JPMorgan Caught in Swirl of Regulatory Woes

Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.

The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.

The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.

In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say.

Mr. Dimon acknowledged in a recent letter to shareholders that “unfortunately, we expect we will have more” enforcement actions in “the coming months.” He apologized for letting “our regulators down” and vowed to “do all the work necessary to complete the needed improvements.”

Still, the broad regulatory scrutiny â€" at least eight federal agencies are investigating the bank â€" presents a threat to JPMorgan at a time when it is raking in record profits.

For executives, the bank’s transition from model citizen to problem child in the eyes of the government has been jarring. It has helped drive top managers out of the bank, and it could make a coming shareholder vote on whether to split the roles of chairman and chief executive an anxious test for Mr. Dimon, long the country’s most influential banker.

Given the bank’s strong earnings, investors are unlikely to pull out. Yet a growing number of shareholders say they are concerned about the regulatory problems.

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.

The 70-page document also took aim at a top bank executive, Blythe Masters. A seminal Wall Street figure, Ms. Masters is known for helping expand the boundaries of finance, including the development of credit default swaps, a derivative that played a role in the financial crisis.

The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.

It is unclear whether the agency will file an action against JPMorgan based on the investigators’ findings. A majority of the five-member commission must first endorse the case. If the regulator does proceed, it could fine the bank and Ms. Masters.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

JPMorgan has until at least mid-May to respond to the accusations in the document.

As the bank fights the energy investigation, it says it is trying to rectify other lingering compliance woes.

Recent departures from the bank, however, could complicate that effort. Frank J. Bisignano, the co-chief operating officer known for cleaning up JPMorgan’s troubled mortgage division after the 2008 financial crisis, announced his departure this week. Barry Koch, a senior lawyer with strong ties to law enforcement, is also expected to soon leave the bank, people close to Mr. Koch say.

Mr. Dimon’s meeting with the comptroller’s office last month further highlighted the bank’s challenges with regulators.

In the credit card investigation, people briefed on the case said the comptroller’s office had discovered that JPMorgan was relying on faulty documents when pursuing lawsuits against delinquent customers. The accusations, which are expected to prompt an enforcement action later this year, echo complaints that JPMorgan and rivals plowed through home foreclosures with little regard for accuracy.

In a separate investigation into JPMorgan’s relationship with Mr. Madoff, the comptroller’s office raised concerns that the company may have violated a federal law that requires banks to report suspicious transactions. Eventually, the people said, the agency could reprimand the bank for the potential oversight failures.

“We believe that the personnel who dealt with the Madoff issue acted in good faith,” Ms. Lemkau, the bank spokeswoman, said.

Some bank analysts also note that JPMorgan’s strong earnings could ameliorate concerns among its investors.

“As long as you’re making money, investors don’t care,” said Paul Miller, a managing director at FBR.

Regulators, however, increasingly do care. When the comptroller’s office sought documents in the Madoff case from JPMorgan, the bank declined, citing attorney-client privilege, according to bank employees. The dispute was then elevated to the Treasury Department’s inspector general, which oversees the comptroller’s office.

“The matter is pending,” said Richard Delmar, a counsel to the inspector general.

The Madoff case, authorities say, exposed a recurring problem at JPMorgan â€" what they say is its sometimes combative stance with regulators. In a recent report examining a $6 billion trading loss at the bank, Senate investigators faulted JPMorgan for briefly withholding documents from regulators. The trading loss has spawned several law enforcement investigations into the traders who created the faulty wager.

Mr. Dimon, who is not suspected of any wrongdoing, met this week with prosecutors and the F.B.I. to discuss the case, two people briefed on the investigation said.

A day before the Senate subcommittee released its report on the trading loss, JPMorgan received another ominous dispatch from Washington. On March 13, enforcement officials at FERC notified the bank that it planned to recommend an action over the power plant investigation.

JPMorgan is the latest big bank to face scrutiny from the energy regulator, which recently pursued actions against Barclays and Deutsche Bank. The cases reflect how the regulator has kept a more vigilant watch over the energy markets ever since the Enron fraud.

But Wall Street is fighting back against the new approach, casting the agency’s enforcement unit as overzealous and overreaching.

The JPMorgan case arose, according to the document, after the bank’s 2008 takeover of Bear Stearns gave the bank the rights to sell electricity from power plants in California and Michigan. It was a losing business that relied on “inefficient” and outdated technology, or as JPMorgan called it, “an unprofitable asset.”

Yet under “pressure to generate large profits,” the agency’s investigators said, traders in Houston devised a workaround. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in “excessive” payments to JPMorgan, the investigators said. The behavior had “harmful effects” on the markets, according to the document.

JPMorgan disputes the claims, arguing that its trading was legal.

“The staff is challenging a bidding strategy that was transparent and was in full compliance with the applicable rules,” said Ms. Lemkau, the bank’s spokeswoman. “We strongly disagree with the staff’s conclusions.”

For now, according to the document, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters “individually liable.” While Ms. Masters was “less involved in the day-to-day decisions,” investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies.

The bank, investigators said, then “planned and executed a systematic cover-up” of documents that exposed the strategy, including profit and loss statements.

In the March document, the government investigators also complained about what they said was obstruction by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the document said.

The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that “JPMorgan does not believe that it violated FERC’s policies.”

JPMorgan Caught in Swirl of Regulatory Woes

Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.

The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.

The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.

In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say.

Mr. Dimon acknowledged in a recent letter to shareholders that “unfortunately, we expect we will have more” enforcement actions in “the coming months.” He apologized for letting “our regulators down” and vowed to “do all the work necessary to complete the needed improvements.”

Still, the broad regulatory scrutiny â€" at least eight federal agencies are investigating the bank â€" presents a threat to JPMorgan at a time when it is raking in record profits.

For executives, the bank’s transition from model citizen to problem child in the eyes of the government has been jarring. It has helped drive top managers out of the bank, and it could make a coming shareholder vote on whether to split the roles of chairman and chief executive an anxious test for Mr. Dimon, long the country’s most influential banker.

Given the bank’s strong earnings, investors are unlikely to pull out. Yet a growing number of shareholders say they are concerned about the regulatory problems.

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.

The 70-page document also took aim at a top bank executive, Blythe Masters. A seminal Wall Street figure, Ms. Masters is known for helping expand the boundaries of finance, including the development of credit default swaps, a derivative that played a role in the financial crisis.

The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.

It is unclear whether the agency will file an action against JPMorgan based on the investigators’ findings. A majority of the five-member commission must first endorse the case. If the regulator does proceed, it could fine the bank and Ms. Masters.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

JPMorgan has until at least mid-May to respond to the accusations in the document.

As the bank fights the energy investigation, it says it is trying to rectify other lingering compliance woes.

Recent departures from the bank, however, could complicate that effort. Frank J. Bisignano, the co-chief operating officer known for cleaning up JPMorgan’s troubled mortgage division after the 2008 financial crisis, announced his departure this week. Barry Koch, a senior lawyer with strong ties to law enforcement, is also expected to soon leave the bank, people close to Mr. Koch say.

Mr. Dimon’s meeting with the comptroller’s office last month further highlighted the bank’s challenges with regulators.

In the credit card investigation, people briefed on the case said the comptroller’s office had discovered that JPMorgan was relying on faulty documents when pursuing lawsuits against delinquent customers. The accusations, which are expected to prompt an enforcement action later this year, echo complaints that JPMorgan and rivals plowed through home foreclosures with little regard for accuracy.

In a separate investigation into JPMorgan’s relationship with Mr. Madoff, the comptroller’s office raised concerns that the company may have violated a federal law that requires banks to report suspicious transactions. Eventually, the people said, the agency could reprimand the bank for the potential oversight failures.

