Herbalife Ties to ‘Work From Home’ Promoters May Draw New Scrutiny

Entities that promote “work from home” opportunities could be a new source of scrutiny for Herbalife, the nutritional products company that has become the subject of a pitched battle on Wall Street.

The Federal Trade Commission has received scores of complaints from people who paid money to operations with names like Income At Home and Online Business Systems, according to materials the agency released under the Freedom of Information Act.

In many of the complaints, consumers who contacted such companies said they discovered at a later stage that they were being recruited to sell Herbalife products, an opportunity many did not wish to pursue.

“I have absolutely no desire to buy and/or sell Herbalife products,” wrote a person from Amarillo, Tex., who made a complaint about Income At Home last year. “I was looking for work that I can do online to earn money since I was recently laid off and have no income to devote to buying products that I don’t want or need.”

The complaints could further stoke the fierce debate over Herbalife’s business practices. They suggest that members of the company’s sales network commonly used the work-from-home entities to recruit new members. And, in a recent move that the company has not fully explained, Herbalife in February told its salespeople that they could no longer use services provided by an entity frequently mentioned in the complaints.

Herbalife has been in the spotlight since the hedge fund manager William A. Ackman called the company a pyramid scheme and took a $1 billion investment position betting that the stock price of the company would collapse.

Mr. Ackman has called on the Federal Trade Commission to investigate the company, and his firm Pershing Square was behind the Freedom of Information Act request that led to the release of the complaints against the entities linked to Herbalife. The F.T.C. confirmed that it had released the complaints. It removed the names of the consumers in the complaints.

In total, the agency in March released 113 complaints relating to work-at-home type businesses. Over 100 of the complaints mention Herbalife in comments that detail the grievances. Herbalife cautions against reading too much into the F.T.C. complaints.

“For a company of our size, we have had a relatively low number of complaints to the F.T.C,” Julian Cacchioli, a company spokesman, said in an e-mail. He also stated that the work-at-home entities, “do not work on behalf of Herbalife and the practices are not condoned or encouraged by Herbalife.”

Still, the complaints could help regulators better understand how Herbalife recruits â€" and how it generates revenue. The company sells its shakes and teas through a network of recruited salespeople and other individuals who do not officially work for the company.

Herbalife says there is genuine and strong demand both inside and outside its network for its products. But the company’s critics say it primarily makes money from selling products to new recruits, most of whom then fail to make much money from selling their Herbalife goods.

The distinction is crucial.

Regulators may target an entity that relies heavily on recruitment for generating revenue. Such firms have often turned out to be pyramid schemes that collapse when they eventually run out of a sufficient number of new entrants into the scheme. “As always, the agency cannot say whether it is or is not investigating a company,” said Frank Dorman, a spokesman for the F.T.C.

Herbalife has repeatedly rejected Mr. Ackman’s assertions and says that for over 30 years its business has benefited salespeople and consumers.

The complaints suggest that individuals, visiting Web sites and listening to ads on talk radio, were invited to buy information on how to start an online business. One person was listed in many of the complaints: Shawn Dahl, a member of the company’s so-called Chairman’s Club, a senior group of salespeople. He has promoted Income At Home and Online Business Systems, both of which have been used to recruit people to Herbalife.

Many of the people assert that they did not know they were going to be asked to join the Herbalife network. When they found out, many said they had trouble getting refunds. “Rather than refunding my $9.95, the company charged me an additional $39.95,” wrote a person from Santa Cruz, Calif., in February.

This is the second batch of complaints relating to Herbalife. In January, the F.T.C. released 192 complaints against Herbalife, also under a Freedom of Information Act request. By reviewing the F.T.C. numbers attached to both sets of complaints, it appears that three in the latest group were also in the earlier release. This suggests the agency has so far released around 300 complaints relating to Herbalife, which were made over five years.

Mr. Cacchioli, the Herbalife spokesman, said the number of complaints was quite low for that time period for a company of Herbalife’s size. He added, “We take complaints seriously and stand by our record of doing right by our distributors and consumers of our products.”

Still, it’s not clear why Herbalife has distanced itself from the major work-at-home entities.

In February, the company appeared to sever ties with Centurion Media Group, a Barbados-based company that owns the Income At Home Web site. Herbalife told its United States sales network that they, “may not purchase, sell, endorse, recommend, promote or use anything from Centurion Media Group.”

Herbalife also said its American network could no longer use Online Business Systems for sales leads and advertising.

Since then, Mr. Cacchioli said the company had gone further. As of June 30, Herbalife will prohibit its network members from selling any sales leads. Mr. Cacchioli did not detail any specific problems that Herbalife had with Centurion Media Group and Online Business Systems. But he said that network members could use third-party firms only if they complied with Herbalife’s rules and any applicable laws.

One of Herbalife’s requirements is that such firms have transparency of ownership, said Mr. Cacchioli.

Centurion’s Web site gives no indication who its owners are and does not provide a phone number. It lists a contact e-mail address, but messages seeking comment did not get a response.

Herbalife Ties to ‘Work From Home’ Promoters May Draw New Scrutiny

Entities that promote “work from home” opportunities could be a new source of scrutiny for Herbalife, the nutritional products company that has become the subject of a pitched battle on Wall Street.

The Federal Trade Commission has received scores of complaints from people who paid money to operations with names like Income At Home and Online Business Systems, according to materials the agency released under the Freedom of Information Act.

In many of the complaints, consumers who contacted such companies said they discovered at a later stage that they were being recruited to sell Herbalife products, an opportunity many did not wish to pursue.

“I have absolutely no desire to buy and/or sell Herbalife products,” wrote a person from Amarillo, Tex., who made a complaint about Income At Home last year. “I was looking for work that I can do online to earn money since I was recently laid off and have no income to devote to buying products that I don’t want or need.”

The complaints could further stoke the fierce debate over Herbalife’s business practices. They suggest that members of the company’s sales network commonly used the work-from-home entities to recruit new members. And, in a recent move that the company has not fully explained, Herbalife in February told its salespeople that they could no longer use services provided by an entity frequently mentioned in the complaints.

Herbalife has been in the spotlight since the hedge fund manager William A. Ackman called the company a pyramid scheme and took a $1 billion investment position betting that the stock price of the company would collapse.

Mr. Ackman has called on the Federal Trade Commission to investigate the company, and his firm Pershing Square was behind the Freedom of Information Act request that led to the release of the complaints against the entities linked to Herbalife. The F.T.C. confirmed that it had released the complaints. It removed the names of the consumers in the complaints.

In total, the agency in March released 113 complaints relating to work-at-home type businesses. Over 100 of the complaints mention Herbalife in comments that detail the grievances. Herbalife cautions against reading too much into the F.T.C. complaints.

“For a company of our size, we have had a relatively low number of complaints to the F.T.C,” Julian Cacchioli, a company spokesman, said in an e-mail. He also stated that the work-at-home entities, “do not work on behalf of Herbalife and the practices are not condoned or encouraged by Herbalife.”

Still, the complaints could help regulators better understand how Herbalife recruits â€" and how it generates revenue. The company sells its shakes and teas through a network of recruited salespeople and other individuals who do not officially work for the company.

Herbalife says there is genuine and strong demand both inside and outside its network for its products. But the company’s critics say it primarily makes money from selling products to new recruits, most of whom then fail to make much money from selling their Herbalife goods.

The distinction is crucial.

Regulators may target an entity that relies heavily on recruitment for generating revenue. Such firms have often turned out to be pyramid schemes that collapse when they eventually run out of a sufficient number of new entrants into the scheme. “As always, the agency cannot say whether it is or is not investigating a company,” said Frank Dorman, a spokesman for the F.T.C.

Herbalife has repeatedly rejected Mr. Ackman’s assertions and says that for over 30 years its business has benefited salespeople and consumers.

The complaints suggest that individuals, visiting Web sites and listening to ads on talk radio, were invited to buy information on how to start an online business. One person was listed in many of the complaints: Shawn Dahl, a member of the company’s so-called Chairman’s Club, a senior group of salespeople. He has promoted Income At Home and Online Business Systems, both of which have been used to recruit people to Herbalife.

Many of the people assert that they did not know they were going to be asked to join the Herbalife network. When they found out, many said they had trouble getting refunds. “Rather than refunding my $9.95, the company charged me an additional $39.95,” wrote a person from Santa Cruz, Calif., in February.

