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Small Firm Could Turn the Vote On Dimon

The fate of Jamie Dimon of JPMorgan Chase could hinge on a small, London-based firm that is virtually unknown, even on Wall Street.

The firm, Governance for Owners, has been tasked with voting the shares of the bank’s largest shareholder â€" the asset management behemoth BlackRock â€" on the question of whether to split the jobs of chairman and chief executive. Mr. Dimon been chairman since 2006 and chief executive since 2005.

The shareholder vote on May 21 has emerged as a referendum on the leadership of Mr. Dimon after a multibillion-dollar trading loss last year and dust-ups with regulators. While not binding, a majority vote to have a separate chairman and chief executive would be a heavy blow to the influential banker.

It is not known how Governance for Owners will vote BlackRock’s approximately 6.5 percent stake, but a few influential shareholders could tip the outcome. Last year, some 40 percent of JPMorgan’s shares supported dividing the top jobs, although BlackRock did not.

Another call for a split came on Tuesday from Glass, Lewis, a shareholder advisory firm, which also urged investors to withhold support for six of the bank’s 11 directors. Its larger rival, Institutional Shareholder Services, on Friday supported a split and recommended against voting for three directors. Both reports raised questions about the independence of several board members.

“JPMorgan Chase strongly endorses the re-election of its current directors. This is the same board, risk committee and audit committee that helped guide the company through the financial crisis without a single losing quarter and has led the company through three years of record performance,” said Kristin Lemkau, a JPMorgan spokeswoman.

In deciding how to vote, some JPMorgan shareholders are weighing whether the board’s lead director, Lee Raymond, the no-nonsense former chief executive of Exxon Mobil, is a strong enough counterbalance to Mr. Dimon. Some question whether Mr. Raymond has pushed back enough on decisions made by Mr. Dimon, saying he and the board appear to have been largely reactive. His defenders point out that he is a strong personality and was instrumental in the decision earlier this year to slash Mr. Dimon’s compensation by more than 50 percent, to $11.5 million.

Having a strong lead director has been important to BlackRock. The firm has previously said that it supports companies that do not have an independent chairman if the lead director is a strong figure and has, for example, the power to set board meetings and call meetings where management is not present.

In voting, Governance for Owners does not have to follow BlackRock’s corporate governance philosophy, but will take it into account, according to people briefed on the matter. Governance for Owners, which advises shareholders on how to vote and also runs a small shareholder activism fund, did not respond to requests for comment.

BlackRock outsourced its voting because of a provision in the Bank Holding Company Act. Because of its ties to the PNC Financial Services Group, BlackRock is required to outsource its votes to independent third parties when ownership exceeds a certain threshold. This provision is aimed at stopping any one company from having inordinate influence over the banking industry. BlackRock appears to be the only major JPMorgan shareholder to be affected this way.

Behind the scenes, JPMorgan has been aggressively working to persuade shareholders to support having Mr. Dimon hold both the chairman and chief executive titles. Most shareholders will not vote until the week before the May 21 meeting and in the leadup, board members are sitting down with some of JPMorgan’s biggest shareholders to make their case.

“There’s a fundamental conflict in combining the roles of chairman and C.E.O.,” Anne Simpson, the director of corporate governance at Calpers, the big California public pension fund that is the bank’s 50th-biggest shareholder. “It’s all thrown into stark relief when you’re dealing with a company that’s too big to fail.” The pension fund plans to vote for a split.

Some directors and top bank executives say privately that it should be up to the board, not shareholders, to make the decision to sever the two roles.

They also contend that shareholders need to put the trading loss by the bank’s chief investment office in London in context. While the loss was damaging, they note it was an isolated incident and in some ways things have never been better at the bank. Last month, the bank reported its 12th consecutive quarterly profit, aided by strong revenue gains from investment banking and mortgage-related activity.

Still there is some concern that investors are unhappy with the fallout from the trading losses and persistent regulatory issues, wondering whether a board shake-up is needed to rein in Mr. Dimon.