“We believe that the personnel who dealt with the Madoff issue acted in good faith,” Ms. Lemkau, the bank spokeswoman, said.

Some bank analysts also note that JPMorgan’s strong earnings could ameliorate concerns among its investors.

“As long as you’re making money, investors don’t care,” said Paul Miller, a managing director at FBR.

Regulators, however, increasingly do care. When the comptroller’s office sought documents in the Madoff case from JPMorgan, the bank declined, citing attorney-client privilege, according to bank employees. The dispute was then elevated to the Treasury Department’s inspector general, which oversees the comptroller’s office.

“The matter is pending,” said Richard Delmar, a counsel to the inspector general.

The Madoff case, authorities say, exposed a recurring problem at JPMorgan â€" what they say is its sometimes combative stance with regulators. In a recent report examining a $6 billion trading loss at the bank, Senate investigators faulted JPMorgan for briefly withholding documents from regulators. The trading loss has spawned several law enforcement investigations into the traders who created the faulty wager.

Mr. Dimon, who is not suspected of any wrongdoing, met this week with prosecutors and the F.B.I. to discuss the case, two people briefed on the investigation said.

A day before the Senate subcommittee released its report on the trading loss, JPMorgan received another ominous dispatch from Washington. On March 13, enforcement officials at FERC notified the bank that it planned to recommend an action over the power plant investigation.

JPMorgan is the latest big bank to face scrutiny from the energy regulator, which recently pursued actions against Barclays and Deutsche Bank. The cases reflect how the regulator has kept a more vigilant watch over the energy markets ever since the Enron fraud.

But Wall Street is fighting back against the new approach, casting the agency’s enforcement unit as overzealous and overreaching.

The JPMorgan case arose, according to the document, after the bank’s 2008 takeover of Bear Stearns gave the bank the rights to sell electricity from power plants in California and Michigan. It was a losing business that relied on “inefficient” and outdated technology, or as JPMorgan called it, “an unprofitable asset.”

Yet under “pressure to generate large profits,” the agency’s investigators said, traders in Houston devised a workaround. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in “excessive” payments to JPMorgan, the investigators said. The behavior had “harmful effects” on the markets, according to the document.

JPMorgan disputes the claims, arguing that its trading was legal.

“The staff is challenging a bidding strategy that was transparent and was in full compliance with the applicable rules,” said Ms. Lemkau, the bank’s spokeswoman. “We strongly disagree with the staff’s conclusions.”

For now, according to the document, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters “individually liable.” While Ms. Masters was “less involved in the day-to-day decisions,” investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies.

The bank, investigators said, then “planned and executed a systematic cover-up” of documents that exposed the strategy, including profit and loss statements.

In the March document, the government investigators also complained about what they said was obstruction by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the document said.

The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that “JPMorgan does not believe that it violated FERC’s policies.”

JPMorgan Caught in Swirl of Regulatory Woes

Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.

The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.

The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.

In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say.

Mr. Dimon acknowledged in a recent letter to shareholders that “unfortunately, we expect we will have more” enforcement actions in “the coming months.” He apologized for letting “our regulators down” and vowed to “do all the work necessary to complete the needed improvements.”

Still, the broad regulatory scrutiny â€" at least eight federal agencies are investigating the bank â€" presents a threat to JPMorgan at a time when it is raking in record profits.

For executives, the bank’s transition from model citizen to problem child in the eyes of the government has been jarring. It has helped drive top managers out of the bank, and it could make a coming shareholder vote on whether to split the roles of chairman and chief executive an anxious test for Mr. Dimon, long the country’s most influential banker.

Given the bank’s strong earnings, investors are unlikely to pull out. Yet a growing number of shareholders say they are concerned about the regulatory problems.

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.

The 70-page document also took aim at a top bank executive, Blythe Masters. A seminal Wall Street figure, Ms. Masters is known for helping expand the boundaries of finance, including the development of credit default swaps, a derivative that played a role in the financial crisis.

The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.

It is unclear whether the agency will file an action against JPMorgan based on the investigators’ findings. A majority of the five-member commission must first endorse the case. If the regulator does proceed, it could fine the bank and Ms. Masters.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

JPMorgan has until at least mid-May to respond to the accusations in the document.

As the bank fights the energy investigation, it says it is trying to rectify other lingering compliance woes.

Recent departures from the bank, however, could complicate that effort. Frank J. Bisignano, the co-chief operating officer known for cleaning up JPMorgan’s troubled mortgage division after the 2008 financial crisis, announced his departure this week. Barry Koch, a senior lawyer with strong ties to law enforcement, is also expected to soon leave the bank, people close to Mr. Koch say.

Mr. Dimon’s meeting with the comptroller’s office last month further highlighted the bank’s challenges with regulators.

In the credit card investigation, people briefed on the case said the comptroller’s office had discovered that JPMorgan was relying on faulty documents when pursuing lawsuits against delinquent customers. The accusations, which are expected to prompt an enforcement action later this year, echo complaints that JPMorgan and rivals plowed through home foreclosures with little regard for accuracy.

In a separate investigation into JPMorgan’s relationship with Mr. Madoff, the comptroller’s office raised concerns that the company may have violated a federal law that requires banks to report suspicious transactions. Eventually, the people said, the agency could reprimand the bank for the potential oversight failures.

“We believe that the personnel who dealt with the Madoff issue acted in good faith,” Ms. Lemkau, the bank spokeswoman, said.

Some bank analysts also note that JPMorgan’s strong earnings could ameliorate concerns among its investors.

“As long as you’re making money, investors don’t care,” said Paul Miller, a managing director at FBR.

Regulators, however, increasingly do care. When the comptroller’s office sought documents in the Madoff case from JPMorgan, the bank declined, citing attorney-client privilege, according to bank employees. The dispute was then elevated to the Treasury Department’s inspector general, which oversees the comptroller’s office.

“The matter is pending,” said Richard Delmar, a counsel to the inspector general.

The Madoff case, authorities say, exposed a recurring problem at JPMorgan â€" what they say is its sometimes combative stance with regulators. In a recent report examining a $6 billion trading loss at the bank, Senate investigators faulted JPMorgan for briefly withholding documents from regulators. The trading loss has spawned several law enforcement investigations into the traders who created the faulty wager.

Mr. Dimon, who is not suspected of any wrongdoing, met this week with prosecutors and the F.B.I. to discuss the case, two people briefed on the investigation said.

A day before the Senate subcommittee released its report on the trading loss, JPMorgan received another ominous dispatch from Washington. On March 13, enforcement officials at FERC notified the bank that it planned to recommend an action over the power plant investigation.

JPMorgan is the latest big bank to face scrutiny from the energy regulator, which recently pursued actions against Barclays and Deutsche Bank. The cases reflect how the regulator has kept a more vigilant watch over the energy markets ever since the Enron fraud.

But Wall Street is fighting back against the new approach, casting the agency’s enforcement unit as overzealous and overreaching.

The JPMorgan case arose, according to the document, after the bank’s 2008 takeover of Bear Stearns gave the bank the rights to sell electricity from power plants in California and Michigan. It was a losing business that relied on “inefficient” and outdated technology, or as JPMorgan called it, “an unprofitable asset.”

Yet under “pressure to generate large profits,” the agency’s investigators said, traders in Houston devised a workaround. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in “excessive” payments to JPMorgan, the investigators said. The behavior had “harmful effects” on the markets, according to the document.

JPMorgan disputes the claims, arguing that its trading was legal.

“The staff is challenging a bidding strategy that was transparent and was in full compliance with the applicable rules,” said Ms. Lemkau, the bank’s spokeswoman. “We strongly disagree with the staff’s conclusions.”

