefine the capital markets” in Mexico, said Jaime Martínez-Negrete, the president of Morgan Stanley Mexico, which opened a broker-dealer in late 2010 to serve the local market. “It’s a market that is becoming more deep and broad in its products.”

To attract investment from those pension funds, Mexico’s stock market and the finance ministry created a special vehicle, a structured equity security known as a CKD.

The CKD allows investors to buy into a publicly traded fund that typically invests in infrastructure, real estate and private companies. Since they were first created in 2009, there have been 29 issues, worth about $4.8 billion.

A subset of the CKDs has been Mexico’s version of real estate investment trusts, known as Fibras. “There is enormous potential for growth and development for CKDs and Fibras,” said Gema Sacristán, chief of the financial markets division at the Inter-American Development Bank in Washington. “Mexico’s regulators should continue looking for new investment schemes and institutional investors.”

Mexico’s stock market is also showing signs of revival, although it is still relatively small compared to Brazil’s, its main rival in Latin America. With only a handful of new issues a year or even less, the stock market is worth just 46 percent of gross domestic product, compared with about 150 percent for Brazil, Luis Téllez, the president of the Mexico Stock Exchange, said.

But initial public offerings are showing signs of life. Mr. Téllez said he expected 15 I.P.O.’s this year, although the total amount they raise may be lower than in 2012 because of the size of the Santander deal. Last month, Sempra Energy’s Mexico subsidiary raised $600 million in the exchange’s third corporate I.P.O. of the year.

Also among this year’s offerings was the I.P.O. of Grupo Sanborns, the retail arm of the billionaire Carlos Slim Helú’s empire. It sold $950 million in shares to finance expansion.

Both foreign and domestic investors are buying the shares, Mr. Téllez said. “For foreign investors, it is very reassuring that there are Mexican institutional funds that can also take the paper.”

There are a number of more subtle factors working in favor of more stock offerings, bankers say. One of those is an evolution in the closely held family-owned businesses, which have been reluctant to list or have so few shares floating that they are very illiquid.

Another change may be a move by more multinationals, like Santander and Sempra, to sell shares in their subsidiaries in Mexico, where growth prospects are higher than at home.

Wal-Mart’s Mexican subsidiary, for example, which is the country’s largest private employer, trades on the Mexican exchange at about double the price-to-earnings ratio that Wal-Mart Stores trades at on the New York Stock Exchange.

“Right now, we have experienced the longest period in three decades of a continuous open window for equities,” Mr. Martínez-Negrete said.

The market for credit is also growing. After the peso crisis of 1994 sent Mexico’s banks into free fall, they were sold off to global banks. But the new owners were conservative about lending in Mexico. The banks are strongly capitalized and have complied with new international standards known as Basel III.

The government’s sound finances means it can issue 30-year bonds priced in pesos. Foreign funds are buying along with local ones. “This shows a lot of confidence in the currency and in the credit of the government,” Mr. Cepeda said.

For the first time in many years, local companies are generating cash and looking to expand at home and abroad, said Alfredo Capote, the head of investment banking at Banamex, Citigroup’s Mexico subsidiary. “Investors like these stories because there are very few stories of growth and consolidation around the world,” he said.

At the same time, foreign manufacturers are returning to Mexico as a production platform for the recovering American market. At the top of that list are global automakers, which are investing $10 billion in new assembly plants.

Mexico “has exported its way to prosperity,” said William H. Gross, the founder of Pimco, which has been accumulating Mexican sovereign debt over the last 18 months. “They now own dollars as opposed to owing dollars.”

Hurrahs and Harrumphs for T-Mobile

In my Times column on Thursday, I cheered T-Mobile’s bold decision to abandon the standard United States cellphone business model. There will be no more two-year contracts, no more idiotic 15-second voice mail instruction recordings, no more games with the cost of your phone.

The column set off an unusually voluminous flood of reader response. Most were as thrilled by T-Mobile’s new policies as I am.

But there was, as always, a sizable crowd who pushed back and objected in various ways. Here are some of their comments, with my responses.

You said that T-Mobile has done away with contracts. Oh yeah Then what about this I think T-Mobile is lying.

Oh, for goodness’ sake! T-Mobile is indeed doing away with service contracts â€" contracts that lock you into its cellular service for a year or two.

What you’ve unearthed is an agreement that you’ll pay T-Mobile for the phone it gives you, even if it takes you a couple of years to do it. You can pay $20 a month, $40 a month, $100 a month, whatever you want â€" but eventually, you have to pay for the phone. That’s all you’re agreeing to.

You really expect T-Mobile to start giving away $600 phones free Come on.

You said that you can leave T-Mobile whenever you want â€" you’re not locked in for two years. But what if I’ve paid for only half of my phone Do I get to keep it Do I have to give it back

Again: You have to pay for the phone, one way or another. Again: T-Mobile isn’t in the business of giving phones away. So if you leave the service before you’re finished paying for the phone, you’ll have to pay the rest of what you owe.

Then again, you’re under no obligation to buy a phone from T-Mobile in the first place. You can bring any compatible phone and just pay for the service.

I can’t believe you ignored Ting/Republic/Virgin Mobile/Straight Talk/Page Plus. I pay only $45 a month, I have no annual contract, and I get everything!

There are lots of these second-tier cell carriers, known in the industry as MVNOs (mobile virtual network operators). They rent bandwidth on the networks of the big boys â€" Verizon, AT&T, Sprint â€" and offer
much lower rates.

There are some fantastic deals to be had. However, to an extent, you do get what you pay for. An MVNO doesn’t offer the same phones â€" you generally can’t get the hot phones like an iPhone or Galaxy S III, for example. With some, like Page Plus, you don’t get 4G LTE Internet speeds. Some, like Virgin, don’t permit roaming. Others are available only in certain regions, which won’t do you much good when you travel. I really should do a column about MVNOs one of these days.

Your outrage toward mobile carriers is refreshing to read. However, the U.S. situation holds no candle to us Canadians. I am currently locked into a THREE-year contract with my cellphone provider, which is standard if you want an iPhone. The T-Mobile situation sounds like a dream.

Ouch! Sadly, T-Mobile’s plan does not compare to European mobile plans. Some examples:

- In Britain, and most of Europe, you can get true pay-as-you-go, where you can put, say, £10 (about $15) on your phone and then you use that till it’s up. If it takes a year, well, fine; you don’t lose it (unless maybe you don’t use it for a long period). 