The report by I.S.S. cites “material failures of stewardship and risk oversight” by the bank’s board after a multibillion-dollar trading loss last year. (Both I.S.S. and Glass, Lewis do not actually vote shares, but many investors follow their recommendations, or use them as a basis on how to vote.)

I.S.S.’s pointed criticism of JPMorgan directors and its recommendation that shareholders withhold support for three who serve on the board’s risk policy committee â€" David M. Cote, James S. Crown and Ellen V. Futter â€" was a rare move for the organization, which noted that its recommendation was usually only under “extraordinary circumstances.”

In its report, Glass, Lewis echoed the criticism of directors on the risk policy committee and recommended votes against three additional directors: Crandall C. Bowles, James A. Bell and Laban P. Jackson, who are members of the board’s audit committee.

“We believe that shareholders may justifiably expect that the audit committee of one of the nation’s largest banks, and one of the largest participants in the global capital and derivative markets, should act to ensure that the bank’s traders cannot obfuscate the values of their positions with as much ease as evidently occurred in the London Whale matter,” Glass, Lewis wrote.

Both the Glass, Lewis and I.S.S. reports raise questions about the independence of several board members.

The directors, the reports note, have business relationships with JPMorgan. Crandall C. Bowles, for example, as chairman of the board of Springs Industries, has a financial relationship with JPMorgan. The bank, according to I.S.S., is currently “acting as financial adviser” to Springs Industries and could participate “in financing” for a possible acquisition.

The financial relationships are transparent and fully disclosed to regulators and investors, a person close to the bank noted.

Michael J. de la Merced contributed reporting.



A Humbled Kleiner Perkins Adjusts Its Strategy

During the dot-com boom, Kleiner Perkins Caufield & Byers, the venture capital investment firm, all but minted money, making prescient early investments in Netscape Communications, Amazon.com and Google and delivering astonishing returns to investors. Along the way, it became a symbol of Silicon Valley.

But the firm has hit a rough patch over the last decade, frustrated by unsuccessful forays into clean technology and by a catch-up effort to take later-stage stakes in social media companies.

Kleiner has held a series of status-report meetings with its outside investors this year, acknowledging that recent fund performance “wasn’t great,” one attendee said. “They really believed green tech was going to be the next big technology wave,” this investor added.

Kleiner has also cut some management fees and reorganized its investment approach, eliminating three “silos” that separated teams making investments in clean technology, health care and technology. The firm has added more investing partners with digital expertise, like the former Twitter executive Mike Abbott, after it missed the early window on hot media start-ups like Facebook and Twitter and jumped in later at higher valuations.

A spokeswoman for Kleiner, which manages $7 billion, said the firm’s partners declined to comment.

The latest setback is the fading fortunes of Fisker Automotive, the green-car start-up backed by Kleiner that has laid off much of its work force and hired bankruptcy advisers.

At a Congressional hearing last month, Republican members of a House oversight committee asked witnesses from Fisker and the Energy Department whether Democratic political contributions and influence of Kleiner partners, led by the Obama adviser John Doerr, had helped Fisker gain $192 million in government green-energy loans.

While the questions were clearly partisan, the spotlight on Kleiner added a new level of public criticism to a reputational injury that has been building for several years, denting Kleiner’s status as one of the top technology venture capital firms.

Some experts predict Fisker could become one of the biggest venture-capital losses ever. Fisker has raised $1.1 billion in venture financing, the most for any clean-technology start-up, compared with $848 million for Solyndra, the solar-panel maker that filed for bankruptcy in 2011, according to the Cleantech Group, which tracks such investments.

Kleiner investors say that three venture funds the firm raised in 1994, 1996 and 1999 â€" which contained Juniper Networks, Amazon and Google â€" delivered staggering returns. The 1994 fund delivered 32 times the investors’ money, the 1996 fund 17 times, and 1999, six times. But since then, they note, funds raised in 2000 and 2004 have been unprofitable. A $1 billion fund raised in 2008 devoted to clean technology is also showing losses, one investor says.