For now, according to the document, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters “individually liable.” While Ms. Masters was “less involved in the day-to-day decisions,” investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies.

The bank, investigators said, then “planned and executed a systematic cover-up” of documents that exposed the strategy, including profit and loss statements.

In the March document, the government investigators also complained about what they said was obstruction by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the document said.

The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that “JPMorgan does not believe that it violated FERC’s policies.”

Handpicked Skeptic to Pitch Hardball Questions at Warren Buffett

Joe Skipper/ReutersDoug Kass, a hedge fund manager who has doubts about Berkshire’s direction, will question Warren Buffett.

In most years, Berkshire Hathaway’s annual meeting is a weekend-long ode to capitalism and generally a lovefest for Warren E. Buffett.

But on Saturday, a hedge fund manager handpicked by the billionaire himself will try to add some skepticism to the proceedings.

“It’s fair to say that I’m Daniel in the lion’s den,” Douglas A. Kass, the head of Seabreeze Partners Management, said on Thursday in the middle of his trip to Nebraska. “But I’ve prepared intensely.”

The addition of Mr. Kass, who is Berkshire’s first credentialed bear and is betting that the company’s stock will fall, is the latest adjustment to a formula that has been in place for decades. More than 18,000 shareholders flock to Omaha in early May every year, hoping to listen to what one of the country’s most celebrated investors has to say.

Most years, shareholders have asked a wide range of largely softball questions, from the billionaire’s thoughts on the global economy to his religious beliefs.

But Mr. Buffett has tried to toughen up the questioning at the annual meeting, a 180-degree turn from what the majority of publicly traded companies seek to do. He has asked reporters, including one from The New York Times, and analysts to ask tougher questions.

Inviting Mr. Kass, 64, is perhaps the boldest move yet. The hedge fund manager is best known for his frequently contrarian positions, often on display in appearances on television shows about business and in his column on TheStreet.com. Mr. Kass has also pointed to his time working for Ralph Nader while a student.

“See if you can drive the stock down 10 percent,” Mr. Buffett teased his new foil during a CNBC interview in March.

Mr. Kass has repeatedly explored Berkshire’s weaknesses over the years, including a 2008 article on TheStreet.com. Among his arguments at the time were Mr. Buffett’s advanced age and the company’s slowing growth.

Mr. Kass maintains a short position on Berkshire’s shares, whose size he declined to disclose other than to describe it as average-size for him. But he spent the last month reading up on Mr. Buffett and his company, and as of Thursday was winnowing 25 potential questions down to six.

Two, he contended, would generate big news if Mr. Buffett answers them. The others have not been asked before, he said.

All the while, Mr. Kass said, he has remained an admirer of Mr. Buffett, sometimes referred to as the Oracle of Omaha. Since beginning his research, manager Mr. Kass has found a number of similarities with Mr. Buffett. For example, both have been treated for prostate cancer, and both once collected discarded horse-racing tickets at tracks in their younger days.

For his first trip to the Berkshire meeting, Mr. Kass is bringing his son and a group of friends.

“I’m psyched,” he said. “It’s like the financial World Series to me.”

Apart from Mr. Kass, many elements of previous Berkshire meetings will be in place again this year. Mr. Buffett, 82, is likely to reiterate that his company â€" a huge conglomerate that counts railroads, private jets and running shoes among its holdings â€" has a succession plan in place for when he finally hangs up his investor’s hat. (He’s unlikely to say who will succeed him as chief executive.)

He will also most likely discuss his hunger to strike more big deals, one of his signature corporate moves. Neither of his acquisitions this year appears to qualify for the giant takeovers he craves: Berkshire teamed up with a Brazilian investment firm to buy H. J. Heinz for $23 billion, and it bought the 20 percent of the Israeli tool maker IMC that it did not already own for about $2 billion.

“It’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants,” Mr. Buffett wrote in his annual investor letter, referring to his longtime investing partner, Charles T. Munger, Berkshire’s vice chairman.

He is also expected to discuss his recent newspaper buying spree, having bought 28 dailies over the last year and a half for $344 million. While the acquisition campaign is not the most expensive he has ever conducted, Mr. Buffett has described himself as an addict who sees value in local news.

It is unclear whether he will be asked about another new move: into social media. On Thursday at 11:20 a.m. Omaha time, Mr. Buffett overcame a famous aversion to technology by posting his first message on Twitter. “Warren is in the house,” he wrote as a camera for Fortune magazine hovered over his shoulder, capturing every tap.

By late afternoon, his post had been reposted more than 25,000 times, and his nascent Twitter account had drawn 176,000 followers. Among them is Mr. Kass, a prolific user of Twitter who has been documenting his passage to Omaha.

The foray was a surprise, given that Mr. Buffett once claimed he missed an important message about Lehman Brothers because he did not know how to check his phone’s voice mail.

“I guess he’s not as much of a Luddite as he professes,” Mr. Kass said.

Mr. Buffett dryly hinted that Twitter had a little more in its favor than other platforms.

“The co-founder came from Nebraska,” he said, in an apparent reference to a Twitter co-founder, Evan Williams. “So it can’t all be bad.”

Handpicked Skeptic to Pitch Hardball Questions at Warren Buffett

Joe Skipper/ReutersDoug Kass, a hedge fund manager who has doubts about Berkshire’s direction, will question Warren Buffett.

In most years, Berkshire Hathaway’s annual meeting is a weekend-long ode to capitalism and generally a lovefest for Warren E. Buffett.

But on Saturday, a hedge fund manager handpicked by the billionaire himself will try to add some skepticism to the proceedings.

“It’s fair to say that I’m Daniel in the lion’s den,” Douglas A. Kass, the head of Seabreeze Partners Management, said on Thursday in the middle of his trip to Nebraska. “But I’ve prepared intensely.”

The addition of Mr. Kass, who is Berkshire’s first credentialed bear and is betting that the company’s stock will fall, is the latest adjustment to a formula that has been in place for decades. More than 18,000 shareholders flock to Omaha in early May every year, hoping to listen to what one of the country’s most celebrated investors has to say.

Most years, shareholders have asked a wide range of largely softball questions, from the billionaire’s thoughts on the global economy to his religious beliefs.

But Mr. Buffett has tried to toughen up the questioning at the annual meeting, a 180-degree turn from what the majority of publicly traded companies seek to do. He has asked reporters, including one from The New York Times, and analysts to ask tougher questions.

Inviting Mr. Kass, 64, is perhaps the boldest move yet. The hedge fund manager is best known for his frequently contrarian positions, often on display in appearances on television shows about business and in his column on TheStreet.com. Mr. Kass has also pointed to his time working for Ralph Nader while a student.

“See if you can drive the stock down 10 percent,” Mr. Buffett teased his new foil during a CNBC interview in March.

Mr. Kass has repeatedly explored Berkshire’s weaknesses over the years, including a 2008 article on TheStreet.com. Among his arguments at the time were Mr. Buffett’s advanced age and the company’s slowing growth.

Mr. Kass maintains a short position on Berkshire’s shares, whose size he declined to disclose other than to describe it as average-size for him. But he spent the last month reading up on Mr. Buffett and his company, and as of Thursday was winnowing 25 potential questions down to six.

Two, he contended, would generate big news if Mr. Buffett answers them. The others have not been asked before, he said.

All the while, Mr. Kass said, he has remained an admirer of Mr. Buffett, sometimes referred to as the Oracle of Omaha. Since beginning his research, manager Mr. Kass has found a number of similarities with Mr. Buffett. For example, both have been treated for prostate cancer, and both once collected discarded horse-racing tickets at tracks in their younger days.

For his first trip to the Berkshire meeting, Mr. Kass is bringing his son and a group of friends.

“I’m psyched,” he said. “It’s like the financial World Series to me.”