- You don’t pay for incoming calls and texts; only the initiating party pays. I think this is a big one and saves a ton of money. As far as I know, the United States is one of the few countries where you pay for incoming and outgoing calls and texts.




Yes, many readers pointed out that cellular service is better and cheaper in Europe. We’re happy for you, we really are.

You didn’t mention the best thing about T-Mobile: free Wi-Fi calling! I can make free calls, with fantastic signal, in my home, or anywhere else where there’s a hot spot.

I’ve always loved this T-Mobile feature. Many T-Mobile phone models (not all) do indeed let you make free calls whenever you’re in a Wi-Fi hot spot. It switches to cellular minutes only when you go outside. Fantastic.

David, you missed T-Mobile’s Achilles’ heel: its once vaunted customer service.

 Frankly, it went from the best to the worst in practically no time. They decided to close down call centers here in the U.S., and ship them to India. Sorry, that doesn’t work for me (and I am from India). Barring a couple, they all have been rather awful.

 I am noticing changes of late that seem to indicate they are trying to right their ship.

That’s a shame â€" but then how do we explain reader comments like the next one

I’ve been with T-Mobile for almost 8 years. When I call customer service I get someone speaking perfect English, located in Albuquerque, N.M.

What almost all 500 respondents agreed on, though, is that United States cellular companies are generally rapacious and loathed by their own customers. Kind of makes you wonder: Do they really enjoy doing business that way

Deutsche Telekom Walks Back Prior Statement on Sweetening MetroPCS Bid

It appears Deutsche Telekom has finally settled on its response to queries about whether it will raise a bid by its T-Mobile USA subsidiary for MetroPCS.

And that answer is, “No comment.”

Here’s what the German telecom company said on Thursday afternoon:

“In response to a variety of published rumors and reports, Deutsche Telekom clarifies that it has no comment as to possible changes to the terms of its agreement with MetroPCS Communications. Deutsche Telekom continues to believe that its existing agreement with MetroPCS provides compelling value and is in the best interests of MetroPCS stockholders, especially in light of the accelerating turnaround at T-Mobile USA.”

But earlier in the day, a Deutsche Telekom spokesman gave a slightly different answer to Reuters, which had reported that the company’s board was working on sweetening the MetroPCS offer, citing unnamed sources.

“No, we can flatly deny that,” the representative told Reuters.

The German company and its advisers are weighing whether to make a better bid, as the current offer faces enormous opposition from MetroPCS shareholders. Two of the American telecom’s biggest investors have argued that the offer should be improved or scrapped, and recently won the backing of the two major proxy advisory firms.

Under the current terms of the offer, MetroPCS shareholders would be paid about $4.09 a share and receive a 26 percent stake in the combined company.

The hedge funds leading the campaign against the deal, P. Schoenfeld Asset Management and Paulson & Company, have argued that MetroPCS investors should receive a bigger stake in the merged telecom. They have also contended that the proposed terms of the debt that the combined company would assume are too onerous.

Consumer Bureau Says 4 Insurers Made Kickbacks to Mortgage Lenders

A federal regulator set up after the financial crisis to protect consumers announced on Thursday enforcement actions against four insurance companies, asserting that the firms paid kickbacks to mortgage lenders for over 10 years.

The Consumer Financial Protection Bureau’s allegations focus on mortgage insurance, a product that many borrowers were required to purchase if they didn’t make a sizable down payment when buying a house. The bureau claims that, because of the kickbacks, home buyers may have had to pay more for the mortgage insurance. The arrangements examined by the agency are the latest example of how murky insurance transactions may be used to cover up payments of questionable intent.

“Illegal kickbacks distort markets and can inflate the financial burden of home ownership for consumers,” Richard Cordray, the bureau’s director, said in a statement. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade.”

Settlements with the four firms require that that they pay a combined $15 million in penalties. The companies are Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, Radian Guaranty and United Guaranty Corporation, a subsidiary of American International Group.

The bureau’s investigation covered deals struck in the years before the housing bust, when using mortgage insurance from private companies was a lot more common. Mortgage banks often steered borrowers toward mortgage insurance provided by certain companies. The consumer agency claims that the insurers made disguised payments to mortgage lenders in order to gain business.

The bureau didn’t name the banks that it said received the kickbacks. When asked why, Kent Markus, assistant director for enforcement, said, “Because we are not done with this matter, there are still a lot of things we can’t talk about.”

According to the bureau, the insurers made the kickbacks in the form of separate insurance payments back to the mortgage lenders, called reinsurance. These payments didn’t appear to provide real economic value to the mortgage insurers, according to Mr. Markus.

In agreeing to the bureau’s orders, which were filed with the United States District Court, Southern District of Florida, none of the four insurers admitted or denied the allegations.

In its statement, Mortgage Guaranty Insurance said it had, “obtained actuarial opinions from independent actuaries reflecting that the reinsurance premiums paid by MGIC were reasonably related to the risk assumed by the captive reinsurers.”

Genworth said that when it set up its reinsurance arrangement, also known as captive reinsurance, it had used guidance from the Department of Housing and Urban Department. “Genworth followed the guidance, and had the arrangements tested by independent third parties to verify that the HUD requirements were met,” the company’s statement said. In its statement, Radian made a similar point about using HUD’s guidance.

Genworth and Mortgage Guaranty Insurance also disputed whether borrowers were financially harmed by the insurance arrangements.

In the settlement, the four companies are prohibited from entering any new captive insurance arrangements with mortgage lenders for 10 years.

In a statement, Jon Diat, a spokesman for American International Group, the owner of United Guaranty, said the unit, “believes these practices complied with the law and were fair to consumers, but settled the matter to avoid the distraction and expense of protracted litigation.”

Because reinsurance deals can be malleable and opaque, companies have been under scrutiny for using them to mask the real motivation for payments. One prominent case was a deal at the start of the last decade between American International Group and a unit of Berkshire Hathaway that made the former’s balance sheet look healthier than it was. In 2010, Berkshire agreed to a $92 million settlement with federal agencies over the arrangement.

Since the financial crisis, there has been less demand for private mortgage insurance. Banks require larger down payments now, removing the need for private mortgage insurance. Meanwhile, the federal government, through the Federal Housing Administration, guarantees many mortgages with small down payments.