This is the second batch of complaints relating to Herbalife. In January, the F.T.C. released 192 complaints against Herbalife, also under a Freedom of Information Act request. By reviewing the F.T.C. numbers attached to both sets of complaints, it appears that three in the latest group were also in the earlier release. This suggests the agency has so far released around 300 complaints relating to Herbalife, which were made over five years.

Mr. Cacchioli, the Herbalife spokesman, said the number of complaints was quite low for that time period for a company of Herbalife’s size. He added, “We take complaints seriously and stand by our record of doing right by our distributors and consumers of our products.”

Still, it’s not clear why Herbalife has distanced itself from the major work-at-home entities.

In February, the company appeared to sever ties with Centurion Media Group, a Barbados-based company that owns the Income At Home Web site. Herbalife told its United States sales network that they, “may not purchase, sell, endorse, recommend, promote or use anything from Centurion Media Group.”

Herbalife also said its American network could no longer use Online Business Systems for sales leads and advertising.

Since then, Mr. Cacchioli said the company had gone further. As of June 30, Herbalife will prohibit its network members from selling any sales leads. Mr. Cacchioli did not detail any specific problems that Herbalife had with Centurion Media Group and Online Business Systems. But he said that network members could use third-party firms only if they complied with Herbalife’s rules and any applicable laws.

One of Herbalife’s requirements is that such firms have transparency of ownership, said Mr. Cacchioli.

Centurion’s Web site gives no indication who its owners are and does not provide a phone number. It lists a contact e-mail address, but messages seeking comment did not get a response.

Herbalife Ties to ‘Work From Home’ Promoters May Draw New Scrutiny

Entities that promote “work from home” opportunities could be a new source of scrutiny for Herbalife, the nutritional products company that has become the subject of a pitched battle on Wall Street.

The Federal Trade Commission has received scores of complaints from people who paid money to operations with names like Income At Home and Online Business Systems, according to materials the agency released under the Freedom of Information Act.

In many of the complaints, consumers who contacted such companies said they discovered at a later stage that they were being recruited to sell Herbalife products, an opportunity many did not wish to pursue.

“I have absolutely no desire to buy and/or sell Herbalife products,” wrote a person from Amarillo, Tex., who made a complaint about Income At Home last year. “I was looking for work that I can do online to earn money since I was recently laid off and have no income to devote to buying products that I don’t want or need.”

The complaints could further stoke the fierce debate over Herbalife’s business practices. They suggest that members of the company’s sales network commonly used the work-from-home entities to recruit new members. And, in a recent move that the company has not fully explained, Herbalife in February told its salespeople that they could no longer use services provided by an entity frequently mentioned in the complaints.

Herbalife has been in the spotlight since the hedge fund manager William A. Ackman called the company a pyramid scheme and took a $1 billion investment position betting that the stock price of the company would collapse.

Mr. Ackman has called on the Federal Trade Commission to investigate the company, and his firm Pershing Square was behind the Freedom of Information Act request that led to the release of the complaints against the entities linked to Herbalife. The F.T.C. confirmed that it had released the complaints. It removed the names of the consumers in the complaints.

In total, the agency in March released 113 complaints relating to work-at-home type businesses. Over 100 of the complaints mention Herbalife in comments that detail the grievances. Herbalife cautions against reading too much into the F.T.C. complaints.

“For a company of our size, we have had a relatively low number of complaints to the F.T.C,” Julian Cacchioli, a company spokesman, said in an e-mail. He also stated that the work-at-home entities, “do not work on behalf of Herbalife and the practices are not condoned or encouraged by Herbalife.”

Still, the complaints could help regulators better understand how Herbalife recruits â€" and how it generates revenue. The company sells its shakes and teas through a network of recruited salespeople and other individuals who do not officially work for the company.

Herbalife says there is genuine and strong demand both inside and outside its network for its products. But the company’s critics say it primarily makes money from selling products to new recruits, most of whom then fail to make much money from selling their Herbalife goods.

The distinction is crucial.

Regulators may target an entity that relies heavily on recruitment for generating revenue. Such firms have often turned out to be pyramid schemes that collapse when they eventually run out of a sufficient number of new entrants into the scheme. “As always, the agency cannot say whether it is or is not investigating a company,” said Frank Dorman, a spokesman for the F.T.C.

Herbalife has repeatedly rejected Mr. Ackman’s assertions and says that for over 30 years its business has benefited salespeople and consumers.

The complaints suggest that individuals, visiting Web sites and listening to ads on talk radio, were invited to buy information on how to start an online business. One person was listed in many of the complaints: Shawn Dahl, a member of the company’s so-called Chairman’s Club, a senior group of salespeople. He has promoted Income At Home and Online Business Systems, both of which have been used to recruit people to Herbalife.

Many of the people assert that they did not know they were going to be asked to join the Herbalife network. When they found out, many said they had trouble getting refunds. “Rather than refunding my $9.95, the company charged me an additional $39.95,” wrote a person from Santa Cruz, Calif., in February.

This is the second batch of complaints relating to Herbalife. In January, the F.T.C. released 192 complaints against Herbalife, also under a Freedom of Information Act request. By reviewing the F.T.C. numbers attached to both sets of complaints, it appears that three in the latest group were also in the earlier release. This suggests the agency has so far released around 300 complaints relating to Herbalife, which were made over five years.

Mr. Cacchioli, the Herbalife spokesman, said the number of complaints was quite low for that time period for a company of Herbalife’s size. He added, “We take complaints seriously and stand by our record of doing right by our distributors and consumers of our products.”

Still, it’s not clear why Herbalife has distanced itself from the major work-at-home entities.

In February, the company appeared to sever ties with Centurion Media Group, a Barbados-based company that owns the Income At Home Web site. Herbalife told its United States sales network that they, “may not purchase, sell, endorse, recommend, promote or use anything from Centurion Media Group.”

Herbalife also said its American network could no longer use Online Business Systems for sales leads and advertising.

Since then, Mr. Cacchioli said the company had gone further. As of June 30, Herbalife will prohibit its network members from selling any sales leads. Mr. Cacchioli did not detail any specific problems that Herbalife had with Centurion Media Group and Online Business Systems. But he said that network members could use third-party firms only if they complied with Herbalife’s rules and any applicable laws.

One of Herbalife’s requirements is that such firms have transparency of ownership, said Mr. Cacchioli.

Centurion’s Web site gives no indication who its owners are and does not provide a phone number. It lists a contact e-mail address, but messages seeking comment did not get a response.

Penney Said to Hire Blackstone to Help Raise Cash

J.C. Penney has hired the Blackstone Group to help it raise much-needed cash, a person briefed on the matter said on Thursday, as the embattled retailer tries a turnaround after replacing its chief executive.

The long-struggling company is seeking to revive its battered fortunes with greater urgency after the disastrous 17-month tenure of Ron Johnson, the former head of Apple’s retail operations, as chief executive.

He was fired on Monday and replaced with Myron E. Ullman III, his predecessor on the job.

Mr. Ullman has returned to a retailer in even worse shape than when he left in late 2011. Once profitable, if having lost ground to rivals like Macy’s and Kohl’s, Penney is now deeply immersed in red ink.

And the future of an expansive â€" and expensive â€" overhaul that Mr. Johnson oversaw is now in question.

Analysts have estimated that Penney could burn through up to $1 billion this year. It is unclear how the company and Blackstone’s advisory arm will seek to raise the money, though potential options could include selling additional equity or some of the real estate that the retailer owns.

In a statement, a J.C. Penney spokeswoman acknowledged the hiring of “outside advisers” to help the retailer assess its financial options. “This will continue as part of the work now underway to develop a game plan for the company going forward,” the spokeswoman added, declining further comment.

News of Blackstone’s hiring was reported earlier by The Wall Street Journal online.

Penney Said to Hire Blackstone to Help Raise Cash

J.C. Penney has hired the Blackstone Group to help it raise much-needed cash, a person briefed on the matter said on Thursday, as the embattled retailer tries a turnaround after replacing its chief executive.

The long-struggling company is seeking to revive its battered fortunes with greater urgency after the disastrous 17-month tenure of Ron Johnson, the former head of Apple’s retail operations, as chief executive.

He was fired on Monday and replaced with Myron E. Ullman III, his predecessor on the job.