Apart from Mr. Kass, many elements of previous Berkshire meetings will be in place again this year. Mr. Buffett, 82, is likely to reiterate that his company â€" a huge conglomerate that counts railroads, private jets and running shoes among its holdings â€" has a succession plan in place for when he finally hangs up his investor’s hat. (He’s unlikely to say who will succeed him as chief executive.)

He will also most likely discuss his hunger to strike more big deals, one of his signature corporate moves. Neither of his acquisitions this year appears to qualify for the giant takeovers he craves: Berkshire teamed up with a Brazilian investment firm to buy H. J. Heinz for $23 billion, and it bought the 20 percent of the Israeli tool maker IMC that it did not already own for about $2 billion.

“It’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants,” Mr. Buffett wrote in his annual investor letter, referring to his longtime investing partner, Charles T. Munger, Berkshire’s vice chairman.

He is also expected to discuss his recent newspaper buying spree, having bought 28 dailies over the last year and a half for $344 million. While the acquisition campaign is not the most expensive he has ever conducted, Mr. Buffett has described himself as an addict who sees value in local news.

It is unclear whether he will be asked about another new move: into social media. On Thursday at 11:20 a.m. Omaha time, Mr. Buffett overcame a famous aversion to technology by posting his first message on Twitter. “Warren is in the house,” he wrote as a camera for Fortune magazine hovered over his shoulder, capturing every tap.

By late afternoon, his post had been reposted more than 25,000 times, and his nascent Twitter account had drawn 176,000 followers. Among them is Mr. Kass, a prolific user of Twitter who has been documenting his passage to Omaha.

The foray was a surprise, given that Mr. Buffett once claimed he missed an important message about Lehman Brothers because he did not know how to check his phone’s voice mail.

“I guess he’s not as much of a Luddite as he professes,” Mr. Kass said.

Mr. Buffett dryly hinted that Twitter had a little more in its favor than other platforms.

“The co-founder came from Nebraska,” he said, in an apparent reference to a Twitter co-founder, Evan Williams. “So it can’t all be bad.”

Handpicked Skeptic to Pitch Hardball Questions at Warren Buffett

Joe Skipper/ReutersDoug Kass, a hedge fund manager who has doubts about Berkshire’s direction, will question Warren Buffett.

In most years, Berkshire Hathaway’s annual meeting is a weekend-long ode to capitalism and generally a lovefest for Warren E. Buffett.

But on Saturday, a hedge fund manager handpicked by the billionaire himself will try to add some skepticism to the proceedings.

“It’s fair to say that I’m Daniel in the lion’s den,” Douglas A. Kass, the head of Seabreeze Partners Management, said on Thursday in the middle of his trip to Nebraska. “But I’ve prepared intensely.”

The addition of Mr. Kass, who is Berkshire’s first credentialed bear and is betting that the company’s stock will fall, is the latest adjustment to a formula that has been in place for decades. More than 18,000 shareholders flock to Omaha in early May every year, hoping to listen to what one of the country’s most celebrated investors has to say.

Most years, shareholders have asked a wide range of largely softball questions, from the billionaire’s thoughts on the global economy to his religious beliefs.

But Mr. Buffett has tried to toughen up the questioning at the annual meeting, a 180-degree turn from what the majority of publicly traded companies seek to do. He has asked reporters, including one from The New York Times, and analysts to ask tougher questions.

Inviting Mr. Kass, 64, is perhaps the boldest move yet. The hedge fund manager is best known for his frequently contrarian positions, often on display in appearances on television shows about business and in his column on TheStreet.com. Mr. Kass has also pointed to his time working for Ralph Nader while a student.

“See if you can drive the stock down 10 percent,” Mr. Buffett teased his new foil during a CNBC interview in March.

Mr. Kass has repeatedly explored Berkshire’s weaknesses over the years, including a 2008 article on TheStreet.com. Among his arguments at the time were Mr. Buffett’s advanced age and the company’s slowing growth.

Mr. Kass maintains a short position on Berkshire’s shares, whose size he declined to disclose other than to describe it as average-size for him. But he spent the last month reading up on Mr. Buffett and his company, and as of Thursday was winnowing 25 potential questions down to six.

Two, he contended, would generate big news if Mr. Buffett answers them. The others have not been asked before, he said.

All the while, Mr. Kass said, he has remained an admirer of Mr. Buffett, sometimes referred to as the Oracle of Omaha. Since beginning his research, manager Mr. Kass has found a number of similarities with Mr. Buffett. For example, both have been treated for prostate cancer, and both once collected discarded horse-racing tickets at tracks in their younger days.

For his first trip to the Berkshire meeting, Mr. Kass is bringing his son and a group of friends.

“I’m psyched,” he said. “It’s like the financial World Series to me.”

Apart from Mr. Kass, many elements of previous Berkshire meetings will be in place again this year. Mr. Buffett, 82, is likely to reiterate that his company â€" a huge conglomerate that counts railroads, private jets and running shoes among its holdings â€" has a succession plan in place for when he finally hangs up his investor’s hat. (He’s unlikely to say who will succeed him as chief executive.)

He will also most likely discuss his hunger to strike more big deals, one of his signature corporate moves. Neither of his acquisitions this year appears to qualify for the giant takeovers he craves: Berkshire teamed up with a Brazilian investment firm to buy H. J. Heinz for $23 billion, and it bought the 20 percent of the Israeli tool maker IMC that it did not already own for about $2 billion.

“It’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants,” Mr. Buffett wrote in his annual investor letter, referring to his longtime investing partner, Charles T. Munger, Berkshire’s vice chairman.

He is also expected to discuss his recent newspaper buying spree, having bought 28 dailies over the last year and a half for $344 million. While the acquisition campaign is not the most expensive he has ever conducted, Mr. Buffett has described himself as an addict who sees value in local news.

It is unclear whether he will be asked about another new move: into social media. On Thursday at 11:20 a.m. Omaha time, Mr. Buffett overcame a famous aversion to technology by posting his first message on Twitter. “Warren is in the house,” he wrote as a camera for Fortune magazine hovered over his shoulder, capturing every tap.

By late afternoon, his post had been reposted more than 25,000 times, and his nascent Twitter account had drawn 176,000 followers. Among them is Mr. Kass, a prolific user of Twitter who has been documenting his passage to Omaha.

The foray was a surprise, given that Mr. Buffett once claimed he missed an important message about Lehman Brothers because he did not know how to check his phone’s voice mail.

“I guess he’s not as much of a Luddite as he professes,” Mr. Kass said.

Mr. Buffett dryly hinted that Twitter had a little more in its favor than other platforms.

“The co-founder came from Nebraska,” he said, in an apparent reference to a Twitter co-founder, Evan Williams. “So it can’t all be bad.”

Senior S.E.C. Officials Depart

The Securities and Exchange Commission has a new look to it.

First, Mary Jo White joined the agency as its chairwoman last month. Then, she went about filling key roles, naming co-leaders of the agency’s enforcement unit last week and hiring a general counsel, Anne Small, who rejoined the S.E.C. from the White House.

Now, she has some fresh spots to fill.

The S.E.C. announced on Thursday that Carlo V. di Florio, head of the agency’s Office of Compliance Inspections and Examinations, will depart the agency. He is heading to Wall Street’s self-regulatory group, the Financial Industry Regulatory Authority, where he will become an executive vice president for risk and strategy.

David P. Bergers, the interim No. 2 enforcement official at the S.E.C., will also leave soon. Mr. Bergers, a 13-year employee of the agency, also ran the S.E.C.’s Boston office.

The continued departures are common amid a transition period. Others are expected to follow as Ms. White shuffles the staff and sets her own roster.