Former SAC Employee Martoma Changes Lawyers in Insider Case

Mathew Martoma, the former SAC portfolio manager facing insider trading charges, has switched lawyers, replacing Charles A. Stillman of Stillman & Friedman, with Richard M. Strassberg of Goodwin Procter.

The move is likely to fuel speculation about whether Mr. Martoma, who has denied the charges and refused to cooperate with the government, will change his plea and help prosecutors build a case against his former boss, Steven A. Cohen, the owner of SAC.

But several white-collar criminal defense lawyers said that it was difficult to ascertain Mr. Martoma’s intentions in changing counsel. If anything, they say, Mr. Martoma’s hiring of Mr. Strassberg â€" a seasoned trial lawyer with several high-profile courtroom victories â€" indicates that Mr. Martoma intends to have his case heard by a jury.

“Hiring Rich would suggest that he plans to go the distance,” said a white-collar criminal defense lawyer who spoke only on the condition of anonymity.

Mr. Stillman confirmed that he had been replaced by Goodwin Procter. He said in a one-sentence e-mailed statement: “We wish Mathew Martoma all the best.”

In December, federal prosecutors indicted Mr. Martoma and charged him with making more than $276 million in a combination of illegal profits and avoided losses by obtaining secret information from a doctor about clinical trials for an Alzheimer’s drug being developed by the companies Elan and Wyeth.

For the first time in the government’s investigation of insider trading at SAC, the trades at the center of the Martoma case directly involve Mr. Cohen. According to the government, Mr. Martoma and Mr. Cohen had a 20-minute telephone conversation the night before SAC started illegally trading shares of Elan and Wyeth.

SAC last month paid $602 million to settled civil charges related to the trades. As part of the settlement it neither admitted nor denied wrongdoing. Mr. Cohen has not been charged with any wrongdoing and has said he believes he has at all times behaved appropriately.

The decision by Mr. Martoma to switch lawyers was something of a surprise. Mr. Stillman, who runs a 14-lawyer criminal defense boutique, is a renowned trial lawyer and considered one of the deans of New York’s white-collar criminal defense bar. In Goodwin Procter, Mr. Martoma has retained a much larger firm. The venerable, century-old firm, started in Boston, now has 800 lawyers with offices across the world.

Mr. Strassberg, 49, a former federal prosecutor, has had a number of significant victories representing white-collar criminal defendants. In 2010, he successfully defended Jon Paul Rorech, a former trader at Deustche Bank, against civil charges brought by the Securities and Exchange Commission in the first-ever insider trading trial involving credit default swaps. He represented David Greenberg, a former partner at the accounting firm of KPMG charged with criminal tax-fraud violations. After a nearly three-month trial, a jury acquired Mr. Greenberg while convicting all of the othe defendants in the case.

Most recently, Mr. Strassberg represented the Swiss bank Wegelin, which pleaded guilty in January to helping American dodge taxes. And in perhaps his highest profile case, he was the trial lawyer for Martha Stewart‘s stockbroker Peter Bacanovic, who served five months in prison after his conviction on charges related to Ms. Stewart’s stock trading.

Mr. Strassberg declined to comment beyond confirming his representation of Mr. Martoma. In addition to Mr. Strassberg, Mr. Martoma’s team at Goodwin is expected to include Roberto M. Braceras, John O. Farley, and Daniel P. Roeser.

Unlocking Vodafone’s Value

Deal prospects make Vodafone look cheap.

An optimistic reading of the underlying valuations suggests an acquisition could deliver shareholders in the London-listed mobile giant perhaps 35 percent more value than they have now. That’s an extra 31.5 billion pounds ($47.6 billion). But unlocking this would entail huge deals and huge headaches to match.

Vodafone and U.S. partner Verizon Communications formed joint venture Verizon Wireless in 1999. In recent years, the joint venture has grown impressively, while Vodafone’s other businesses have flagged. As the two arms of the company have diverged, M.&A. speculation has grown. Some talk about a sale of some or all of Vodafone’s 45 percent stake in Verizon Wireless. Others envisage a full-blown takeover of Vodafone by Verizon Communications. Others mull a breakup of Vodafone orchestrated by Verizon and AT&T.

Verizon rejected this last, latest idea this week. Still, the chatter highlights the gulf between Vodafone’s current valuation and how much its assets could be worth to the right buyers.

Vodafone’s stake in the wireless joint venture is the jewel in the crown. At, say, 8.5 times earnings before interest, taxes, depreciation and amortization, or Ebitda â€" the midpoint of the seven-to-10 times range that Deutsche Bank recently suggested â€" this could be worth 82 billion pounds.

Some argue the stake is worth even more, and it could be if a cash flow-based valuation is used. Verizon Wireless has light debts, no moribund landline businesses and enjoys high margins.

Put Vodafone’s other businesses on a slimmer multiple of, say, five times. That level â€" roughly in line with big European peers â€" would value them at 40.4 billion pounds, after subtracting net debt of 26.5 billion pounds. So Vodafone’s total equity could be worth 123 billion pounds. That equates to 251 pence a share â€" or about 35 percent over Vodafone’s April 3 close, a Breakingviews calculator shows.

This is catnip for M.&A.-starved investors. But reality is rarely as obliging as spreadsheets. Talk has swirled inconclusively around the Verizon Wireless stake for a decade. Funding a buyout would be a big stretch for Verizon since its market capitalization is only $140 billion. The sale could generate a huge capital gains bill, since Vodafone carries Verizon Wireless on its books at about $15 billion, according to Jefferies, although some analysts see ways to dilute the liability. Citigroup argues that selling Vodafone’s U.S. holding company, where other assets have fallen in value, could cut the tax bill to a maximum $5 billion.

A full-blown acquisition of Vodafone would give Verizon an unwanted, sprawling set of international businesses. Meanwhile, only a small handful of suitors have the firepower to help Verizon stage a breakup â€" and it’s not obvious that AT&T would want Vodafone’s relatively pedestrian non-U.S. assets. Nor, presumably, would it want to help its domestic arch-rival get ahead.

But with Vodafone valued at 30 billion pounds below its breakup value, the potential for value release is mouth-watering. There might be enough to satisfy the taxman, Vodafone investors and Verizon all at once.

Quentin Webb and Robert Cyran are columnists for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Report Hints at Possible MF Global Suit

MF Global‘s bankruptcy trustee is hinting at taking legal action against the brokerage firm’s top executives, blaming them in a new report for engineering a “risky business strategy” and ignoring “glaring deficiencies” in internal controls.