“They had stellar returns for years, but their reputation has been tarnished by performance of late,” said Nancy Lambert, a former private banker at Citigroup who is now an independent adviser to wealthy families and foundations. “It doesn’t seem like investors are turning away, they’re just more cautious.”

Kleiner’s investors have included top universities like Harvard and Yale, the Ford Foundation and certain venture capital funds-of-funds.

The firm’s reputation was also dented last year when a junior partner, Ellen Pao, filed a sexual discrimination lawsuit. She contended that the firm improperly retaliated against her after she complained about being pressured into a sexual relationship by a colleague, resulting in lower compensation and poor performance reviews.

Kleiner has denied all the claims and said that it chose not to promote her based on valid “performance concerns.”

The shift in Kleiner’s fortunes is emblematic of the venture capital business as a whole, where the titanic returns from the late-1990s dot-com bubble have ebbed, and investor dollars flowing into new funds have slowed as well.

“The days of huge returns in venture are long gone,” said Scott Ryles, a longtime Silicon Valley banker who has led two Kleiner-backed companies.

Venture funds returned 35.7 percent annually in the decade ending in 2000, but they lost 1.9 percent annually in the decade ending in 2010, according to data compiled by Cambridge Associates for the National Venture Capital Association.

As a result, annual commitments to venture funds have fallen from $56.1 billion in the four years ending in 2001, to $17.3 billion in the four years ending in 2012, according to Thomson Reuters data compiled by the association.

Founded in 1972, Kleiner scored big early returns on Tandem Computers, a maker of processors used by banks and brokerage firms, and Genentech, the biotechnology start-up whose initial public offering electrified the stock market in 1980. The firm cashed in on a spate of hot Internet offerings, led by Netscape and Amazon, during the dot-com bubble.

About five years after the bubble burst, clean technology became Kleiner’s marquee strategy. Kleiner hired Al Gore, the former vice president, soon after his 2006 film about global warming, “An Inconvenient Truth,” won two Oscars. A member of President Obama’s economic recovery advisory board, Mr. Doerr has advocated for government policies and subsidies favoring clean-technology innovation.

“Going green is bigger than the Internet,” Mr. Doerr said in 2007. “It could be the biggest economic opportunity of the 21st century.”

Kleiner has invested in 88 clean-technology companies since 1999, more than any other venture firm, according to the Cleantech Group. They include the personal-transport device Segway, the fuel-cell developer Bloom Energy and the utility smart-grid provider Silver Spring Networks, which went public in March.

In funds raised in 2006, 2008 and 2010, green technology was one of three main strategies, under the aegis of the general partners Ray Lane and Bill Joy â€" who have since both become partners emeritus. While still committed to clean technology, Kleiner has played down the sector and sought to make less expensive investments within it.

Some of the clean technology bets, like the Mascoma Corporation, a specialized ethanol start-up, and Sundrop Fuels, a developer of biogasoline, require plants that cost hundreds of millions of dollars, according to Pavel Molchanov, a biofuels analyst at Raymond James. In March, Mascoma withdrew plans for a stock offering first filed in September 2011, citing market conditions.

The green-technology portfolio has had its share of flops. Think Global, a Norwegian electric-car company, failed in 2011. Kleiner’s investment in MiaSolé, a solar-panel producer, was wiped out when the company was sold to a Chinese clean-energy company at the end of last year. Plans have stalled for V-Vehicle, a plastic-car company later renamed Next Autoworks, which also had backing from Google Ventures and T. Boone Pickens.

Because Kleiner did not invest in earlier clean-technology blowups like Solyndra and Range Fuels, which also received government loans, Fisker presents a new level of public criticism. At the House hearing on April 24, Jim Jordan, Republican of Ohio, asked Fisker’s founder and former executive chairman, Henrik Fisker, about Kleiner’s ability to help obtain government loans.

Kleiner Perkins has helped raise “over $2 million in political contributions in the 2008 election cycle, most of which went to Democrats including President Obama,” Mr. Jordan said. He asked if that, or Mr. Doerr’s role as an Obama adviser, helped Fisker “to get a loan, get taxpayer money from the Department of Energy?”