But the turnover could pose a challenge to the S.E.C. as it sheds top officials with a rich vein of knowledge about the markets and the agency itself.

Ms. White on Thursday described Mr. Bergers as “a tremendous asset to the agency.” In a statement about Mr. di Florio, who overhauled the agency’s exam program in the aftermath of the financial crisis, she said that he “has been an outstanding leader of the National Exam Program and has made a lasting impact on the S.E.C.”

The changes come at an already difficult time for the agency, which has fallen far behind its rule-making responsibilities. Nearly three years after Congress passed the Dodd-Frank Act, the overhaul of Wall Street regulation, the S.E.C. has not carried out many of the changes.

The enforcement unit faces its own challenges. The unit, which also received a makeover after the crisis, is on pace to file the lowest number of enforcement cases in a decade, according to S.E.C. figures provided to The New York Times. Some longtime enforcement officials attribute the decline to low morale at the Washington office.

Mr. Bergers took on the deputy enforcement role early this year, but it was on an interim basis. When Ms. White announced last week that Andrew J. Ceresney and George Canellos would share the top role, it signaled that a broader shake-up could be at hand.

For Mr. Bergers, it appeared the time was right to move on. “I have been incredibly fortunate to serve alongside the agency’s talented and dedicated staff working hard every day to protect investors,” he said on Thursday.

Twitter Hires Morgan Stanley Banker

Twitter has turned to Wall Street for talent.

The company has hired Cynthia Gaylor, a managing director at Morgan Stanley, to be its head of corporate development, Alexander Macgillivray, Twitter’s chief lawyer, said in a tweet on Thursday.

Excited to welcome @cynthiag as head of @Twitter corp dev. She’s joining a great team /cc @jess

â€" Alex Macgillivray (@amac) 2 May 13

Ms. Gaylor, a technology-focused investment banker with 17 years of experience, posted her first tweet on Thursday.

@amac @twitter @jess look forward to joining and focusing on M&A + strategy. pointed north … let the migration begin!

â€" cynthia gaylor (@cynthiag) 2 May 13

Over her career, Ms. Gaylor has worked on technology deals including the sale of Zappos to Amazon.com, according to her profile on LinkedIn. More recently, she has advised on financing transactions like initial public offerings.

Among her clients are Facebook, Zynga, Netflix and LinkedIn, the LinkedIn profile says. She joined Morgan Stanley in 2006 after working at Hambrecht & Quist, which became part of JPMorgan Chase.

Ms. Gaylor’s move to Twitter will most likely fuel speculation about an eventual I.P.O. for the company. In January, Twitter was reported to have a valuation of at least $9 billion.

Investment bankers typically aren’t permitted to be on Twitter for work purposes. One exception is Ted Tobiason, a managing director at Deutsche Bank, who tweets about I.P.O.’s.

Perelman Pledges $100 Million to Columbia Business School

Years from now, students at Columbia Business School will go about their studies in a pair of buildings named for two Wall Street giants. One is Henry R. Kravis. The other is now Ronald O. Perelman.

Mr. Perelman, a billionaire and longtime deal maker, has pledged $100 million to Columbia Business School, the university announced on Thursday. The donation ties the record for the biggest gift ever to the school, which was set in 2010 by Mr. Kravis, a co-founder of K.K.R.

The money will go toward the construction of new facilities at the planned Manhattanville campus, a $6.3 billion project that is expected to be completed within the next two decades. With Mr. Perelman’s donation, the business school has raised $455 million of a $600 million goal.

One of the new buildings, expected to open within the next decade, will be called the Ronald O. Perelman Center for Business Innovation.

“Columbia Business School has its finger on the pulse of the changing nature of business education,” Mr. Perelman, the chairman and chief executive of MacAndrews & Forbes, said in a statement released by the university. “The school’s commitment to developing transformative business thinkers is unparalleled.”

Mr. Perelman, who received a masters degree in business from the Wharton School of the University of Pennsylvania, is a longtime member of Columbia Business School’s board of overseers. Three of his children went to business school at Columbia, according to Christine Taylor, a spokeswoman.

“Ronald O. Perelman has long valued and supported business education and innovation in New York City,” R. Glenn Hubbard, dean of the Columbia Business School, said in a release. “We are extremely grateful for his vision and generosity, and this gift will allow us to reach a new phase in the School’s expansion into Manhattanville.”

In addition to the gifts from Mr. Perelman and Mr. Kravis, the business school has received $25 million from Leon G. Cooperman, chairman and chief executive of Omega Advisors.

In February, Mr. Perelman gave $25 million to the University of Pennsylvania to build a new facility called the Ronald O. Perelman Center for Political Science and Economics.

Perelman Pledges $100 Million to Columbia Business School

Years from now, students at Columbia Business School will go about their studies in a pair of buildings named for two Wall Street giants. One is Henry R. Kravis. The other is now Ronald O. Perelman.

Mr. Perelman, a billionaire and longtime deal maker, has pledged $100 million to Columbia Business School, the university announced on Thursday. The donation ties the record for the biggest gift ever to the school, which was set in 2010 by Mr. Kravis, a co-founder of K.K.R.

The money will go toward the construction of new facilities at the planned Manhattanville campus, a $6.3 billion project that is expected to be completed within the next two decades. With Mr. Perelman’s donation, the business school has raised $455 million of a $600 million goal.

One of the new buildings, expected to open within the next decade, will be called the Ronald O. Perelman Center for Business Innovation.

“Columbia Business School has its finger on the pulse of the changing nature of business education,” Mr. Perelman, the chairman and chief executive of MacAndrews & Forbes, said in a statement released by the university. “The school’s commitment to developing transformative business thinkers is unparalleled.”

Mr. Perelman, who received a masters degree in business from the Wharton School of the University of Pennsylvania, is a longtime member of Columbia Business School’s board of overseers. Three of his children went to business school at Columbia, according to Christine Taylor, a spokeswoman.

“Ronald O. Perelman has long valued and supported business education and innovation in New York City,” R. Glenn Hubbard, dean of the Columbia Business School, said in a release. “We are extremely grateful for his vision and generosity, and this gift will allow us to reach a new phase in the School’s expansion into Manhattanville.”

In addition to the gifts from Mr. Perelman and Mr. Kravis, the business school has received $25 million from Leon G. Cooperman, chairman and chief executive of Omega Advisors.

In February, Mr. Perelman gave $25 million to the University of Pennsylvania to build a new facility called the Ronald O. Perelman Center for Political Science and Economics.

Perelman Pledges $100 Million to Columbia Business School

Years from now, students at Columbia Business School will go about their studies in a pair of buildings named for two Wall Street giants. One is Henry R. Kravis. The other is now Ronald O. Perelman.

Mr. Perelman, a billionaire and longtime deal maker, has pledged $100 million to Columbia Business School, the university announced on Thursday. The donation ties the record for the biggest gift ever to the school, which was set in 2010 by Mr. Kravis, a co-founder of K.K.R.

The money will go toward the construction of new facilities at the planned Manhattanville campus, a $6.3 billion project that is expected to be completed within the next two decades. With Mr. Perelman’s donation, the business school has raised $455 million of a $600 million goal.

One of the new buildings, expected to open within the next decade, will be called the Ronald O. Perelman Center for Business Innovation.

“Columbia Business School has its finger on the pulse of the changing nature of business education,” Mr. Perelman, the chairman and chief executive of MacAndrews & Forbes, said in a statement released by the university. “The school’s commitment to developing transformative business thinkers is unparalleled.”

Mr. Perelman, who received a masters degree in business from the Wharton School of the University of Pennsylvania, is a longtime member of Columbia Business School’s board of overseers. Three of his children went to business school at Columbia, according to Christine Taylor, a spokeswoman.