Mr. Ullman has returned to a retailer in even worse shape than when he left in late 2011. Once profitable, if having lost ground to rivals like Macy’s and Kohl’s, Penney is now deeply immersed in red ink.

And the future of an expansive â€" and expensive â€" overhaul that Mr. Johnson oversaw is now in question.

Analysts have estimated that Penney could burn through up to $1 billion this year. It is unclear how the company and Blackstone’s advisory arm will seek to raise the money, though potential options could include selling additional equity or some of the real estate that the retailer owns.

In a statement, a J.C. Penney spokeswoman acknowledged the hiring of “outside advisers” to help the retailer assess its financial options. “This will continue as part of the work now underway to develop a game plan for the company going forward,” the spokeswoman added, declining further comment.

News of Blackstone’s hiring was reported earlier by The Wall Street Journal online.

Penney Said to Hire Blackstone to Help Raise Cash

J.C. Penney has hired the Blackstone Group to help it raise much-needed cash, a person briefed on the matter said on Thursday, as the embattled retailer tries a turnaround after replacing its chief executive.

The long-struggling company is seeking to revive its battered fortunes with greater urgency after the disastrous 17-month tenure of Ron Johnson, the former head of Apple’s retail operations, as chief executive.

He was fired on Monday and replaced with Myron E. Ullman III, his predecessor on the job.

Mr. Ullman has returned to a retailer in even worse shape than when he left in late 2011. Once profitable, if having lost ground to rivals like Macy’s and Kohl’s, Penney is now deeply immersed in red ink.

And the future of an expansive â€" and expensive â€" overhaul that Mr. Johnson oversaw is now in question.

Analysts have estimated that Penney could burn through up to $1 billion this year. It is unclear how the company and Blackstone’s advisory arm will seek to raise the money, though potential options could include selling additional equity or some of the real estate that the retailer owns.

In a statement, a J.C. Penney spokeswoman acknowledged the hiring of “outside advisers” to help the retailer assess its financial options. “This will continue as part of the work now underway to develop a game plan for the company going forward,” the spokeswoman added, declining further comment.

News of Blackstone’s hiring was reported earlier by The Wall Street Journal online.

How Herbalife Was Drawn Into KPMG Insider Trading Inquiry

Herbalife wasn’t knowingly involved the insider trading scheme that revolved around a now-former KPMG partner. But the nutritional supplements company still played a major role all the same.

As part of a criminal complaint filed in court on Thursday, federal investigators detailed how the onetime KPMG executive, Scott I. London, improperly shared confidential information about a number of companies.

Though Mr. London began sharing information about Herbalife to his golfing buddy, Bryan Shaw, in early 2011, the focus of the complaint centers on a series of calls in mid-February this year.

As KPMG’s senior partner for the Southern California region, Mr. London was privy to Herbalife’s books â€" putting him in a unique position at a company whose stock sometimes swung dramatically because of public criticisms by the prominent investor William A. Ackman.

During a Feb. 14 call, Mr. London leaked elements of Herbalife’s latest earnings report, five days before the company was set to disclose them. In particular, the accountant said that not only were the results better than expected, but that his client planned to raise its financial guidance.

“The numbers are slightly better than the street’s estimates … and they are raising the guidance,” Mr. London told Mr. Shaw, according to the complaint.

On Feb. 19, the two men spoke as Mr. London was on his way to Herbalife’s offices to certify his client’s financial statements before they went out later that day. Mr. Shaw told his friend that he was willing to get back into things “and make both of us some money.”

The duo then chatted about how Mr. Ackman’s continued bet against the company would affect the stock’s movement. Mr. London expressed caution, given the volatility.

Later on, the two discussed how news that Carl C. Icahn had purchased a big slug of Herbalife shares had propelled the company’s stock price. Mr. Shaw lamented not knowing about the move, which “could’ve made some money.”

Mr. London replied, “Yeah, that would have been nice.”

The accountant then noted rumors swirling around the markets at the time about a potential leveraged buyout of Herbalife. “That is going to be where you make a ton of money … because, you know, we’ll know that,” he said.

Then he outlined a classic strategy of insider-trading schemes:

“What we oughta do is, when I know that it’s gonna start happening, what you do is you start just buying in small blocks, right, so it doesn’t draw attention and then, you know, then it doesn’t look unusual at all.”

Herbalife hasn’t disclosed any plans to take itself private, and given the current controversy may have a hard time finding a willing buyer.

In Push for Gender Equality, Breaking Down the Boardroom Door

Beth A. Stewart doesn’t mind making waves.

Last year, Ms. Stewart, who runs a search firm that specializes in female directors, helped stoke the debate over board diversity by taking aim at the giant social network Facebook. As the Internet company prepared to go public in a much-hyped debut, she worked behind the scenes on a campaign to publicize the lack of women on Facebook’s board. To bolster her effort, she enlisted a women’s advocacy group, which decided to stage a protest at Facebook’s offices in New York in April.

Facing pressure from a number of sources, Facebook in June named its first female director, the company’s chief operating officer, Sheryl Sandberg. The company has since added Susan Desmond-Hellmann, the chancellor at the University of California, San Francisco, to the nine-member board.

Ms. Stewart “is a very outspoken leader in addressing the lack of gender diversity on corporate boards,” said Janice Hester-Amey, a portfolio manager at the California State Teachers’ Retirement System, which also pressed for more women on the Facebook board. “One thing that stands out about her is, she’s inside the room already,” Ms. Hester-Amey added, referring to Ms. Stewart’s corporate board work.

Ms. Stewart, 56, is on a quest â€" for personal and professional reasons.

Two years ago, Ms. Stewart tried to find a new directorship after General Growth Properties emerged from bankruptcy and her service on its board ended. After a six-month search for a new role, she concluded “there was no demand for women” and decided to start her own business, Trewstar.

“I saw how difficult it was for a woman to become a director,” Ms. Stewart said. “I started this business because I saw a gap in the market, and I believe I have a different approach to the other alternatives out there.”

It’s a strategy born of experience.

A graduate of Wellesley College and Harvard Business School, she left Goldman Sachs in 1992 to focus on raising five children with her husband, Mikael Salovaara, a former partner at the investment bank. But she maintained a foot in the corporate world with her board positions.

In 1993, she was named to the board of General Growth, a mall operator and one of her clients at Goldman. Her board service ended in 2010 after the bankrupt company received an equity infusion from outside investors.

In the intervening years, she added three more corporate boards to her résumé: Imperial Parking, a parking lot manager; Avatar Holdings, a residential developer; and the used-car dealer CarMax. On a part-time basis from 2001 to 2009, Ms. Stewart also ran Storetrax.com, an Internet real estate company.

To build her business, Ms. Stewart is tapping her years of connections.

In 2011, she contacted the wife of a former Goldman colleague, whose children went to the same school as hers in suburban New Jersey. The woman served on the board of trustees at Cornell with Cheryl A. Francis, a board member at the investment research firm Morningstar.

In an initial phone call with Ms. Francis, Ms. Stewart pitched Trewstar’s approach of finding qualified women through her network. Ms. Francis said Morningstar wanted a director with financial services experience in the New York area, Ms. Stewart’s home base.

When Ms. Stewart eventually met with the head of Morningstar’s nominating and governance committee, Paul Sturm, she had several potential board candidates. On April 4, Morningstar disclosed the nomination of Ms. Stewart’s candidate for the board, Gail Landis, a retired founding partner of Evercore Asset Management.

“She gave us some great ideas,” Ms. Francis said. “They were people with tremendous backgrounds without prior board experience, and my assumption is we wouldn’t have seen them in a traditional search process.”

Ms. Stewart is undertaking a similar search for Electronic Arts.

At first, Ms. Stewart shared the common misperception that 98 percent of video game players were “young men in the man cave,” said Richard A. Simonson, a board member at the game maker. In reality, he said, women are one of the fastest-growing segments of gamers, a big reason Electronic Arts wanted to keep women as part of its board after the departure of two women directors.

“I was impressed by Beth’s unrelenting focus on women only, her energy, background, drive to do the job better than anyone, so I opened a few doors for her,” said Geraldine Laybourne, the founder of Oxygen Media and a former Electronic Arts director who put her in touch with Mr. Simonson.

The search has been delayed for two months as Electronic Arts works through management changes, including the departure of its chief executive. In the meantime, Ms. Stewart is in talks with five other companies about possible searches, and just received a third formal assignment from another, a large technology company. Ms. Stewart vows to contribute one quarter of her firm’s profit to “women-focused nonprofit organizations.”