Mr. Fisker denied “any undue political favors or anything like that,” and noted that it was Mr. Lane, not Mr. Doerr, who had served as Kleiner’s representative on the Fisker board.

As it focused on green technology, Kleiner lost ground to some rivals like Accel Partners and Greylock Partners, which made early investments in Facebook, which Kleiner missed. The firm seemed to address the issue in late 2010 by hiring Mary Meeker, the former Morgan Stanley Internet analyst known as the “Queen of the Net” during the bubble.

Ms. Meeker has led a $1 billion digital growth fund started in 2011 that has made about 25 later-stage bets including several hot social media start-ups, putting Kleiner in that game but at higher valuations.

While a bet on Facebook is up slightly, its shares of the game developer Zynga are down sharply. Kleiner’s biggest current holding, in Twitter, is valued at more than double Kleiner’s cost, and the fund is up so far over all, a person briefed on the fund said.

Some of Kleiner’s later clean-technology investments have a more digital focus, like Nest Labs, which makes smart thermostats, OPower, which offers energy-efficiency strategies for utility customers, and Clean Power Finance, which finances solar-power installations.

But one of its largest investments, at more than $100 million, is Fisker. In mid-April, the Energy Department seized $21 million from a Fisker reserve account about 10 days before a scheduled loan repayment. Fisker is seeking new funds. But with its car production stalled since mid-2012, any outcome is likely to shred the value of Kleiner’s stake.



A Humbled Kleiner Perkins Adjusts Its Strategy

During the dot-com boom, Kleiner Perkins Caufield & Byers, the venture capital investment firm, all but minted money, making prescient early investments in Netscape Communications, Amazon.com and Google and delivering astonishing returns to investors. Along the way, it became a symbol of Silicon Valley.

But the firm has hit a rough patch over the last decade, frustrated by unsuccessful forays into clean technology and by a catch-up effort to take later-stage stakes in social media companies.

Kleiner has held a series of status-report meetings with its outside investors this year, acknowledging that recent fund performance “wasn’t great,” one attendee said. “They really believed green tech was going to be the next big technology wave,” this investor added.

Kleiner has also cut some management fees and reorganized its investment approach, eliminating three “silos” that separated teams making investments in clean technology, health care and technology. The firm has added more investing partners with digital expertise, like the former Twitter executive Mike Abbott, after it missed the early window on hot media start-ups like Facebook and Twitter and jumped in later at higher valuations.

A spokeswoman for Kleiner, which manages $7 billion, said the firm’s partners declined to comment.

The latest setback is the fading fortunes of Fisker Automotive, the green-car start-up backed by Kleiner that has laid off much of its work force and hired bankruptcy advisers.

At a Congressional hearing last month, Republican members of a House oversight committee asked witnesses from Fisker and the Energy Department whether Democratic political contributions and influence of Kleiner partners, led by the Obama adviser John Doerr, had helped Fisker gain $192 million in government green-energy loans.

While the questions were clearly partisan, the spotlight on Kleiner added a new level of public criticism to a reputational injury that has been building for several years, denting Kleiner’s status as one of the top technology venture capital firms.

Some experts predict Fisker could become one of the biggest venture-capital losses ever. Fisker has raised $1.1 billion in venture financing, the most for any clean-technology start-up, compared with $848 million for Solyndra, the solar-panel maker that filed for bankruptcy in 2011, according to the Cleantech Group, which tracks such investments.

Kleiner investors say that three venture funds the firm raised in 1994, 1996 and 1999 â€" which contained Juniper Networks, Amazon and Google â€" delivered staggering returns. The 1994 fund delivered 32 times the investors’ money, the 1996 fund 17 times, and 1999, six times. But since then, they note, funds raised in 2000 and 2004 have been unprofitable. A $1 billion fund raised in 2008 devoted to clean technology is also showing losses, one investor says.