“Ronald O. Perelman has long valued and supported business education and innovation in New York City,” R. Glenn Hubbard, dean of the Columbia Business School, said in a release. “We are extremely grateful for his vision and generosity, and this gift will allow us to reach a new phase in the School’s expansion into Manhattanville.”

In addition to the gifts from Mr. Perelman and Mr. Kravis, the business school has received $25 million from Leon G. Cooperman, chairman and chief executive of Omega Advisors.

In February, Mr. Perelman gave $25 million to the University of Pennsylvania to build a new facility called the Ronald O. Perelman Center for Political Science and Economics.

A Tobin Tax, Bankruptcy Style

The bankruptcy world just got its own financial transaction Tobin tax. Just like France. Sort of.

Starting this month, there is a new $25 fee to file a notice that a debtor claim in a Chapter 11 case has been sold. The requirement to file the notice is the result of Federal Rule of Bankruptcy Procedure 3001(e).

The precise size of the market in bankruptcy claims is a bit hard to pin down. Recent estimates make it robust. For example, according to SecondMarket, a marketplace for private shares, there were 1,237 trades valued at $4.9 billion during December. But trading was dominated by claims in Lehman Brothers Holdings and MF Global, which together had 838 trades with a combined face value of $4.4 billion. That number appears likely to shrink as the Lehman case winds down. But it does seem that the market has grown over the last few decades, and the new fee is an apparent attempt by the courts to recover some of the cost associated with that trend.

But rule 3001(e), and thus the new fee, is rather limited in its scope. First, it applies only to sales of claims happening after the original proof of claim was filed. Next, the rule does not really apply to bonds and notes because a trustee files the claim on behalf of all holders.

There is an odd exception in the rule for public debt, which does tend to distract even bankruptcy experts, but it’s really beside the point. Noteholders can trade with wild abandon because the trustee’s original claim remains filed with the bankruptcy court, which is unaware of any trading going on in individual notes.

Thus, this new fee is only going to work as a kind of Tobin tax on a part of the market: namely, trading in nonstandardized debts. These could include, for example, customer claims against MF Global for account shortfalls that exceeded insurance under the Securities Investor Protection Corporation, or auto dealer claims against General Motors or Chrysler for rejection of their franchise agreements.

The market for this kind of distressed debt is probably not that efficient to begin with. To properly value a nonstandard claim in a bankruptcy proceeding requires both a deep understanding of the debtor’s capital structure and a strong understanding of bankruptcy law. An understanding of how that law works in practice, rather than as described by academics, helps, too.

This is the real reason why distressed debt traders can make such large returns: only a few people can be bothered to amass all of these skills.

The $25 fee will make the market a bit more inefficient, but you can bet the buyers of these claims will simply extract the fee from the seller. Whether the seller will notice is another thing altogether.

Hedge Fund Trader Sentenced to 4 1/2 Years in Insider Case

It is a scene that has played out over and over again at the federal courthouse in Lower Manhattan.

A once high-flying hedge fund trader stands before a judge, oftentimes apologizing for his misdeeds. A high-priced defense lawyer asks for leniency, arguing that the client â€" other than his insider trading crimes â€" has lived an otherwise admirable life. After listening intently, the judge rejects those pleas and sends the defendant to prison.

Todd Newman became the latest in a parade of Wall Street traders â€" along with a smattering business executives, management consultants and corporate lawyers â€" who has gone through this routine and had their life upended by the government’s crackdown on insider trading.

In his almost five years trading technology stocks at Diamondback Capital Management, Mr. Newman, 48, earned more than $10 million.

On Thursday, he received a four and a half year prison sentence.

“This is a crime that has an impact across an economy and across a society,” said Judge Richard J. Sullivan, who presided over Mr. Newman’s trial and handed down the sentence. “This was a stark crossing of the line, engaging in criminal conduct, and that’s just wrong.”

Last December, a jury convicted Mr. Newman and another former hedge fund trader, Anthony Chiasson, co-founder of Level Global Investors, of a conspiring with six others to earn about $70 million illegally trading technology stocks. Much of the charges centered on trading in shares of Dell based on secret financial information obtained from an insider at the computer company.

Both Diamondback and Level Global, which are now defunct, have ties to SAC Capital Advisors, the giant $14 billion hedge fund run by the billionaire investor Steven A. Cohen that has become a focus of the government’s insider trading inquiry. SAC Capital alumni started both firms.

Former SAC employees were also charged as part of the conspiracy involving Mr. Newman. Jon Horvath, a former tech-stock analyst, pleaded guilty last year to illegally trading in Dell and Nvidia, a chipmaker. And federal prosecutors last month arrested Mr. Horvath’s boss, Michael S. Steinberg, and charged him with being part of the conspiracy. Mr. Steinberg has pleaded not guilty.

Mr. Cohen has not been charged with any wrongdoing and has said that he behaved appropriately at all times. On Thursday, SAC announced several measures to beef up its legal and compliance effort, including clawing back pay for employees that break the law.

Diamondback, a Stamford, Conn.-based hedge fund that shut down last year, is seeking millions of dollars in restitution from Mr. Newman, characterizing itself as a victim of his crimes. The divorced father of a 12-year-old daughter, Mr. Newman lives in Needham, Mass., a low-key Boston suburb. He built a successful career specializing in investing in technology stocks. Before joining Diamondback in 2006, he worked at Tudor Investment, one of the world’s most prominent hedge funds.

Describing him as a “good, honorable and decent human being,” Mr. Newman’s lawyer made his case for a light sentence. “This is not who he is,” said the lawyer, John Nathanson. “His reputation has been decimated.”

The sentence was less than the as much as six and a half years that federal prosecutors had sought. Judge Sullivan also imposed about $1.75 million in fines and forfeiture.

Mr. Newman is one of 81 individuals charged by the United States attorney in Manhattan since 2009. Of those, 73 have either pleaded guilty or been convicted by a jury, and 48 of those have already been sentenced.

The vast majority of the insider-trading defendants have confessed instead of fighting the charges. Just 10 have taken their cases to trial, and all of them have been found guilty.

Mr. Steinberg and another former SAC portfolio manager, Mathew Martoma, could test the government’s perfect trial record. Mr. Martoma was indicted in December on charges that he corrupted a doctor to leak him secret data about a clinical drug trial that allowed SAC to earn profits and avoid losses of $276 million.

Both Mr. Martoma and Mr. Steinberg have refused to cooperate with the government in helping them build a potential case against their former boss, Mr. Cohen. Their trials are not yet set, but are likely to not start until at least early 2014.

Meanwhile, SAC has settled a pair of civil lawsuits â€" one for $602 million, one for $14 million â€" that was brought against the firm by securities regulators related to Mr. Martoma’s and Mr. Steinberg’s cases.

During Thursday’s sentencing of Mr. Newman, Judge Sullivan, who has presided over a number of the insider trading cases, said he grappled with the question of why so many Wall Street executives have committed this crime. He compared Mr. Newman and others to less-fortunate defendants, like one he had recently sentenced who grew up in dire poverty in the Dominican Republic and turned to a life of crime.

“I’m not excusing that, but one could see how those circumstances would push one to the dangers of criminal activity,” the judge said. “But it is hard to understand why someone who has reached the pinnacle of success,” he added, “would risk all that for more.”

Hedge Fund Trader Sentenced to 4 1/2 Years in Insider Case

It is a scene that has played out over and over again at the federal courthouse in Lower Manhattan.

A once high-flying hedge fund trader stands before a judge, oftentimes apologizing for his misdeeds. A high-priced defense lawyer asks for leniency, arguing that the client â€" other than his insider trading crimes â€" has lived an otherwise admirable life. After listening intently, the judge rejects those pleas and sends the defendant to prison.