As part of her diversity efforts, Ms. Stewart is also focused on education, including helping women navigate boardroom politics.

She recently co-hosted a dinner at the law firm Weil, Gotshal & Manges, covering a range of corporate governance topics for about 18 women directors. Over salmon and chicken, Ms. Stewart threw out examples of potential obstacles and encouraged the attendees to discuss possible responses.

Her point, she said, is “to brainstorm about specific blocking and tackling techniques to overcome the subtle resistance.” At the event, she asked what a female director should do when the chief executive, hearing a suggestion to add more women to a board, responds, “We already have two women.” Some attendees proposed alternatives, including discussing the issue in a more casual setting like a social event, or going around the chief executive to a powerful board member.

Ms. Stewart “posed a couple of hypotheticals about the kinds of things you run into when trying to do a search or have a discussion about bringing women on boards,” said Holly J. Gregory, one of the Weil, Gotshal lawyers who co-hosted the event with Ms. Stewart. “They’re very subtle objections, and the issue was, how do you respond without becoming defensive”

With her sometimes aggressive tactics in her broad efforts, Ms. Stewart understands she risks a backlash.

At the height of the Facebook campaign, she notified a Facebook official last year that a protest might be staged at a Harvard Business School commencement speech by Ms. Sandberg, unless Facebook publicly promised to add women to the board. Some Facebook officials were shocked and upset at what was taken as a threat against someone who is actually an advocate for women, said one person with knowledge of the incident.

“She can get very worked up, and that can frighten some people,” said Charlotte Laurent-Ottomane, executive director of the Thirty Percent Coalition, a group focused on gender diversity in boardrooms. “But she does bring people to the table.”

In September, Ms. Stewart met briefly in a conference room at Facebook headquarters in Menlo Park, Calif., to make peace with Ms. Sandberg. The Facebook executive said the board campaign had been a distraction, according to Ms. Stewart.

But Ms. Sandberg said that she, like Ms. Stewart, favored more women on boards as part of her goal of getting more women into upper management ranks. In a follow-up e-mail, Ms. Stewart said, she apologized for raising the possibility of the Harvard speech disruption. Ms. Sandberg has since offered positive suggestions and a possible candidate for another Trewstar search, Ms. Stewart said.

“I am willing to say the emperor has no clothes, which may offend some people,” Ms. Stewart said. “I take what I think is a more direct approach.”

In Push for Gender Equality, Breaking Down the Boardroom Door

Beth A. Stewart doesn’t mind making waves.

Last year, Ms. Stewart, who runs a search firm that specializes in female directors, helped stoke the debate over board diversity by taking aim at the giant social network Facebook. As the Internet company prepared to go public in a much-hyped debut, she worked behind the scenes on a campaign to publicize the lack of women on Facebook’s board. To bolster her effort, she enlisted a women’s advocacy group, which decided to stage a protest at Facebook’s offices in New York in April.

Facing pressure from a number of sources, Facebook in June named its first female director, the company’s chief operating officer, Sheryl Sandberg. The company has since added Susan Desmond-Hellmann, the chancellor at the University of California, San Francisco, to the nine-member board.

Ms. Stewart “is a very outspoken leader in addressing the lack of gender diversity on corporate boards,” said Janice Hester-Amey, a portfolio manager at the California State Teachers’ Retirement System, which also pressed for more women on the Facebook board. “One thing that stands out about her is, she’s inside the room already,” Ms. Hester-Amey added, referring to Ms. Stewart’s corporate board work.

Ms. Stewart, 56, is on a quest â€" for personal and professional reasons.

Two years ago, Ms. Stewart tried to find a new directorship after General Growth Properties emerged from bankruptcy and her service on its board ended. After a six-month search for a new role, she concluded “there was no demand for women” and decided to start her own business, Trewstar.

“I saw how difficult it was for a woman to become a director,” Ms. Stewart said. “I started this business because I saw a gap in the market, and I believe I have a different approach to the other alternatives out there.”

It’s a strategy born of experience.

A graduate of Wellesley College and Harvard Business School, she left Goldman Sachs in 1992 to focus on raising five children with her husband, Mikael Salovaara, a former partner at the investment bank. But she maintained a foot in the corporate world with her board positions.

In 1993, she was named to the board of General Growth, a mall operator and one of her clients at Goldman. Her board service ended in 2010 after the bankrupt company received an equity infusion from outside investors.

In the intervening years, she added three more corporate boards to her résumé: Imperial Parking, a parking lot manager; Avatar Holdings, a residential developer; and the used-car dealer CarMax. On a part-time basis from 2001 to 2009, Ms. Stewart also ran Storetrax.com, an Internet real estate company.

To build her business, Ms. Stewart is tapping her years of connections.

In 2011, she contacted the wife of a former Goldman colleague, whose children went to the same school as hers in suburban New Jersey. The woman served on the board of trustees at Cornell with Cheryl A. Francis, a board member at the investment research firm Morningstar.

In an initial phone call with Ms. Francis, Ms. Stewart pitched Trewstar’s approach of finding qualified women through her network. Ms. Francis said Morningstar wanted a director with financial services experience in the New York area, Ms. Stewart’s home base.

When Ms. Stewart eventually met with the head of Morningstar’s nominating and governance committee, Paul Sturm, she had several potential board candidates. On April 4, Morningstar disclosed the nomination of Ms. Stewart’s candidate for the board, Gail Landis, a retired founding partner of Evercore Asset Management.

“She gave us some great ideas,” Ms. Francis said. “They were people with tremendous backgrounds without prior board experience, and my assumption is we wouldn’t have seen them in a traditional search process.”

Ms. Stewart is undertaking a similar search for Electronic Arts.

At first, Ms. Stewart shared the common misperception that 98 percent of video game players were “young men in the man cave,” said Richard A. Simonson, a board member at the game maker. In reality, he said, women are one of the fastest-growing segments of gamers, a big reason Electronic Arts wanted to keep women as part of its board after the departure of two women directors.

“I was impressed by Beth’s unrelenting focus on women only, her energy, background, drive to do the job better than anyone, so I opened a few doors for her,” said Geraldine Laybourne, the founder of Oxygen Media and a former Electronic Arts director who put her in touch with Mr. Simonson.

The search has been delayed for two months as Electronic Arts works through management changes, including the departure of its chief executive. In the meantime, Ms. Stewart is in talks with five other companies about possible searches, and just received a third formal assignment from another, a large technology company. Ms. Stewart vows to contribute one quarter of her firm’s profit to “women-focused nonprofit organizations.”

As part of her diversity efforts, Ms. Stewart is also focused on education, including helping women navigate boardroom politics.

She recently co-hosted a dinner at the law firm Weil, Gotshal & Manges, covering a range of corporate governance topics for about 18 women directors. Over salmon and chicken, Ms. Stewart threw out examples of potential obstacles and encouraged the attendees to discuss possible responses.

Her point, she said, is “to brainstorm about specific blocking and tackling techniques to overcome the subtle resistance.” At the event, she asked what a female director should do when the chief executive, hearing a suggestion to add more women to a board, responds, “We already have two women.” Some attendees proposed alternatives, including discussing the issue in a more casual setting like a social event, or going around the chief executive to a powerful board member.

Ms. Stewart “posed a couple of hypotheticals about the kinds of things you run into when trying to do a search or have a discussion about bringing women on boards,” said Holly J. Gregory, one of the Weil, Gotshal lawyers who co-hosted the event with Ms. Stewart. “They’re very subtle objections, and the issue was, how do you respond without becoming defensive”

With her sometimes aggressive tactics in her broad efforts, Ms. Stewart understands she risks a backlash.

At the height of the Facebook campaign, she notified a Facebook official last year that a protest might be staged at a Harvard Business School commencement speech by Ms. Sandberg, unless Facebook publicly promised to add women to the board. Some Facebook officials were shocked and upset at what was taken as a threat against someone who is actually an advocate for women, said one person with knowledge of the incident.

“She can get very worked up, and that can frighten some people,” said Charlotte Laurent-Ottomane, executive director of the Thirty Percent Coalition, a group focused on gender diversity in boardrooms. “But she does bring people to the table.”