In accusing Jon S. Corzine and other MF Global executives of “negligent conduct” that may have accelerated the firm’s demise, Louis J. Freeh, the trustee for MF Global Holdings and a former director of the F.B.I., laid the groundwork for potential litigation.

The 124-page report filed in federal bankruptcy court early Thursday leveled its sharpest critique at Mr. Corzine, the former chief executive who was once the governor of New Jersey. Expanding on similar reports issued last year by Congressional investigators and another bankruptcy trustee, Mr. Freeh claimed that the C.E.O. ignored warning signs that the firm was in a precarious position even as he placed a risky bet on European debt.

While the bonds were not by themselves to blame for felling MF Global, the bet unnerved MF Global’s investors and ratings agencies. And when the firm spun out of control in October 2011, it grabbed money from its customers in a futile bid for survival. Mr. Freeh argued that the breach, still the subject of a broad law enforcement investigation, could have been prevented.

“Corzine and management knew, or should have known, that these factors were contributing to a precarious liquidity position that ultimately spelled disaster for MF Global,” Mr. Freeh wrote in the report.

A spokesman for Mr. Corzine did not immediately comment. Federal authorities have not accused him of any wrongdoing.

But as Mr. Freeh weighs his next step, a range of legal avenues are available for him to pursue. He could join an earlier lawsuit against Mr. Corzine and other executives, teaming up with the firm’s customers and the trustee overseeing the return of money to customers. Alternatively, Mr. Freeh could file his own case against Mr. Corzine.

The lawsuit, which could help Mr. Freeh recover money for MF Global’s creditors, would likely hinge on what Mr. Corzine knew about the firm’s mounting problems. Mr. Freeh’s report suggests he knew plenty.

In April 2010, a subordinate wrote to Mr. Corzine to warn about the company’s “disorganized” structure. “There is little business or dispositional integration between the many offices and branches,” the employee wrote. “There is, in short, no house culture.”

At a board meeting a month later, the report said, Mr. Corzine further learned that MF Global’s internal controls control were “flawed.” He and other managers received documents detailing dozens of gaps between the firm’s required risk policies and its actual practices. MF Global employees also put executives on notice that they lacked “the appropriate systems” to support the European wager.

Some employees, balking at the risk taking, planned to create a new risk system to forecast potential losses. But Mr. Corzine, according to Mr. Freeh, “stalled” the effort because it was unduly expensive.

The warning signs continued over the next year. In June 2011, more than a year after Mr. Corzine was first alerted to the problems, MF Global’s internal auditors sounded alarms about the firm’s inability to fully track its liquidity. In a submission to management, the auditors warned that “existing liquidity monitoring and forecasting is manual and limited.”

The 2011 submission also foreshadowed problems with customer money. MF Global, the auditors cautioned, placed “unnecessarily high reliance on key employees” to manage the firm’s liquidity reporting and monitoring, including a single employee in Chicago, Edith O’Brien. Ms. O’Brien later emerged as a crucial player in the federal investigation into missing customer money, as e-mails showed that she transferred customer money to an account at JPMorgan Chase.

Despite knowing the risks of relying on Ms. O’Brien, Mr. Freeh noted that MF Global’s management looked the other way. “The business accepts this risk and a formal action plan will not be tracked,” MF Global employees wrote at the time, according to Mr. Freeh’s report.

The firm’s Treasury Department, where Mr. O’Brien worked, also became a cause of concern when employees could not fulfill even simple requests for monthly cash flow reports. The problems forced other employees to “correct” MF Global’s accounting books manually “to make sure they were accurate.”

One employee described the Treasury Department’s systems as a “hodgepodge of systems and processes without a design,” according to Mr. Freeh’s report.

While the MF Global first learned of the problems in early 2010, MF Global executives did not plan to engineer a fix until February 2012. As it turned out, MF Global collapsed four months earlier.

“Instead of heeding the warnings, management began to execute Corzine’s vision,” the report said.

Report Hints at Possible MF Global Suit

MF Global‘s bankruptcy trustee is hinting at taking legal action against the brokerage firm’s top executives, blaming them in a new report for engineering a “risky business strategy” and ignoring “glaring deficiencies” in internal controls.

In accusing Jon S. Corzine and other MF Global executives of “negligent conduct” that may have accelerated the firm’s demise, Louis J. Freeh, the trustee for MF Global Holdings and a former director of the F.B.I., laid the groundwork for potential litigation.

The 124-page report filed in federal bankruptcy court early Thursday leveled its sharpest critique at Mr. Corzine, the former chief executive who was once the governor of New Jersey. Expanding on similar reports issued last year by Congressional investigators and another bankruptcy trustee, Mr. Freeh claimed that the C.E.O. ignored warning signs that the firm was in a precarious position even as he placed a risky bet on European debt.

While the bonds were not by themselves to blame for felling MF Global, the bet unnerved MF Global’s investors and ratings agencies. And when the firm spun out of control in October 2011, it grabbed money from its customers in a futile bid for survival. Mr. Freeh argued that the breach, still the subject of a broad law enforcement investigation, could have been prevented.

“Corzine and management knew, or should have known, that these factors were contributing to a precarious liquidity position that ultimately spelled disaster for MF Global,” Mr. Freeh wrote in the report.

A spokesman for Mr. Corzine did not immediately comment. Federal authorities have not accused him of any wrongdoing.

But as Mr. Freeh weighs his next step, a range of legal avenues are available for him to pursue. He could join an earlier lawsuit against Mr. Corzine and other executives, teaming up with the firm’s customers and the trustee overseeing the return of money to customers. Alternatively, Mr. Freeh could file his own case against Mr. Corzine.

The lawsuit, which could help Mr. Freeh recover money for MF Global’s creditors, would likely hinge on what Mr. Corzine knew about the firm’s mounting problems. Mr. Freeh’s report suggests he knew plenty.

In April 2010, a subordinate wrote to Mr. Corzine to warn about the company’s “disorganized” structure. “There is little business or dispositional integration between the many offices and branches,” the employee wrote. “There is, in short, no house culture.”

At a board meeting a month later, the report said, Mr. Corzine further learned that MF Global’s internal controls control were “flawed.” He and other managers received documents detailing dozens of gaps between the firm’s required risk policies and its actual practices. MF Global employees also put executives on notice that they lacked “the appropriate systems” to support the European wager.