Todd Newman became the latest in a parade of Wall Street traders â€" along with a smattering business executives, management consultants and corporate lawyers â€" who has gone through this routine and had their life upended by the government’s crackdown on insider trading.

In his almost five years trading technology stocks at Diamondback Capital Management, Mr. Newman, 48, earned more than $10 million.

On Thursday, he received a four and a half year prison sentence.

“This is a crime that has an impact across an economy and across a society,” said Judge Richard J. Sullivan, who presided over Mr. Newman’s trial and handed down the sentence. “This was a stark crossing of the line, engaging in criminal conduct, and that’s just wrong.”

Last December, a jury convicted Mr. Newman and another former hedge fund trader, Anthony Chiasson, co-founder of Level Global Investors, of a conspiring with six others to earn about $70 million illegally trading technology stocks. Much of the charges centered on trading in shares of Dell based on secret financial information obtained from an insider at the computer company.

Both Diamondback and Level Global, which are now defunct, have ties to SAC Capital Advisors, the giant $14 billion hedge fund run by the billionaire investor Steven A. Cohen that has become a focus of the government’s insider trading inquiry. SAC Capital alumni started both firms.

Former SAC employees were also charged as part of the conspiracy involving Mr. Newman. Jon Horvath, a former tech-stock analyst, pleaded guilty last year to illegally trading in Dell and Nvidia, a chipmaker. And federal prosecutors last month arrested Mr. Horvath’s boss, Michael S. Steinberg, and charged him with being part of the conspiracy. Mr. Steinberg has pleaded not guilty.

Mr. Cohen has not been charged with any wrongdoing and has said that he behaved appropriately at all times. On Thursday, SAC announced several measures to beef up its legal and compliance effort, including clawing back pay for employees that break the law.

Diamondback, a Stamford, Conn.-based hedge fund that shut down last year, is seeking millions of dollars in restitution from Mr. Newman, characterizing itself as a victim of his crimes. The divorced father of a 12-year-old daughter, Mr. Newman lives in Needham, Mass., a low-key Boston suburb. He built a successful career specializing in investing in technology stocks. Before joining Diamondback in 2006, he worked at Tudor Investment, one of the world’s most prominent hedge funds.

Describing him as a “good, honorable and decent human being,” Mr. Newman’s lawyer made his case for a light sentence. “This is not who he is,” said the lawyer, John Nathanson. “His reputation has been decimated.”

The sentence was less than the as much as six and a half years that federal prosecutors had sought. Judge Sullivan also imposed about $1.75 million in fines and forfeiture.

Mr. Newman is one of 81 individuals charged by the United States attorney in Manhattan since 2009. Of those, 73 have either pleaded guilty or been convicted by a jury, and 48 of those have already been sentenced.

The vast majority of the insider-trading defendants have confessed instead of fighting the charges. Just 10 have taken their cases to trial, and all of them have been found guilty.

Mr. Steinberg and another former SAC portfolio manager, Mathew Martoma, could test the government’s perfect trial record. Mr. Martoma was indicted in December on charges that he corrupted a doctor to leak him secret data about a clinical drug trial that allowed SAC to earn profits and avoid losses of $276 million.

Both Mr. Martoma and Mr. Steinberg have refused to cooperate with the government in helping them build a potential case against their former boss, Mr. Cohen. Their trials are not yet set, but are likely to not start until at least early 2014.

Meanwhile, SAC has settled a pair of civil lawsuits â€" one for $602 million, one for $14 million â€" that was brought against the firm by securities regulators related to Mr. Martoma’s and Mr. Steinberg’s cases.

During Thursday’s sentencing of Mr. Newman, Judge Sullivan, who has presided over a number of the insider trading cases, said he grappled with the question of why so many Wall Street executives have committed this crime. He compared Mr. Newman and others to less-fortunate defendants, like one he had recently sentenced who grew up in dire poverty in the Dominican Republic and turned to a life of crime.

“I’m not excusing that, but one could see how those circumstances would push one to the dangers of criminal activity,” the judge said. “But it is hard to understand why someone who has reached the pinnacle of success,” he added, “would risk all that for more.”

Why a UBS Split Would Not Be the Best Move

UBS is the wrong target for an activist-led breakup. Knight Vinke has called on the Swiss bank to separate its risky investment banking business from the core wealth-management arm. The campaigning investment firm is right that no one would create a bank modeled on UBS as it is today. But it doesn’t automatically follow that a breakup is the best strategy.

This week’s results were the first set of full quarterly numbers since UBS set out plans to shrink and cut risk in its troubled investment bank back in October. The firm is performing well across the board, and has a peer-leading 10.1 percent core Tier 1 ratio. The shares trade at a premium to book value. Other bank-sector investments still languish at 0.6 times book value, and have less capital to absorb losses. Knight Vinke says, with justification, that the best time to review strategy is when things are going well. The last time a UBS breakup was debated in public was when former UBS employee Luqman Arnold called for one as the financial crisis was raging in 2008.

The argument for doing the splits is that it is the only sure way to protect wealth management from potential losses in the investment bank. The snag is that separation would remove the synergies between wealth management and investment banking - the first is a big customer of the second, for example. Above all, it would carry big one-off costs. As a standalone entity, the investment bank would almost certainly require an additional capital injection to be able to fund itself. It’s not clear where that capital would come from. Meanwhile, UBS is lumbered with 382 billion Swiss francs of non-core assets that look like a huge obstacle to corporate change.

The alternative is to continue with the current model and protect the wealth management franchise by stuffing UBS with more capital and cutting risk in the investment bank. That’s essentially the strategy that the chairman, Axel Webel, and the chief executive, Sergio Ermotti, have carved out. Their plan is to turn UBS’s investment bank into a super-boutique in the model of SG Warburg, focused on advisory and equities. Mr. Ermotti is undoing much of UBS’s disastrous dash to bulk up in fixed-income trading at the height of the credit boom.

But that doesn’t mean Knight Vinke is totally wrong. There are questions about UBS’s commitment to its new course and just how far it is willing to withdraw from risky trading activities. Mr. Ermotti should see Knight Vinke’s intervention as a warning - stick with the program and don’t stop cutting risk.

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

Buffett Speaks and Tweets

Warren E. Buffett has built a following over the years with pithy and memorable aphorisms about investing.

Now, he’ll try to do the same in 140 characters or fewer.

Mr. Buffett made his debut on Twitter on Thursday, with the handle @WarrenBuffett. He issued his first tweet at 12:20 p.m. (11:20 a.m. in Omaha):

Warren is in the house.

â€" Warren Buffett (@WarrenBuffett) 2 May 13

Though revered on Wall Street, Mr. Buffett is not a technology whiz. In fact, the investor has a reputation as something of a technophobe, once saying he did not know how to check his voice mail on his cellphone.

In an interview with Fortune’s Pattie Sellers on Thursday, Mr. Buffett acknowledged some hesitations about making the leap onto Twitter.

“It’s pretty daring,” he said. “But I’ll try.”

Within minutes, Mr. Buffett’s Twitter account had thousands of followers. His Twitter account even got a blue check mark, indicating it was real.

Still, Mr. Buffett is not yet a member of one exclusive club â€" the Twitter users whose messages are beamed across Wall Street via Bloomberg terminals.

The early reviews of Mr. Buffett’s posts were largely positive.

Twitter test - in which 1000 of Warren Buffett’s followers are you? Haven’t seen this much excitement since the Pope joined Twitter #buffett

â€" Elly Williamson (@EPWilliamson) 2 May 13

This is probably, after @PhilJackson11, the 2nd greatest debut tweet ever. RT @WarrenBuffett Warren is in the house.