In September, Ms. Stewart met briefly in a conference room at Facebook headquarters in Menlo Park, Calif., to make peace with Ms. Sandberg. The Facebook executive said the board campaign had been a distraction, according to Ms. Stewart.

But Ms. Sandberg said that she, like Ms. Stewart, favored more women on boards as part of her goal of getting more women into upper management ranks. In a follow-up e-mail, Ms. Stewart said, she apologized for raising the possibility of the Harvard speech disruption. Ms. Sandberg has since offered positive suggestions and a possible candidate for another Trewstar search, Ms. Stewart said.

“I am willing to say the emperor has no clothes, which may offend some people,” Ms. Stewart said. “I take what I think is a more direct approach.”

Former KPMG Partner Is Charged With Insider Trading

The payments came in various forms. There were envelopes of $100 bills wrapped in $10,000 bundles. There were tickets to a Bruce Springsteen concert. There was a 2011 Rolex Cosmograph Daytona valued at $12,000.

Bryan Shaw, the owner and operator of a Los Angeles-area jewelry business, bestowed these gifts upon his longtime friend and golf buddy Scott I. London, a senior partner at the accounting giant KPMG. In return for such largesse, Mr. Shaw received secret information from Mr. London about KPMG clients, and earned more than $1 million illegally trading in the shares of publicly traded companies.

On Thursday, federal prosecutors filed criminal charges against Mr. London, laying bare a brazen two-year insider trading scheme. The Securities and Exchange Commission filed a parallel civil case against Mr. London and Mr. Shaw.

“London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,” said George S. Canellos, the acting director of enforcement at the S.E.C. Acting Director of the Division of Enforcement, in a statement.

Mr. London and Mr. Shaw have already acknowledged their misconduct in statements issued through their lawyers.

“I regret my actions in leaking nonpublic data to a third party,” said Mr. London, 50, of Agoura Hills, Calif., in a statement made on Tuesday. Mr. London is expected to be arraigned on Thursday afternoon at Federal District Court in Los Angeles.

Mr. Shaw, 52, of Lake Sherwood, Calif., said he had accepted “full and complete responsibility for what I have done.”

Indeed, Mr. Shaw began cooperating with the government in February after they confronted him with evidence of insider trading. He turned against his friend, recording telephone conversations and in-person meetings to help the authorities build a case against Mr. London.

Last month, Mr. Shaw participated in a sting operation to ensnare Mr. London. The F.B.I. provided Mr. Shaw with $5,000 cash, which was placed in manila envelope and then wrapped inside a black paper bag. Mr. Shaw met London in the parking lot outside of a Starbucks and handed him the bag. Federal agents took photographs of the exchange, one of which was included in the government’s complaint on Thursday.

Federal authorities opened up an investigation last July after the brokerage firm Fidelity raised red flags about activity in Mr. Shaw’s account. After Fidelity put Mr. Shaw’s account on hold, Mr. Shaw called Mr. London to express concern that they had been found out.

“Shaw said that London reassured him that there was no reason for concern, and explained that insider trading was like counting cards at a casino in Las Vegas - if you were caught they simply ask you to leave because they cannot prove it,” according to the government’s complaint.

Mr. London worked for nearly 29 years at KPMG, rising to a senior partner in the firm’s Los Angeles office, where he supervised more than 500 accountants and oversaw the audits for some of its most important clients. Over a two-year period, Mr. London secretly passed sensitive information to Mr. Shaw about a number of different KPMG clients, including Herbalife, the nutritional-supplement company; the footwear makers Skechers and Deckers Outdoor Corporation; and Pacific Capital Bancorp, the government said.

Citi’s Washington Push

Citigroup‘s chief executive, Michael Corbat, understands Washington’s importance.

On Wednesday the bank’s new boss cut the ribbon at a new branch in the nation’s capital. It’s not just any old location, but on K Street, home to the city’s legions of lobbyists. The potential symbolism is hard to avoid: that Citi may be about to get more engaged with Washington’s influence peddlers. Shareholders might like that - regulators perhaps not so much.

The event itself emphasized the new office’s elegance. It features lots of glass and clean lines, almost reminiscent of an Apple store. And it comes replete with high-tech features like digital media walls and environmentally friendly elements.

But a hulking bank with close to $2 trillion in assets and more than 4,600 branches around the globe doesn’t send its chief executive to open a new store. And it’s not as if its latest in Washington is the first of its kind to display all the new gadgetry. Citi has already built that into some of its so-called smart banking locations.

It’s the location that nails it. Many of the special interest groups hoping to persuade lawmakers and regulators of their cause base their hired guns on K Street. Some of that industry’s biggest names popped by to the invitation-only event, including Financial Services Forum’s chief executive, Rob Nichols, Financial Services Roundtable boss Tim Pawlenty and the Business Roundtable’s president, John Engler.

It’s hard to knock Mr. Corbat for wanting a little face time with them. Lawmakers and watchdogs wield more power - and are more inclined to use it - than in the past. So using any opportunity to be as plugged in to the Washington net as possible is good business. That should appeal to Citi’s shareholders, at least.

But it might not sit as well with regulators and politicians. They had to bail Citi out twice in the crisis - and the bank also stepped on many of the financial landmines of the previous two decades.

If nothing else, though, Mr. Corbat’s appearance is a reminder that large financial institutions don’t intend to let bureaucrats or lawmakers ravage their profits without a fight. Regulators should remain on their guard.

Daniel Indiviglio is Washington columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

As Big Investors Emerge, Bitcoin Gets Ready for its Close-Up

Cameron and Tyler Winklevoss have been many things in a short time: Olympic rowers. Nemeses of Mark Zuckerberg. Characters on “The Simpsons.” Now they can add a new label: bitcoin moguls.

The 31-year old identical twins have amassed since last summer what appears to be one of the single largest portfolios of the online currency that has caused such a stir in financial and technology circles.

An array of speculators have now bid up the price of the bitcoin to the point where the outstanding supply of the digital money was worth $1.3 billion at last count. The Winklevii â€" as they are popularly known â€" say they own nearly 1 percent of that, or some $11 million.

The decision by the brothers to go public with their position signals a new stage for what has been an experimental alternative to national currencies. Created in 2009 by a programmer or programmers known only by a pseudonym, the bitcoin world has been dominated by anonymous programmers and traders.

Now mainstream investments in the digital money are starting to emerge. On Thursday, a group of venture capitalists, including Andreessen Horowitz, announced that they were funding a bitcoin-related company, OpenCoin.

Other Silicon Valley venture firms, while not holding bitcoins, are starting to show interest in the technology. Tim Draper of the firm Draper Fisher Jurvetson put money into CoinLab, which is doing bitcoin-related projects. Tribeca Venture Partners announced this week that it was putting money into Coinsetter, a start-up trading platform for the currency.

Bitcoin is the new new thing but the question is whether it will end up in the same dustbin as Dutch tulips and Pets.com, or, as its backers believe, turn into a disruptive technology with the potential to revolutionize the global payments system.

The perils have been obvious over the last two days, as bitcoin has gone through its most volatile stretch ever, sinking from a high of $260 a bitcoin to a low of $105, before ending Wednesday around $175. On Thursday it was down again to $120 when one of the major online exchanges called a 12-hour halt on trading. The volatility has raised questions about whether bitcoin can even be called a currency.

“It’s not something I’d want to be involved in or have any investors’ money involved with,” said Steve Hanke, a professor specializing in alternative currencies at Johns Hopkins University. “To say highly speculative would be the understatement of the century.”

But the 6-foot-5 Winklevii were unfazed by the latest tumult. Indeed, the brothers said they used the low prices to buy more. They argue that bitcoin will have much further to soar once a broader audience sees its virtues: a unit of exchange that can be moved around the world at the click of a button without requiring any payments to Western Union or American Express.

“People say it’s a Ponzi scheme, it’s a bubble,” said Cameron Winklevoss. “People really don’t want to take it seriously. At some point that narrative will shift to ‘virtual currencies are here to stay.’ We’re in the early days.”

Other champions of bitcoin also believe that it could mark a new chapter in the history of money.

“Three eras of currency,” Chris Dixon, a partner at Andreesen Horowitz and well-known technology investor, recently wrote on a personal Web site. “Commodity based, e.g., gold; politically based, e.g., dollar; and math based, e.g., bitcoin.”