Some employees, balking at the risk taking, planned to create a new risk system to forecast potential losses. But Mr. Corzine, according to Mr. Freeh, “stalled” the effort because it was unduly expensive.

The warning signs continued over the next year. In June 2011, more than a year after Mr. Corzine was first alerted to the problems, MF Global’s internal auditors sounded alarms about the firm’s inability to fully track its liquidity. In a submission to management, the auditors warned that “existing liquidity monitoring and forecasting is manual and limited.”

The 2011 submission also foreshadowed problems with customer money. MF Global, the auditors cautioned, placed “unnecessarily high reliance on key employees” to manage the firm’s liquidity reporting and monitoring, including a single employee in Chicago, Edith O’Brien. Ms. O’Brien later emerged as a crucial player in the federal investigation into missing customer money, as e-mails showed that she transferred customer money to an account at JPMorgan Chase.

Despite knowing the risks of relying on Ms. O’Brien, Mr. Freeh noted that MF Global’s management looked the other way. “The business accepts this risk and a formal action plan will not be tracked,” MF Global employees wrote at the time, according to Mr. Freeh’s report.

The firm’s Treasury Department, where Mr. O’Brien worked, also became a cause of concern when employees could not fulfill even simple requests for monthly cash flow reports. The problems forced other employees to “correct” MF Global’s accounting books manually “to make sure they were accurate.”

One employee described the Treasury Department’s systems as a “hodgepodge of systems and processes without a design,” according to Mr. Freeh’s report.

While the MF Global first learned of the problems in early 2010, MF Global executives did not plan to engineer a fix until February 2012. As it turned out, MF Global collapsed four months earlier.

“Instead of heeding the warnings, management began to execute Corzine’s vision,” the report said.

Twitter Arrives on Wall Street, Via Bloomberg

Largely blocked on Wall Street, Twitter is making its big debut on trading desks â€" via Bloomberg terminals.

Bloomberg L.P. announced on Thursday that it was incorporating tweets into its data service, which is widely used in the financial industry. The new feature allows traders and other professionals to monitor social media buzz and important news about companies they follow.

This arrival of Twitter comes through something of a side door. The big Wall Street banks largely ban the use of Twitter and other social media sites at work, citing regulations governing communication. Though some firms are allowing certain employees onto social media, that usage is carefully controlled.

Now, bank employees are getting a broader and more organized view of what’s being said in the Twittersphere. Some on Wall Street already use their mobile phones to monitor the site for information that could move stocks.

Bloomberg’s new service shows tweets sorted by company and topic, allowing users to search by key word and to set up alerts for when a particular company is getting an unusual amount of attention.

“We were getting requests from customers who were seeing news they wanted to be aware of on Twitter,” said Brian Rooney, core products manager for news at Bloomberg, who said that compliance officers from Wall Street banks had expressed an interest in allowing employees to see tweets.

But Mr. Rooney added: “This isn’t where you monitor The Onion or Ashton Kutcher.”

Rather, Bloomberg will show tweets from companies, chief executives and other news-makers, in addition to certain economists and financial bloggers. Mr. Rooney cited the economist Nouriel Roubini and Paul Kedrosky, the investor and blogger, as examples.

It’s not uncommon these days for news to surface on Twitter, even before the wire services carry it. This week, the Securities and Exchange Commission outlined rules for disseminating corporate information via social media outlets like Twitter.

“It just seems like there’s been a tipping point where more companies are using Twitter and other social media to put out announcements,” said Ted Merz, news content business manager at Bloomberg. “That’s evidenced by what the S.E.C. put out.”

Enron’s Skilling Could Get Early Prison Release

Jeffrey K. Skilling, the former Enron chief executive serving a 24-year sentence for his role in the energy company’s collapse, could be released from prison early under a possible agreement with the government, according to a notice on the Justice Department’s Web site.

Since his 2006 conviction on charges of securities fraud, conspiracy and insider trading, Mr. Skilling has served jail time in federal prisons in Minnesota and now Colorado. He and his legal team have waged an aggressive appeal, repeatedly seeking to overturn his conviction on various grounds.

The notice, posted early Thursday, is required under a federal law mandating that the government notify victims of a crime of any changes related to a defendant’s sentence.

“The Department of Justice is considering entering into a sentencing agreement with the defendant in this matter,” reads the notice, which was earlier reported on by CNBC. “Such a sentencing agreement could restrict the parties and the Court from recommending, arguing for, or imposing certain sentences or conditions of confinement.”

If the government decides to enter into an agreement to shorten Mr. Skilling’s sentence, it is unclear by how much it would be reduced. And any reduction would require the approval of Judge Sim Lake of Federal District Court in Houston, who presided over Mr. Skilling’s trial. (Kenneth Lay, the company’s chairman, was also found guilty but died just over a month after the trial.)

Mr. Skilling and Mr. Lay became public symbols of executive wrongdoing and financial malfeasance after the tech and telecom boom of the late 1990s turned to bust. Enron was at the center of a wave of corporate accounting scandals that emerged out of the stock market collapse. The executives, along with other prominent businessmen like Bernard Ebbers of WorldCom and John Rigas of Adelphia, were convicted by juries and received lengthy prison terms for, among other crimes, lying to their investors about the health of their companies.

After the Enron and WorldCom collapses in late 2001 punctuated the end of the historic bull market, the Bush White House took an aggressive stance on prosecuting white-collar crime. President Bush, who counted Mr. Lay as a friend and had considered him for a post in his administration, created the Corporate Fraud Task Force, which secured nearly 1,300 corporate fraud convictions, including cases against more than 200 chief executives, company presidents and chief financial officers, according to a 2008 report.

An Enron Task Force was also formed to prosecute crimes specifically connected to the energy company’s bankruptcy. The conviction of Mr. Skilling was one of about 16 that the Justice Department secured against former Enron executives, several of whom cooperated with the government and testified at Mr. Skillilng’s trial.

Mr. Skilling’s appeal gained traction with his argument that the government had relied on a dubious legal theory that Mr. Skilling deprived others of his “honest service.” In 2010, the Supreme Court called the use of the awkwardly written “honest services” law unconstitutionally vague and said his conviction was “flawed.”

But a federal appeals court subsequently ruled that the conviction was not tainted by the use of the theory and said there was “overwhelming evidence” that Mr. Skilling had conspired to commit fraud. Last year, the Supreme Court declined to hear Mr. Skilling’s appeal of the appeals court ruling.