“They had stellar returns for years, but their reputation has been tarnished by performance of late,” said Nancy Lambert, a former private banker at Citigroup who is now an independent adviser to wealthy families and foundations. “It doesn’t seem like investors are turning away, they’re just more cautious.”

Kleiner’s investors have included top universities like Harvard and Yale, the Ford Foundation and certain venture capital funds-of-funds.

The firm’s reputation was also dented last year when a junior partner, Ellen Pao, filed a sexual discrimination lawsuit. She contended that the firm improperly retaliated against her after she complained about being pressured into a sexual relationship by a colleague, resulting in lower compensation and poor performance reviews.

Kleiner has denied all the claims and said that it chose not to promote her based on valid “performance concerns.”

The shift in Kleiner’s fortunes is emblematic of the venture capital business as a whole, where the titanic returns from the late-1990s dot-com bubble have ebbed, and investor dollars flowing into new funds have slowed as well.

“The days of huge returns in venture are long gone,” said Scott Ryles, a longtime Silicon Valley banker who has led two Kleiner-backed companies.

Venture funds returned 35.7 percent annually in the decade ending in 2000, but they lost 1.9 percent annually in the decade ending in 2010, according to data compiled by Cambridge Associates for the National Venture Capital Association.

As a result, annual commitments to venture funds have fallen from $56.1 billion in the four years ending in 2001, to $17.3 billion in the four years ending in 2012, according to Thomson Reuters data compiled by the association.

Founded in 1972, Kleiner scored big early returns on Tandem Computers, a maker of processors used by banks and brokerage firms, and Genentech, the biotechnology start-up whose initial public offering electrified the stock market in 1980. The firm cashed in on a spate of hot Internet offerings, led by Netscape and Amazon, during the dot-com bubble.

About five years after the bubble burst, clean technology became Kleiner’s marquee strategy. Kleiner hired Al Gore, the former vice president, soon after his 2006 film about global warming, “An Inconvenient Truth,” won two Oscars. A member of President Obama’s economic recovery advisory board, Mr. Doerr has advocated for government policies and subsidies favoring clean-technology innovation.

“Going green is bigger than the Internet,” Mr. Doerr said in 2007. “It could be the biggest economic opportunity of the 21st century.”

Kleiner has invested in 88 clean-technology companies since 1999, more than any other venture firm, according to the Cleantech Group. They include the personal-transport device Segway, the fuel-cell developer Bloom Energy and the utility smart-grid provider Silver Spring Networks, which went public in March.

In funds raised in 2006, 2008 and 2010, green technology was one of three main strategies, under the aegis of the general partners Ray Lane and Bill Joy â€" who have since both become partners emeritus. While still committed to clean technology, Kleiner has played down the sector and sought to make less expensive investments within it.

Some of the clean technology bets, like the Mascoma Corporation, a specialized ethanol start-up, and Sundrop Fuels, a developer of biogasoline, require plants that cost hundreds of millions of dollars, according to Pavel Molchanov, a biofuels analyst at Raymond James. In March, Mascoma withdrew plans for a stock offering first filed in September 2011, citing market conditions.

The green-technology portfolio has had its share of flops. Think Global, a Norwegian electric-car company, failed in 2011. Kleiner’s investment in MiaSolé, a solar-panel producer, was wiped out when the company was sold to a Chinese clean-energy company at the end of last year. Plans have stalled for V-Vehicle, a plastic-car company later renamed Next Autoworks, which also had backing from Google Ventures and T. Boone Pickens.

Because Kleiner did not invest in earlier clean-technology blowups like Solyndra and Range Fuels, which also received government loans, Fisker presents a new level of public criticism. At the House hearing on April 24, Jim Jordan, Republican of Ohio, asked Fisker’s founder and former executive chairman, Henrik Fisker, about Kleiner’s ability to help obtain government loans.

Kleiner Perkins has helped raise “over $2 million in political contributions in the 2008 election cycle, most of which went to Democrats including President Obama,” Mr. Jordan said. He asked if that, or Mr. Doerr’s role as an Obama adviser, helped Fisker “to get a loan, get taxpayer money from the Department of Energy?”