For those whose idea of money still involves greenbacks and metal coins, bitcoins do not exist in any explicit physical form. The creators wrote algorithms that allow only a finite number of bitcoins to be created â€" the count is currently around 11 million â€" with new coins “mined” by programmers who solve mathematical riddles.
The coins can then be bought and sold through upstart exchanges, and held in what are known as virtual wallets.

So far, few real companies accept bitcoins as payment, and the primary place they can be used is an online bazaar, known as Silk Road, where narcotics and weapons are the main wares for sale. But the currency’s believers see a future in which Starbucks and Amazon take bitcoins. For their part, the Winklevoss twins have used some of their bitcoin to pay for the services of a Ukrainian computer programmer who has worked on the site of their venture capital firm.

While bitcoin has amassed a cult following since its beginnings, it has set off a frenzy in recent weeks as the price spiked to $260 per bitcoin early Wednesday after trading at $35 at the beginning of March. Some of the credit for this surge is given to the banking crisis in Cyprus, which raised some questions about the viability of the euro currency.

“We have elected to put our money and faith in a mathematical framework that is free of politics and human error,” Tyler Winklevoss said.

Bitcoin is far from the first bet the brothers have made on an emerging technology. As students at Harvard College, the twins founded a social networking site, ConnectU, and enlisted their schoolmate, Mark Zuckerberg, to help them build the company. After Mr. Zuckerberg went off to start Facebook, the brothers sued him, accusing him of stealing their idea â€" a story that was dramatized in the movie “The Social Network.” The case was settled with the brothers being given $20 million in cash and Facebook shares that are now worth over $200 million.

They have parlayed that fortune into Winklevoss Capital Partners. Their first two investments were in Hukkster, a start-up shopping Web site and SumZero, an online community for professional money managers.

The brothers began dabbling in bitcoin last summer when the dollar value of a single coin was still in the single digits. In addition to the purchase of bitcoins, they also say they have invested in a bitcoin-related company, but declined to disclose which one. The currency itself exists as a string of letters and numbers. In order to keep their holdings secure from hackers, they have taken those codes off networked computers and saved them on small flash drives. They said they have put the drives in safe deposit boxes at banks in three different cities.

It’s hard to verify how the Winklevoss holdings compare with other bitcoin players given the anonymity of accounts, and the twins believe that some early users of the system probably have holdings that are at least as large.

A Maltese company, Exante, started a hedge fund that the company says has bought up about 82,000 bitcoins â€" or about $10 million as of Thursday â€" with money from wealthy investors. A founder of the fund, Anatoli Knyazev, said his main concern is hackers and government regulators, who have so far mostly left the currency alone.

These investments were all in an uncertain state on Thursday after the big price swings and the shutdown of trading on Mt. Gox, a Japan-based company that claims to handle 80 percent of all bitcoin trades. Mt. Gox said in a statement that the problems were a result of the currency’s popularity, making it impossible to process all the incoming orders. It added that it was not the victim of hackers but “instead victim of our own success!”

The Winklevoss brothers said that this week’s chaotic trading are only “growing pains” like those seen by other young technologies, and not enough to scare them away.

“It has been four years and it has yet to be discredited as a viable alternative to fiat currency,” said Tyler Winklevoss. “We could be totally wrong, but we are curious to see this play out a lot more.”

Bitcoin Reading List

• New York Magazine: The Bitcoin Apocalypse Is Nigh. By Kevin Roose (April 10, 2013)
• Medium: The Bitcoin Bubble and the Future of Currency. By Felix Salmon. (April 3, 2013)
• The Financial Times’s Alphaville blog: When memory becomes money; the story of Bitcoin so far. By Izabella Kaminska [subscription required] (April 3, 2013)
• The New Yorker: The Crypto Currency. By Joshua Davis [subscription required] (Oct. 10, 2011)
• NPR’s Planet Money: What Is Bitcoin By Jacob Goldstein and David Kestenbaum (Aug. 24, 2011)
• The New York Times: Speed Bumps on the Road to Virtual Cash. By Noam Cohen (July 3, 2011)

Foursquare Raises $41 Million — in New Debt

Apr 11th

Hey guys, Dennis here.

If you’ve ever met me, you know I get really excited about how all the technology we carry around will change the way we explore the world. When Naveen and I started Foursquare four years ago, it was to help build that future.

Today, I’m really happy to announce we’ve secured additional funding to help us realize that vision. We’ve raised $41 million - a combination of new investment from the Silver Lake Waterman growth debt fund, as well as convertible debt from all of our existing investors (Andreessen Horowitz, O’Reilly AlphaTech Ventures, Spark Capital, and Union Square Ventures).

The stuff we’re building takes a lot of work. Look at yesterday’s big update, for example. The most amazing thing about it is that it tells you interesting things around you, anywhere in the world, the second you open the app. That’s not easy. We have to crunch your 3,500,000,000 check-ins, layer your social data over it, semantically analyze our tens of millions of tips, and take a look at real-time activity around you. We do all that in under a second, all to recommend two or three places that are perfect for you.

To us, this is like when Google came and revolutionized web search. Suddenly, you could find things on the internet. The real world is the same way. Four years ago when we started Foursquare, it was really hard to discover a new retro arcade that opened up on a side street, or to make sure you weren’t overlooking the best dish on the menu, or to know a good friend was just around the corner. Sometimes, we think of Foursquare as having the ability to give people superpowers for exploring the real world.

But we’ve got a ton left to do. We’re building tools for local businesses to connect with their customers. We’re making search better, every single day. We’re building that location layer for the internet - the platform that all other companies use to power location in their apps. This takes time and a lot of work, and great investors.

So, today, thanks to our investors, the 1,300,000 businesses using Foursquare, and especially the 33,000,000 of you who have given us a try. Stay tuned… we’ve got a lot more coming in 2013 and beyond!

Hedge Funds Drop Campaign Against T-Mobile’s Bid for MetroPCS

The most outspoken opponents of T-Mobile USA’s bid for MetroPCS are backing off following an improvement in the takeover offer’s terms.

Both Paulson & Company and P. Schoenfeld Asset Management indicated on Thursday that they would support the revised proposal by T-Mobile’s parent, Deutsche Telekom.

Under the provisions of that new scheme, the combined company would cut the amount of debt it would assume by about $3.8 billion, and the interest rate on those borrowings would fall by about half a percentage point.

Deutsche Telekom also agreed to stay an investor in the combined company for 18 months instead of 6 months. The German telecommunications giant will hold onto a 74 percent stake, while current MetroPCS shareholders will keep a 26 percent stake.

While Paulson & Co. said that it needed to review MetroPCS’ proxy statement to make its final decision, the hedge fund said that it intended to vote for the sweetened proposal.

P. Schoenfeld said that it would drop its proxy solicitation campaign and support the new deal as well, even if the investment firm didn’t get everything it was looking for. Besides cutting the amount of debt and lowering the interest rate, the shareholder had recommended a bigger equity stake in the combined company for current MetroPCS investors.

But to the arbitrager, the newly revised deal is still a winner.

From P. Schoenfeld’s statement:

“While the revised transaction terms do not reflect all the improvements we were seeking, we feel our central goal of making the combined PCS/T-Mobile company more competitive and valuable for all shareholders, including Deutsche Telekom, resulted in obtaining superior value for PCS shareholders and believe that these revised terms are the best available alternative for PCS shareholders at this time.”

The two hedge funds, which together own about 12 percent of MetroPCS’ stock, had largely succeeded in drumming up opposition to the first bid by T-Mobile. People briefed on the matter said that preliminary vote tallies indicated that the original offer would have failed had it been put up to a vote on Friday.

How to Value Bausch & Lomb

The mooted value for Bausch & Lomb needs to be re-examined through fresh lenses. The private equity firm Warburg Pincus bought the eye care company for $3.7 billion at the peak of the buyout boom and has been reportedly seeking a valuation of up to $10 billion. Even after cleaning up problems with recalls and accounting, Bausch & Lomb isn’t worth a big premium to other similar companies. A figure like $8 billion makes more sense.

The company’s 2007 leveraged buyout always held more promise than most other debt-inflated deals of the era. Bausch & Lomb was too ugly for public markets. Several hundred consumers using its contact solution developed infections and sued the company. The Brazilian and Spanish units admitted to fiddling the books. Investors feared sales would dry up, and the valuation tumbled. Warburg Pincus opportunistically scooped up the company at less than two times sales.