But the federal appeals court also reiterated an earlier ruling that Mr. Skilling still needed to have his sentence re-calculated because Judge Lake had erred in his handling of another issue in the case. That re-sentencing was put on hold while the broader appeal wended its way through the courts.

Regulators Blamed in Foreclosure Review

A new report in Washington is placing blame on federal regulators and private consultants for a botched review of foreclosures. The Federal Reserve and the Office of the Comptroller of the Currency designed a flawed review process that the consultants mishandled, says a draft of the report by the Government Accountability Office, Ben Protess and Jessica Silver-Greenberg report in DealBook.

The Senate Banking Committee also plans to hold a hearing next week to examine the foreclosure review and other missteps at consultants like Promontory Financial and Deloitte & Touche, people with direct knowledge of the matter said. Regulators from the Fed and the Office of the Comptroller of the Currency are likely to testify at the hearing on April 11, according to DealBook. “Senator Sherrod Brown, the Ohio Democrat leading the inquiry, is expected to broadly question the quality and independence of consulting firms that are paid billions of dollars by the same banks they are expected to police.”

The concerns emerged when the consultants, under orders from regulators to see if homeowners had been wrongfully evicted, conducted an inefficient review of only a small fraction of foreclosed loans, ultimately leading regulators to cancel the review. “The Senate hearing comes at a difficult time, particularly for the consultants. Regulators at the Fed and the Comptroller of the Currency’s office are questioning the prudence of relying on consultants so heavily, according to government officials briefed on the matter.” The consultants have long enjoyed a privileged status in Washington; Promontory announced this week that it had hired Mary L. Schapiro, the former chairwoman of the Securities and Exchange Commission.

COHEN ON HIS PICASSO  |  It turns out that Steven A. Cohen’s purchase of Picasso’s “Le Rêve” from the casino magnate Stephen A. Wynn was completed in early November, before the insider trading case against Mr. Cohen’s hedge fund, SAC Capital Advisors, entered a serious phase. “The timing was bad,” Sandy Heller, Mr. Cohen’s art adviser, said on Wednesday. And what does the hedge fund titan himself think of the painting “When you stand in front of it, you’re blown away,” Mr. Cohen told DealBook.

The new details about the Picasso emerged as another legal headache developed for Mr. Cohen. A federal appeals court revived a lawsuit that Patricia Cohen, his ex-wife, had filed against him in 2009, accusing him of hiding millions of dollars in assets at the time of their divorce years earlier.

Without addressing the merits of the case, the United States Court of Appeals for the Second Circuit in Manhattan said the trial court judge had improperly dismissed it on the grounds that Ms. Cohen filed the suit after legal deadlines had passed. Among the allegations by Ms. Cohen is that SAC was a “racketeering scheme” that engaged in insider trading. A spokesman for SAC said that the “decades-old allegations by Mr. Cohen’s former spouse are patently false and entirely without merit.”

CONCERNS WITH A RISE IN BUSINESS LENDING  | 
A recent surge in banks lending to businesses “is starting to flash some warning signs,” DealBook’s Peter Eavis says. “The concern is that banks are making loans to businesses at rates that are so low that they may end up being unprofitable. A recent survey by the Federal Reserve shows that American banks are charging an average of just 2.83 percent on so-called commercial and industrial loans. That’s down from 3.4 percent a year earlier.”

ON THE AGENDA  | 
The Bank of Japan on Thursday announced an aggressive monetary easing effort. The European Central Bank and the Bank of England are also set to announce decisions on monetary policy. Janet L. Yellen, vice chairwoman of the Federal Reserve, speaks at an event of the Society of American Business Editors and Writers in Washington at 5 p.m. Steve Case, the AOL co-founder, is on CNBC at 2 p.m. Bill Gross of Pimco is on Bloomberg TV at 3:30 p.m.

A LEGAL SUCCESS FOR JPMORGAN  | 
A federal judge dealt a blow to a lawsuit accusing JPMorgan Chase of misleading investors in mortgage-backed securities. Judge Jed S. Rakoff dismissed claims from the Belgian-French bank Dexia, over losses on $1.6 billion of the investments, significantly limiting the potential legal bill in the case, Jessica Silver-Greenberg reports in DealBook. “The lawsuit was being closely watched on Wall Street, in part because it could provide a window into another high-stakes suit facing the industry. In 2011, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, accused 17 banks of selling $200 billion of dubious mortgage securities to the housing finance giants. At least 20 of the securities at issue were also included in the Dexia case, according to an analysis of court records.â

Mergers & Acquisitions »

Dish Network Raises $2.3 Billion of Debt  |  The company said it might use the proceeds for “wireless and spectrum-related strategic transactions.”
REUTERS

TPG and Madison Dearborn Said to Vie for Wealth Manager  |  The two private equity firms are “the two finalists” bidding for the wealth management company National Financial Partners, according to Reuters.
REUTERS

AstraZeneca Buys American Biotechnology Company  | 
REUTERS

INVESTMENT BANKING »

And Then There Were Two  |  Gary Cohn, president of Goldman Sachs, says his firm and JPMorgan Chase are among the only big global banks that are not retrenching, Bloomberg News reports.
BLOOMBERG NEWS

Uncovering the Human Factor in Risk Management Models  |  John Breit, the former top risk manager at Merrill Lynch, says that mathematical models fail because they don’t account for human frailty, Jesse Eisinger of ProPublica writes in his column, The Trade.
The Trade »

Moscow Tries to Reinvent Itself as Financial Hub  |  Moscow is trying yet again to become a major financial center, but finds itself competing for business with other regional rivals like Warsaw. The city’s government faces an uphill challenge, as midsize companies in neighboring Ukraine or other former Soviet republics are turning elsewhere to tap the financial markets, Andrew E. Kramer reports in The New York Times.
NEW YORK TIMES

How to Measure a Successful Investor  |  “All of us, even the old guys like Buffett, Soros, Fuss, yeah - me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience,” Bill Gross of Pimco writes in an Investment Outlook. “Perhaps, however, it was the epoch that made the man as opposed to the man that made the epoch.”
PIMCO