Mr. Fisker denied “any undue political favors or anything like that,” and noted that it was Mr. Lane, not Mr. Doerr, who had served as Kleiner’s representative on the Fisker board.

As it focused on green technology, Kleiner lost ground to some rivals like Accel Partners and Greylock Partners, which made early investments in Facebook, which Kleiner missed. The firm seemed to address the issue in late 2010 by hiring Mary Meeker, the former Morgan Stanley Internet analyst known as the “Queen of the Net” during the bubble.

Ms. Meeker has led a $1 billion digital growth fund started in 2011 that has made about 25 later-stage bets including several hot social media start-ups, putting Kleiner in that game but at higher valuations.

While a bet on Facebook is up slightly, its shares of the game developer Zynga are down sharply. Kleiner’s biggest current holding, in Twitter, is valued at more than double Kleiner’s cost, and the fund is up so far over all, a person briefed on the fund said.

Some of Kleiner’s later clean-technology investments have a more digital focus, like Nest Labs, which makes smart thermostats, OPower, which offers energy-efficiency strategies for utility customers, and Clean Power Finance, which finances solar-power installations.

But one of its largest investments, at more than $100 million, is Fisker. In mid-April, the Energy Department seized $21 million from a Fisker reserve account about 10 days before a scheduled loan repayment. Fisker is seeking new funds. But with its car production stalled since mid-2012, any outcome is likely to shred the value of Kleiner’s stake.



A Humbled Kleiner Perkins Adjusts Its Strategy

During the dot-com boom, Kleiner Perkins Caufield & Byers, the venture capital investment firm, all but minted money, making prescient early investments in Netscape Communications, Amazon.com and Google and delivering astonishing returns to investors. Along the way, it became a symbol of Silicon Valley.

But the firm has hit a rough patch over the last decade, frustrated by unsuccessful forays into clean technology and by a catch-up effort to take later-stage stakes in social media companies.

Kleiner has held a series of status-report meetings with its outside investors this year, acknowledging that recent fund performance “wasn’t great,” one attendee said. “They really believed green tech was going to be the next big technology wave,” this investor added.

Kleiner has also cut some management fees and reorganized its investment approach, eliminating three “silos” that separated teams making investments in clean technology, health care and technology. The firm has added more investing partners with digital expertise, like the former Twitter executive Mike Abbott, after it missed the early window on hot media start-ups like Facebook and Twitter and jumped in later at higher valuations.

A spokeswoman for Kleiner, which manages $7 billion, said the firm’s partners declined to comment.

The latest setback is the fading fortunes of Fisker Automotive, the green-car start-up backed by Kleiner that has laid off much of its work force and hired bankruptcy advisers.

At a Congressional hearing last month, Republican members of a House oversight committee asked witnesses from Fisker and the Energy Department whether Democratic political contributions and influence of Kleiner partners, led by the Obama adviser John Doerr, had helped Fisker gain $192 million in government green-energy loans.

While the questions were clearly partisan, the spotlight on Kleiner added a new level of public criticism to a reputational injury that has been building for several years, denting Kleiner’s status as one of the top technology venture capital firms.

Some experts predict Fisker could become one of the biggest venture-capital losses ever. Fisker has raised $1.1 billion in venture financing, the most for any clean-technology start-up, compared with $848 million for Solyndra, the solar-panel maker that filed for bankruptcy in 2011, according to the Cleantech Group, which tracks such investments.

Kleiner investors say that three venture funds the firm raised in 1994, 1996 and 1999 â€" which contained Juniper Networks, Amazon and Google â€" delivered staggering returns. The 1994 fund delivered 32 times the investors’ money, the 1996 fund 17 times, and 1999, six times. But since then, they note, funds raised in 2000 and 2004 have been unprofitable. A $1 billion fund raised in 2008 devoted to clean technology is also showing losses, one investor says.