Five years on, Bausch & Lomb has recovered. About two-thirds of the lawsuits have been settled and the accounting difficulties are behind it. Moreover, investors appear to be welcoming buyouts of the era and are broadly eager for new shares.

Nevertheless, rivals appear to have shied away from Bausch & Lomb’s $10 billion price tag, and fund managers would be wise to do the same. The vision and surgery businesses, which make up nearly 60 percent of sales, are mature. Its drugs unit has better prospects, but the company isn’t a pharmaceutical powerhouse.

At the reported price, Bausch & Lomb would be valued at 42 times earnings before interest and taxes. By contrast, Merck trades at 10 times and Johnson & Johnson at 16 times. Valuing revenue may be more appropriate for a company like Bausch & Lomb, which is still improving profitability. Applying a 15 percent discount to the blended enterprise value-to-sales multiples of Merck and J.&J. would make Bausch & Lomb worth a more reasonable $8 billion.

For Warburg Pincus, it just received $750 million of dividends from Bausch & Lomb. At $8 billion, its equity would be worth $4.3 billion. Combined, that would be a return on paper of almost three times its initial $1.7 billion investment. Holding out for too much would be myopic.

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

The Problem With Investment Banks, as Seen By a Bank

LONDON - As Jamie Dimon puts the final touches on JPMorgan Chase’s latest earnings to be published on Friday, the bank’s own analysts are raining on his parade.

In a report on the global investment banking industry, the firm’s analysts cut right to the chase.

Many of the world’s largest investment banks will likely offer investors paltry returns for the rest of the decade. And uncertainty caused by rising regulatory costs means investors should shy away from banks that combine complex trading activity with more mundane operations like retail banking. For the analysts, the investment advice is simple.

“We see Tier I investment banks as un-investable,” JPMorgan’s banking analysts wrote in a report to investors on Thursday. “The viability of running a global Tier I investment bank business as part of a universal banking business is starting to be put in question.”

The report singles out Goldman Sachs and Deutsche Bank as ones to avoid, and did not specifically say to shun JPMorgan. But the 300-page report will make for some uneasy reading for many of the firm’s senior managers.

The bank has championed its success as both a retail and investment bank, and has continued to report strong earnings during the financial crisis, despite a recent $6 billion trading loss from a bad bet on complex derivatives. (To avoid conflicts of interest, banks like JPMorgan have kept their analysts separated from their investment banking operations).

A spokesman for JPMorgan declined to comment.

JPMorgan’s banking analysts are wary of how a series of new, uncoordinated global banking regulation will hurt the future earnings of the world’s largest investment banks.

New capital requirements mean firms will need to hold more funds in reserve to cover potential losses on risky trading activity. Concern remains over how other rules like Dodd-Frank and Europe’s proposed cap on bank bonuses will be implemented. And a reduction in investment banking revenues because of the financial crisis will likely hit firms’ bottom lines.

All told, JPMorgan analysts expect the average return on equity, a measure of firms’ profitability, for top investment banks to fall to 9.6 percent after 2015, compared to 15 percent before the new regulation comes into effect.

“Our estimate of revenue impact for global investment banks from various regulations is 8.3 percent on average,” the JPMorgan report said.

In response to the expected regulatory changes, some banks have been cutting their losses by shrinking the investment banking units and focusing on more profitable businesses. Last year, the Swiss bank UBS announced that it would cut 10,000 jobs in its investment banking operations and promote its wealth management division. Local rival Credit Suisse also is looking to reduce costs and focus on its wealthy clients, while the British bank Barclays said earlier this year that it would lay off almost 4,000 employees as part of a major restructuring.

The analysis did advise buying some of the smaller banks like UBS, Credit Suisse & Julius Baer, which are less focused on investment banking and have large wealth management businesses. But for firms with sizable investment banking divisions, the JPMorgan analysts warn that shareholders are now demanding higher returns to compensate for the increased risks in the world’s financial markets.

Despite efforts to cut costs and shed risky financial liabilities from their balance sheets, banks will likely have to boost their profits to satisfy shareholder demands, including potentially through more job losses and reductions in pay, or face calls to offload the risky trading activity.

“The investment banking industry is not out of the woods yet,” said the JPMorgan analysts.

New PC Sales Data May Bolster Case for a Dell Sale

It is becoming harder to believe that a turnaround of Dell will be anything but messy â€" and shareholders may not want to stick around for that part.

A new report released on Wednesday by the International Data Corporation appears to bolster the company’s argument for going private, noting a steep drop in global personal computer sales in the first quarter this year.

The carnage was clear nearly across the board, with sales in the United States dropping 12.7 percent from the quarter a year earlier. Quarterly shipments reached their lowest level since 2006. Virtually all major computer makers have scrambled to cope with falling unit prices and the rise of tablets and smartphones as attractive alternatives to traditional desktops and laptops.

The bloodshed was especially noticeable at Dell, where global shipments contracted more than 10 percent worldwide and 14 percent in the United States. With its shipment of nine million units, the company claimed 11.8 percent of the overall market, again falling behind Hewlett-Packard and Lenovo.

I.D.C. attributed Dell’s problems to continued competition from an array of rivals and customer uncertainty over the company’s future path.

The report mirrors a trend Dell itself documented in its proxy statement last month. The thick document noted repeated instances of the company failing to meet its own projected financial targets for seven quarters.

Dell’s internal revenue estimates for the 2014 fiscal year fell to as low as $56 billion from $66 billion.

PC sales, according to the proxy, still account for more than half of Dell’s revenue despite a number of takeovers meant to bolster the size of its corporate services arm.

In presentations to the board explaining his rationale for what became a $24.4 billion take-private offer, company founder Michael S. Dell said that the necessary fixes would hammer the stock even more.

“Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk,” Dell disclosed in its proxy.

Still, shareholders like Southeastern Asset Management have argued that Mr. Dell’s bid is a lowball offer, citing a belief that the worst of the turnaround is over. Southeastern in particular has supported tentative rival bids from the Blackstone Group and Carl C. Icahn that would allow investors to hold onto a piece of the company through what’s known as a public stub.

Proponents of that deal structure may be heartened by I.D.C.’s noting that the company slowed its overall decline in shipments from previous quarters and achieved some growth in sales within the Asia region, excluding Japan.

I.D.C. itself appears more pessimistic about the overall prospects for the business of selling computers, however.

“Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,” David Daoud, I.D.C.’s research director for personal computing, said in a statement. “Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.”

Live Video: Panel on Efforts to Regulate Bank Consultants

U.S. Senate Live video from the Senate Banking Committee hearing.

The use of consultants, who are paid by the same banks they are expected to help reform, is being examined at a Senate Banking Committee hearing on Thursday. Senator Sherrod Brown, the Ohio Democrat leading the hearing, is examining whether regulators inappropriately “outsource” oversight like the foreclosure review to consultants like Deloitte & Touche and Promontory Financial Group.

Sinclair to Buy Fisher Communications

BALTIMORE, MD and SEATTLE, WA--(Marketwired - Apr 11, 2013) - Sinclair Broadcast Group, Inc. (NASDAQ: SBGI) ("Sinclair") and Fisher Communications, Inc. (NASDAQ: FSCI) ("Fisher") announced today that they have entered into a definitive merger agreement whereby Sinclair will acquire Fisher in a merger transaction valued at approximately $373.3 million.

Under the terms of the agreement, Fisher shareholders will receive $41.00 in cash for each share of Fisher common stock they own. The transaction represents a 44% premium to the closing price of Fisher common stock on January 9, 2013, the final trading day prior to Fisher announcing a review of strategic alternatives.

Fisher owns 20 television stations1 in eight markets, reaching 3.9% of U.S. TV households, and three radio stations in the Seattle market. Additionally, Fisher previously entered into an agreement to provide certain operating services for three TV stations, including two simulcasts, pending regulatory approval.

"We are excited to acquire Fisher and expand our coverage westward, especially in the two key markets of Seattle (DMA 12) and Portland (DMA 22)," commented David Smith, President and CEO of Sinclair. "Started in 1910, Fisher's history of operating television and radio stations in the northwest corner of the U.S. has played an important role in its communities and in producing high-quality local news. We look forward to expanding upon those traditions and improving the cash flow of the stations through the benefits that come with our scale."

"After conducting our review of potential strategic alternatives, the Board concluded this all-cash transaction was the best path to maximizing value for shareholders," said Paul A. Bible, Chairman of Fisher's Board of Directors.