JPMorgan Chase’s ‘Teflon C.E.O.’  | 
BLOOMBERG VIEW

Bank of America and Citigroup Name Rate-Trading Executives  | 
BLOOMBERG NEWS

Toronto-Dominion Announces C.E.O. Succession  |  Bharat B. Masrani, the head of the bank’s U.S. operation, will take over as chief executive of the Canadian giant when William E. Clark retires as president and chief executive in November 2014.
DealBook »

PRIVATE EQUITY »

Blackstone Said to Favor an I.P.O. for SeaWorld  |  The Blackstone Group may begin marketing an I.P.O. of SeaWorld Entertainment in the last two weeks of April, “after rejecting takeover bids for the theme-park operator, said a person familiar with the matter,” Bloomberg News reports.
BLOOMBERG NEWS

Cerberus Said to Tap Banks for I.P.O. of German Property Assets  | 
BLOOMBERG NEWS

Private Equity Giants Look to Attract Individual Investors  |  The Carlyle Group, the Blackstone Group and K.K.R. are lowering an investment threshold or offering new products in an effort to attract individuals, Bloomberg News writes.
BLOOMBERG NEWS

Rubenstein Warns Over Cyprus  |  “Cyprus is 0.2 percent of the E.U.’s gross domestic product so it’s insignificant. The real thing that has resonated around the world is that for the first time, people realized that governments could come in and wipe out their bank accounts,” David Rubenstein, co-chief executive of the Carlyle Group, said at a Thomson Reuters event.
REUTERS

HEDGE FUNDS »

As Assets Shrink, Investment Firm Moves to Liquidate  |  Once managing $14.45 billion, Stark Investments, which is based in Wisconsin, is winding down its hedge funds, according to Absolute Return.
ABSOLUTE RETURN

Harvard’s Investment Chief Expresses Confidence  |  Reuters reports: “Even as many investors move into index funds, Harvard University is confident that it can keep posting above-average returns with actively managed investments, the head of the school’s investment arm said on Wednesday.”
REUTERS

I.P.O./OFFERINGS »

With a Phone, Facebook’s International Push  |  Facebook is expected to introduce a phone on Thursday, as part of an effort to make money from users in emerging markets, The New York Times reports.
NEW YORK TIMES

Zynga Introduces Gambling in Britain  |  Zynga’s stock price rose substantially on Wednesday after the company began to allow residents of Britain to gamble with real money online.
TECHCRUNCH

Shares of Moleskine Fall Modestly in Trading Debut  |  Shares of the vintage notebook company rose in trading in Milan on Wednesday as much as 3.9 percent before falling back slightly to close at 2.28 euros a share, down 0.87 percent from its offering price.
DealBook »

VENTURE CAPITAL »

A League Table for Apps  |  “The Billboard of the mobile era, the app charts are something all technology investors should follow to understand who is up and who is down in the smartphone age,” The Wall Street Journal’s Heard on the Street column writes.
WALL STREET JOURNAL

LEGAL/REGULATORY »

German Authorities Are Said to Investigate Deutsche Bank  |  The Bundesbank is sending a team to New York next week to look into allegations that Deutsche Bank hid billions of dollars in losses to avoid a potential bailout during the financial crisis, according to people with direct knowledge of the matter.
DealBook »

Former Goldman Trader Pleads Guilty to Wire Fraud  |  Matthew M. Taylor admitted to fabricating trades to conceal a risky position that led to about $120 million in losses for the bank.
DealBook »

Report Faults ‘at All Costs’ Attitude at Barclays  |  The push to change Barclays from a predominantly British retail bank to a global financial giant created a culture that put profits before customers, an independent review has found.
DealBook »

Barclays’ Need for a Culture Change  |  Changing the banking culture at Barclays will take time and will require perseverance, Dominic Elliott of Reuters Breakingviews writes. It will also require deftness of touch.
REUTERS BREAKINGVIEWS

In Russia, Searching for Irish Billionaire’s Assets  |  The New York Times reports: “The Irish Bank Resolution Company is working with one of Russia’s largest banks to help find and seize assets in the former Soviet Union that belong to Sean Quinn, a bankrupt Irish billionaire who was once Ireland’s richest man.”
NEW YORK TIMES

Metro New York Banks to Merge

Provident New York Bancorp said on Thursday that it would acquire Sterling Bancorp for $344 million in stock.

The deal would combine two metropolitan New York banks that serve small-to-middle market commercial clients and consumers. The merged bank will be known as Sterling National Bank.

Under the terms of the deal, Sterling shareholders will receive 1.2625 shares of Provident for every share. Based on Provident’s closing stock price on Wednesday, that value of $11.12 represents a premium of 11 percent to Sterling’s closing stock price on Wednesday.

The acquisition of Sterling, which was founded in New York in 1929, is the most significant deal for Provident since its 2004 takeover of Warwick Community Bancorp for $147 million. Provident, based in Montebello in Rockland County, New York, was founded in 1888.

The two banks had combined pro forma revenue of $257 million last year. Together, they will have nearly $7 billion in assets.

Jack L. Kopnisky, president and chief executive of Provident New York Bancorp will be C.E.O. of the combined company, while Louis J. Cappelli, Sterling Bancorp’s chairman and chief executive, will be chairman.

Bank of America Merrill Lynch, Credit Suisse and the law firm Wachtell, Lipton, Rosen & Katz advised Provident. JPMorgan Chase, Keefe Bruyette & Woods and the law firm Sullivan & Cromwell advised Sterling.<>

During the merger talks, Provident was given the code name “pepper,” while Sterling was â€" you guessed it â€" “salt.”

Metro New York Banks to Merge

Provident New York Bancorp said on Thursday that it would acquire Sterling Bancorp for $344 million in stock.

The deal would combine two metropolitan New York banks that serve small-to-middle market commercial clients and consumers. The merged bank will be known as Sterling National Bank.

Under the terms of the deal, Sterling shareholders will receive 1.2625 shares of Provident for every share. Based on Provident’s closing stock price on Wednesday, that value of $11.12 represents a premium of 11 percent to Sterling’s closing stock price on Wednesday.

The acquisition of Sterling, which was founded in New York in 1929, is the most significant deal for Provident since its 2004 takeover of Warwick Community Bancorp for $147 million. Provident, based in Montebello in Rockland County, New York, was founded in 1888.

The two banks had combined pro forma revenue of $257 million last year. Together, they will have nearly $7 billion in assets.

Jack L. Kopnisky, president and chief executive of Provident New York Bancorp will be C.E.O. of the combined company, while Louis J. Cappelli, Sterling Bancorp’s chairman and chief executive, will be chairman.