“They had stellar returns for years, but their reputation has been tarnished by performance of late,” said Nancy Lambert, a former private banker at Citigroup who is now an independent adviser to wealthy families and foundations. “It doesn’t seem like investors are turning away, they’re just more cautious.”

Kleiner’s investors have included top universities like Harvard and Yale, the Ford Foundation and certain venture capital funds-of-funds.

The firm’s reputation was also dented last year when a junior partner, Ellen Pao, filed a sexual discrimination lawsuit. She contended that the firm improperly retaliated against her after she complained about being pressured into a sexual relationship by a colleague, resulting in lower compensation and poor performance reviews.

Kleiner has denied all the claims and said that it chose not to promote her based on valid “performance concerns.”

The shift in Kleiner’s fortunes is emblematic of the venture capital business as a whole, where the titanic returns from the late-1990s dot-com bubble have ebbed, and investor dollars flowing into new funds have slowed as well.

“The days of huge returns in venture are long gone,” said Scott Ryles, a longtime Silicon Valley banker who has led two Kleiner-backed companies.

Venture funds returned 35.7 percent annually in the decade ending in 2000, but they lost 1.9 percent annually in the decade ending in 2010, according to data compiled by Cambridge Associates for the National Venture Capital Association.

As a result, annual commitments to venture funds have fallen from $56.1 billion in the four years ending in 2001, to $17.3 billion in the four years ending in 2012, according to Thomson Reuters data compiled by the association.

Founded in 1972, Kleiner scored big early returns on Tandem Computers, a maker of processors used by banks and brokerage firms, and Genentech, the biotechnology start-up whose initial public offering electrified the stock market in 1980. The firm cashed in on a spate of hot Internet offerings, led by Netscape and Amazon, during the dot-com bubble.

About five years after the bubble burst, clean technology became Kleiner’s marquee strategy. Kleiner hired Al Gore, the former vice president, soon after his 2006 film about global warming, “An Inconvenient Truth,” won two Oscars. A member of President Obama’s economic recovery advisory board, Mr. Doerr has advocated for government policies and subsidies favoring clean-technology innovation.

“Going green is bigger than the Internet,” Mr. Doerr said in 2007. “It could be the biggest economic opportunity of the 21st century.”

Kleiner has invested in 88 clean-technology companies since 1999, more than any other venture firm, according to the Cleantech Group. They include the personal-transport device Segway, the fuel-cell developer Bloom Energy and the utility smart-grid provider Silver Spring Networks, which went public in March.

In funds raised in 2006, 2008 and 2010, green technology was one of three main strategies, under the aegis of the general partners Ray Lane and Bill Joy â€" who have since both become partners emeritus. While still committed to clean technology, Kleiner has played down the sector and sought to make less expensive investments within it.

Some of the clean technology bets, like the Mascoma Corporation, a specialized ethanol start-up, and Sundrop Fuels, a developer of biogasoline, require plants that cost hundreds of millions of dollars, according to Pavel Molchanov, a biofuels analyst at Raymond James. In March, Mascoma withdrew plans for a stock offering first filed in September 2011, citing market conditions.

The green-technology portfolio has had its share of flops. Think Global, a Norwegian electric-car company, failed in 2011. Kleiner’s investment in MiaSolé, a solar-panel producer, was wiped out when the company was sold to a Chinese clean-energy company at the end of last year. Plans have stalled for V-Vehicle, a plastic-car company later renamed Next Autoworks, which also had backing from Google Ventures and T. Boone Pickens.

Because Kleiner did not invest in earlier clean-technology blowups like Solyndra and Range Fuels, which also received government loans, Fisker presents a new level of public criticism. At the House hearing on April 24, Jim Jordan, Republican of Ohio, asked Fisker’s founder and former executive chairman, Henrik Fisker, about Kleiner’s ability to help obtain government loans.

Kleiner Perkins has helped raise “over $2 million in political contributions in the 2008 election cycle, most of which went to Democrats including President Obama,” Mr. Jordan said. He asked if that, or Mr. Doerr’s role as an Obama adviser, helped Fisker “to get a loan, get taxpayer money from the Department of Energy?”