"Sinclair is the largest independent TV broadcaster in the country, and we believe its commitment to the industry -- along with its greater scale and sizable resources -- will provide our stations, team members and business partners with new opportunities to flourish," said Colleen B. Brown, Fisher's President and CEO.

This transaction is subject to approval by the Federal Communications Commission ("FCC"), antitrust clearance, the affirmative vote of two-thirds of Fisher's outstanding shares and other customary conditions. The transaction is not conditioned on Sinclair obtaining financing or Fisher achieving or maintaining any financial or operational thresholds or metrics. The transaction is expected to close and fund during the third quarter of 2013, subject to closing conditions. Fisher has no long-term debt and is expected to have approximately $20 to $25 million of working capital at the time of the close. Sinclair expects to finance the purchase price through cash on hand, a bank loan and/or by accessing the capital markets.

Moelis & Company LLC served as financial advisor and White & Case LLP served as primary legal counsel for Fisher.

The Fisher television stations covered by the transaction are:

Â	Â	Â	Â	Â	Â	Â
Â	Â	Â	Â	Â	Â	Â
Station	Â	Affil.	Â	Market	Â	DMA2
KOMO	Â	ABC/This TV	Â	Seattle-Tacoma, WA	Â	12
KUNS	Â	Univision/Mundo Fox	Â	Seattle-Tacoma, WA	Â	12
KATU	Â	ABC/Me TV	Â	Portland, OR	Â	22
KUNP	Â	Univision/Mundo Fox	Â	Portland, OR	Â	22
KLEW	Â	CBS	Â	Spokane, WA	Â	73
KBOI	Â	CBS/CW	Â	Boise, ID	Â	111
KYUU	Â	CW	Â	Boise, ID	Â	111
KVAL	Â	CBS/This TV	Â	Eugene, OR	Â	121
KCBY	Â	CBS	Â	Eugene, OR	Â	121
KPIC	Â	CBS	Â	Eugene, OR	Â	121
KMTR3	Â	NBC/CW	Â	Eugene, OR	Â	121
KMCB3	Â	NBC	Â	Eugene, OR	Â	121
KTCW3	Â	NBC	Â	Eugene, OR	Â	121
KIMA	Â	CBS/CW	Â	Yakima-Pasco-Richland-Kennewick, WA	Â	123
KEPR	Â	CBS/CW	Â	Yakima-Pasco-Richland-Kennewick, WA	Â	123
KUNW	Â	Univision	Â	Yakima-Pasco-Richland-Kennewick, WA	Â	123
KVVK	Â	Univision	Â	Yakima-Pasco-Richland-Kennewick, WA	Â	123
KORX	Â	Univision	Â	Yakima-Pasco-Richland-Kennewick, WA	Â	123
KBAK	Â	CBS	Â	Bakersfield, CA	Â	126
KBFX	Â	FOX/This TV	Â	Bakersfield, CA	Â	126
KIDK	Â	CBS/FOX	Â	Idaho Falls-Pocatello, ID	Â	160
KXPI	Â	FOX	Â	Idaho Falls-Pocatello, ID	Â	160
Â					Â	Â
The Fisher radio stations covered by the transaction are:					Â	MSA2
Â					Â	Â
KOMO	Â	1000 AM (news)	Â	Seattle-Tacoma, WA	Â	13
KOMO	Â	97.7 FM (news)	Â	Seattle-Tacoma, WA	Â	13
KPLZ	Â	101.5 FM (contemporary)	Â	Seattle-Tacoma, WA	Â	13
KVI	Â	570 AM (talk)	Â	Seattle-Tacoma, WA	Â	13
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Investor Call:
The senior management of Sinclair will hold a conference call to discuss the acquisition of Fisher on Thursday, April 11, 2013, at 3:00 p.m. ET. After the call, an audio replay will be available at www.sbgi.net under "Investor Information." The press and the public will be welcome on the call in a listen-only mode. The dial-in number is 877-407-8033.

About Sinclair:
On a pro forma basis, assuming consummation of the Fisher transaction as well as the previously announced Barrington and COX transactions, Sinclair Broadcast Group, Inc., the largest and one of the most diversified television broadcasting companies, will own and operate, program or provide sales services to 134 television stations in 69 markets. Sinclair's television group will reach approximately 33.7% of U.S. television households and is affiliated with all major networks. Sinclair's television portfolio will include 29 FOX, 20 MNT, 21 CW, 19 ABC, 24 CBS, 14 NBC, 5 Univision, one independent and one Azteca station. Sinclair owns equity interests in various non-broadcast related companies. Sinclair regularly uses its website as a key source of company information which can be accessed at www.sbgi.net.

About Fisher Communications, Inc.:
Fisher Communications, Inc. is a Seattle-based communications company that owns and operates 13 full power television stations, 7 low power television stations, 3 owned radio stations and one managed radio station in the Western United States. Fisher also owns and operates Fisher Interactive Network, its online division (including over 120 online sites), and Fisher Pathways, a satellite and fiber transmission provider. For more information about Fisher, go to www.fsci.com.

Forward-Looking Statements:
Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actua results, performance or achievements of Sinclair or Fisher to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans," "increase," "forecast" and "guidance" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are based upon then-current assumptions and expectations and are generally forward-looking in nature and not historical facts. Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results are also forward-looking statements. There can be no assurance that the proposed acquisition of Fisher will occur as currently contemplated, or at all, or that the expected benefits from the transaction will be realized on the timetable currently contemplated, or at al! l. Additional risks and uncertainties relating to the proposed acquisition of Fisher include, but are not limited to, uncertainties as to the satisfaction of closing conditions to the acquisition, including timing and receipt of regulatory approvals, timing and receipt of approval by the shareholders of Fisher, the respective parties' performance of their obligations under the merger agreement relating to the acquisition, and other factors affecting the execution of the transaction. Other risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to, Sinclair's ability to promptly and effectively integrate the businesses of Fisher and Sinclair (if and when the acquisition of Fisher is completed), satisfaction of closing conditions to Sinclair's proposed acquisition of stations from Cox Media Group and Barrington Broadcasting Group, including timing and receipt of regulatory approvals and any required licese asset third party transactions, the successful implementation of Sinclair's small market strategy, any change in national and regional economic conditions, the competitiveness of political races and voter initiatives, successful integration of acquired television stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, future regulatory actions and conditions in the television stations' operating areas, competition from others in the broadcast television markets served by Sinclair or Fisher, volatility in programming costs, the effects of governmental regulation of broadcasting, industry consolidation, technological developments and major world news events.

A further list and description of important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in Sinclair's Annual Report on Form 10-K for the year ended December 31, 2012 and Fisher's Annual Report on Form 10-K for the year ended December 31, 2012, included under headings such as "Forward-Looking Statements," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," Sinclair's and Fisher's most recently filed Form 10-Q, and in other filings and furnishings made by Sinclair and Fisher with the SEC from time to time. Other unknown or unpredictable factors could also have material adverse effects on Sinclair's or Fisher's performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-loking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Sinclair and Fisher undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law.

Additional Information:
In connection with the meeting of Fisher shareholders to be held with respect to the proposed merger, Fisher plans to file with the SEC preliminary and definitive proxy statements and other relevant materials. The definitive proxy statement (when available) will be mailed to Fisher shareholders. INVESTORS AND SECURITYHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain a free copy of the proxy statement (when available) and other relevant documents filed by Fisher with the SEC from the SEC's website at http://www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC at Fisher' website at www.fsci.com by clicking on the "Investor Relations" link, then clicking on the "SEC Filings" link.

Fisher and its directors, executive officers and certain other employees may be deemed to be participants in the solicitation of proxies of Fisher shareholders in connection with the proposed merger. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of Fisher directors and executive officers by reading Fisher's proxy statement for its 2012 annual meeting of shareholders, which was filed with the SEC on April 9, 2012. Additional information regarding potential participants in such proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement and other relevant materials filed by Fisher with the SEC in connection with the proposed merger when they become available.

1 KUNP operates as a full and low power station.

2 DMA represents television designated market areas according to the Nielsen Company. The numbers in the column represent the ranking in terms of size of the DMA out of the 210 generally recognized DMAs in the United States. MSA represents radio metropolitan statistical areas according to Arbitron Inc.

3 Pending regulatory approval for Fisher to provide certain operating services.