Bank of America Merrill Lynch, Credit Suisse and the law firm Wachtell, Lipton, Rosen & Katz advised Provident. JPMorgan Chase, Keefe Bruyette & Woods and the law firm Sullivan & Cromwell advised Sterling.

During the merger talks, Provident was given the code name “pepper,” while Sterling was â€" you guessed it â€" “salt.”

Bertelsmann Confirms Plans to Sell Stock in RTL

The German media conglomerate Bertelsmann confirmed plans on Thursday to raise money for acquisitions by selling stock in RTL, the biggest commercial broadcaster in Europe.

Bertelsmann, which currently controls 92 percent of RTL, said it planned to reduce its ownership to as little as 75 percent through a public stock offering and private sales to institutional investors. The company said it planned to sell RTL shares on the Frankfurt Stock Exchange “before the summer,” adding to existing listings in Luxembourg and Brussels, where RTL is thinly traded.

No price was given, but Ian Whittaker, an analyst at Liberum Capital in London, estimated that at current market prices, the sale would raise €2 billion to €2.2 billion, or $3 billion to $3.3 billion.

Thomas Rabe, chief executive of Bertelsmann, told reporters last month that Bertelsmann planned to raise money to fuel an expansion in digital media and developing markets, which are growing faster than the company’s core businesses in Europe.

RTL, which owns television channels and radio stations in many European countries, including Germany, France and the Netherlands, has been Bertelsmann’s cash cow for years, but broadcasting is a slow-growing business.

RTL does, however, also own a television production house that Mr. Rabe has identified as a key source of future growth â€" Fremantle Media, the television production house behind shows like “American Idol” and “The X Factor.”

“We have resolved to make Bertelsmann more growth-oriented, more digital and more international in the coming years,” Mr. Rabe said at a news conference in Berlin as Bertelsmann announced its 2012 financial results last month. At the time, the company, which is privately held by the Mohn family, reported sales growth of 4.5 percent, to €16.1 billion.

One driver of that growth, Mr. Rabe said, was the “Fifty Shades of Grey” book series, published by a Bertelsmann unit, Random House. Bertelsmann recently moved to bolster its book publishing operations by agreeing to merge Random House with Penguin, which is owned by Pearson, a British media company. The companies are still waiting for regulatory clearance in Europe to complete that deal.

Another potential growth area identified by Mr. Rabe is Bertelsmann’s music arm, BMG, which manages the rights to songs by artists like Duran Duran and Johnny Cash but does not operate in the troubled record label business. Bertelsmann this week announced that it had taken over full control of BMG by buying a 51 percent stake from Kohlberg Kravis Roberts, a private equity firm.

Mr. Rabe has said the company plans to spend as much as €3 billion on acquisitions over the next three years. Instead of using it all for one big purchase, he told reporters in Berlin, Bertelsmann would prefer to do a number of medium-size deals.

Other areas of growth, he added, include education, professional publishing and the Fremantle content production business, prompting considerable speculation among analysts about possible takeover targets.

“They clearly don’t want to use all their firepower at once,” Mr. Whittaker said. “There are plenty of niches in digital. If you look at what Axel Springer has done, that should give you a pretty good indication.”

Axel Springer, a German newspaper publisher, has expanded its digital operations by buying medium-size Internet businesses like SeLoger and AuFeminin in France.

While Mr. Rabe last year raised the possibility of an initial public offering of Bertelsmann stock, he said in March that this option was now “off the table for the foreseeable future.” In January, Bertelsmann gave the first indication that it was instead weighing the possibility of reducing its stake in RTL.

A version of this article appeared in print on April 5, 2013, in The International Herald Tribune.

German Authorities Are Said to Investigate Deutsche Bank

PARIS â€" The German central bank is investigating allegations that Deutsche Bank hid billions of dollars in losses to avoid a potential bailout during the financial crisis, people with direct knowledge of the matter said on Thursday.

The Bundesbank is sending a team to New York next week to look into the allegations, the people said, noting that while the bank was obligated to look into the matter, there was no certainty that the investigation would result in any enforcement measures. The people spoke on condition of anonymity because they were not authorized to speak publicly about the sensitive legal matter.

The investigation stems from allegations that the German lender understated the value of credit derivatives positions beginning in 2007 that were worth as much as $130 billion in so-called notional terms.

The financial positions came under severe stress at the height of the financial crisis, when many complex derivatives could not be traded at all. Had the position been properly reported, according to the allegations, Deutsche Bank would have needed a bailout from the German government. One of the country’s small lenders, Commerzbank, received 18.2 billion euros, or $23.3 billion, in taxpayer funds in 2009.

In contrast, Deutsche Bank has avoided the stigma of a bailout during the financial crisis. The German firm is expected to argue that its accounting at the time was in line with industry standards, and that its external auditors signed off on it.

One of Deutsche Bank’s former employees, a quantitative risk analyst named Eric Ben-Artzi, had reported the alleged abuses to the U.S. Securities and Exchange Commission through the regulator’s new whistle-blower program. Mr. Ben-Artzi is also suing the bank, claiming wrongful dismissal, and stands to gain financially if the bank is fined.

News of the Bundesbank’s involvement was reported earlier by The Financial Times. Shares of Deutsche Bank were trading higher in Frankfurt on Thursday.

Ute Bremers, a spokeswoman for the German central bank, said in a statement that the central bank did not comment on individual investigations.

‘‘You may assume that supervisors always investigate allegations that have been raised in order to verify their validity,” she added. “This is the task of banking supervisors.’’

Deutsche Bank declined to comment. Ronald Weichert, a bank spokesman in Frankfurt, referred to a December statement that noted the allegations ‘‘have been the subject of a careful and thorough investigation, and they are wholly unfounded.’’

The people making the allegations, the statement said, had ‘‘no personal knowledge of key facts and information.’’

‘‘We have and will continue to cooperate fully with our regulators on this matter,’’ the Deutsche bank statement said.

Deutsche Bank surprised investors on Jan. 31 by reporting a net loss of $3 billion for the fourth quarter of 2012. The loss was a result in part to an impairment of 1 billion euros, or $1.3 billion, that had been set aside to cover legal bills and investigations, including those stemming from accusations that Deutsche Bank had joined other global banks in manipulating the London interbank offered rate, or Libor.