â€" Liam Gillis (@LiamGillis08) 2 May 13

.@warrenbuffett still hasn’t followed anyone. Does Warren Buffett understand The Conversation?

â€" Joseph Weisenthal (@TheStalwart) 2 May 13

Mr. Buffett, who is preparing for the annual meeting of Berkshire Hathaway this weekend, said Twitter had at least one feature going for it.

“The co-founder came from Nebraska,” he said, in an apparent reference to Evan Williams. “So it can’t all be bad.”

British Activists Press Tax Case Involving Goldman Sachs

LONDON - A court case in Britain involving Goldman Sachs is drawing public attention to the tax breaks that the British government has tried to lure corporations.

At a hearing on Thursday, an activist group campaigning against tax avoidance programs called UK Uncut asked asking the court to review the circumstances leading up to a deal struck in 2010 between Goldman Sachs and British tax authorities. Under the deal, Goldman allowed to avoid as much as £20 million ($31 million) in interest on unpaid taxes.

The court case is adding pressure on large corporations that have attracted public anger for using tax avoidance programs to cut their tax bills, costing Britain much-needed revenue. A government report published at the end of 2011 concluded that British tax officials were treating big businesses too favorably with so-called sweetheart deals often struck at expensive restaurants or in secret.

The activist group has argued that the deal with Goldman was partly struck to avoid personal embarrassment to the finance ministry and a top tax official.

At the hearing at the Royal Courts of Justice, Ingrid Simler, a lawyer at law firm Leigh Day & Company representing UK Uncut, said that the tax authorities failed to apply their policy by allowing Goldman Sachs to forgo the payment.

Goldman Sachs is not a defendant in the case, but in court documents, the activist group says that when Goldman Sachs was initially told to pay the interest “it responded aggressively.” The group claims Goldman “went off the deep end” and alleged that the tax official acted in “extreme bad faith” by asking the firm to pay interest.

At a meeting at Goldman Sachs’s offices in November 2010 tax authorities agreed Goldman would not be required to pay interest on the taxes if it repays the taxes it owes from the program.

Ms. Simler cited an e-mail from December 2010 in which David Hartnett, who was permanent secretary for tax at the time, wrote that “the risks here are major embarrassment to the Chancellor of the Exchequer, Her Majesty’s Revenue and Customs, the large business service of the H.M.R.C., you and me.”

The decision was based on “irrelevant considerations” such as reputational risks to the government, and should be declared unlawful by the court, Ms. Simler argued.

Mr. Hartnett acknowledged at a Parliamentary committee in September that tax officials had failed to follow correct procedures in two major tax deals.

Like many other banks, Goldman Sachs took advantage of tax breaks in the late 1990s to avoid paying national insurance contributions on bonuses it paid to staff in London. Because the plan was ineffective, all banks except Goldman Sachs decided to settle with the tax authorities, UK Uncut argued in court documents.

If the court agrees to a judicial review, then it can order the government to reconsider an action. But the government body is allowed to reach the same conclusion as long as proper procedures are followed.

The hearing continues Friday.

A Journey to the World of European Tech

Greetings from Germany!

I’m visiting here and am amazed by and immersed in how Europe has become a different technological world.

None of this will be new to world travelers. But if you’re an American who hasn’t been to Europe recently, you might enjoy these notes:

* On the flight over, Finnair offers in-flight Wi-Fi. How? Slowly and expensively â€" via satellite.
Using this service, you pay by the megabyte (as on cellphones), not by time (as in hotels). I decided to try it out: $5 for 10 megabytes.

What did I get for my five bucks? About three e-mails and seven lines of instant messaging. What the heck? How could a little text eat up 10 megabytes?

I suspected that something was sucking down the megs behind the scenes. After scratching my head at 39,000 feet, it finally occurred to me to turn off the iCloud feature of my laptop, which keeps my calendar, address book and other data constantly synchronized with the Web. Genius! That was it.

Now, for another $5, I was able to text-chat for about an hour.

* Americans like to think that conserving power and water is a huge inconvenience. But in Europe, it’s just the way things are, and somehow people survive.

Toilets have two buttons: a big one and a small one, depending on how big a flush you need.

In public buildings and hotels, motion sensors turn the lights on when you enter a hallway, off again once you’re past.

Hotel showers tend to have wall-mounted shampoo dispensers, to prevent millions of small plastic bottles from winding up in the landfill every year.

And most controversial (to Americans) of all, your room key has to be inserted by the hotel-room door to turn on power and air-conditioning.

Yes, it means that your room takes a couple of minutes to cool when you return in the summer. But it also means that you can’t leave for the day with all lights and chillers blazing. (As a handy by-product, you can’t misplace your room key, either.)

* Speaking of room keys: the hotels we stayed in all had stripeless key cards. That is, you just place your key card next to a sensor rather than inserting it into a slot. The beauty of this system is that there’s no magnetic stripe to get demagnetized by a phone in your pocket.

* I won’t point out how much less expensive cellphone service is here, and how superior the coverage.

* In one of our hotels, there was no Wi-Fi in the rooms â€" only a wired connection, an Ethernet cable. Since our rooms were adjacent, we resorted to a sneaky trick you might need someday: we hooked up the Ethernet to the producer’s laptop in the middle room, and turned on Internet Sharing.

That’s a feature of both Mac OS X and Windows that turns any computer into a Wi-Fi hot spot. In our case, that meant that the laptops in the rooms on either side could get online.

* I didn’t bother signing up for one of those international roaming plans for my cellphone; it has stayed in airplane mode all week, except for Wi-Fi. I used services like Google Voice and Messages to send and receive text messages whenever I had an Internet signal.

* In Germany, T.S.A. doesn’t stand for “tub stacking agency.” Once you’re past the X-ray machine, you set your tub on edge in a special sloping track. It rolls on its own, gravity-style, back to the front of the line, where the next passenger grabs it. Nobody wastes time collecting them and hauling them around.

The power, water and time savings of the tweaks we’ve observed here are designed to address whole-world problems. And they’re something more American institutions might want to consider.

Instagram Deal Is Looking Better and Better

Facebook’s Instagram option is looking like a better bet than it was a year ago. The social network agreed to shell out $1 billion for the revenue-free photo-sharing app. Even paid for partially in overvalued stock, the deal looked pricey. Instagram’s growth spurt - it passed 100 million monthly users in the first quarter - suggests Facebook is turning a defensive move to its advantage.

Quarterly results show Facebook is doing well - revenue was up 38 percent. Earnings rose only 7 percent, but this is for a good reason. Mark Zuckerberg’s firm is increasing investment in areas of growth. Facebook has a history of creating new services and only later figuring out how to make them pay. Mobile users grew rapidly from 2010, but the company only rolled out ads for smartphones and tablets a year ago. Mobile now accounts for just under a third of advertising revenue.

The Instagram purchase, however, was risky even by Facebook’s standards. There was no assurance a free photo app would ever make money. And it raised questions about Facebook’s capabilities. Social networks are built around photo sharing, so why couldn’t Mr. Zuckerberg’s band of hackers build a better app at a cheaper price?

Such concerns are receding. When the deal closed, Facebook’s falling stock price meant the acquisition was valued at just over $700 million. The real action, however, was in user growth. Instagram has doubled its monthly user base since the acquisition. That is faster than Facebook was growing at a similar size. Mr. Zuckerberg says he is in no rush to capitalize, but is focusing on capturing more users and improving the app. But he did tease investors listening to Facebook’s conference call by saying companies were putting content on Instagram and wanted to do more.

Instagram has not generated any profit yet. But the potential payoff is increasing as the photo service grows and attracts more young users. And Facebook’s trajectory in mobile bodes well for the company - eventually - to find ways to turn Instagram into cash. The option Mr. Zuckerberg bought is closer to being in the money.

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