Mr. Fisker denied “any undue political favors or anything like that,” and noted that it was Mr. Lane, not Mr. Doerr, who had served as Kleiner’s representative on the Fisker board.

As it focused on green technology, Kleiner lost ground to some rivals like Accel Partners and Greylock Partners, which made early investments in Facebook, which Kleiner missed. The firm seemed to address the issue in late 2010 by hiring Mary Meeker, the former Morgan Stanley Internet analyst known as the “Queen of the Net” during the bubble.

Ms. Meeker has led a $1 billion digital growth fund started in 2011 that has made about 25 later-stage bets including several hot social media start-ups, putting Kleiner in that game but at higher valuations.

While a bet on Facebook is up slightly, its shares of the game developer Zynga are down sharply. Kleiner’s biggest current holding, in Twitter, is valued at more than double Kleiner’s cost, and the fund is up so far over all, a person briefed on the fund said.

Some of Kleiner’s later clean-technology investments have a more digital focus, like Nest Labs, which makes smart thermostats, OPower, which offers energy-efficiency strategies for utility customers, and Clean Power Finance, which finances solar-power installations.

But one of its largest investments, at more than $100 million, is Fisker. In mid-April, the Energy Department seized $21 million from a Fisker reserve account about 10 days before a scheduled loan repayment. Fisker is seeking new funds. But with its car production stalled since mid-2012, any outcome is likely to shred the value of Kleiner’s stake.



White Makes Case for Bigger S.E.C. Budget

Mary Jo White cleared a rite of passage on Tuesday: She asked Congress for more money.

Like most Securities and Exchange Commission chiefs before her, Ms. White testified before a Senate Appropriations subcommittee to outline her agency’s need for a bigger budget. In the testimony, she called for new resources to complete an overhaul of financial regulation and to keep a closer eye on Wall Street fraud.

Under President Obama’s budget plan, the S.E.C. is seeking $1.67 billion for the 2014 fiscal year, a roughly 26 percent uptick from the current level.

“The S.E.C.’s current level of resources still presents significant challenges as we seek to keep pace with the growing size and complexity of the securities markets and fulfill our broad mandates and responsibilities,” Ms. White said in written testimony to the Senate subcommittee.

Ms. White’s predecessors have wrangled with Congress for years, seeking to pry open its purse strings. Under Mary L. Schapiro, who ran the agency in the aftermath of the financial crisis, the S.E.C. squeezed out a roughly 50 percent budget increase.

Republican lawmakers have balked a major budget hikes, saying the agency should learn to do more with less.

But Ms. White, who joined the agency last month, noted that the S.E.C.’s budget comes at no cost to taxpayers. Rather, it’s “deficit-neutral,” meaning the cost is offset by fees the agency levies on the financial industry.

And her request, she noted, comes at a time when the agency is struggling to keep up. It has fallen behind in writing dozens of new rules for Wall Street under the Dodd-Frank Act. It also inherited new oversight powers over hedge funds and the $700 trillion derivatives market.

The agency’s examination of investment advisers has also lagged, Ms. White said. In the 2012 fiscal year, the S.E.C. inspected only about eight percent of registered investment advisers.

“The current level of resources is not sufficient to permit the S.E.C. to examine regulated entities and enforce compliance with the securities laws in a way that investors deserve and expect,” Ms. White said.

Ms. White, a former federal prosecutor turned white collar defense lawyer, emphasized a need for new cops on the Wall Street beat. Under the new budget plan, the S.E.C. would attempt to add 676 staff, including 131 for the enforcement division that polices financial fraud.

“Strong enforcement of the securities laws is necessary for investor confidence and is essential to the integrity of our financial markets,” she said.



Coty Said to Seek $700 Million in I.P.O.

Coty is seeking to raise about $700 million in its forthcoming initial public offering, a person briefed on the matter said on Tuesday, as the cosmetics maker moves forward with its market debut.

The company will likely seek to go public within the next month, people briefed on its plans said.

Coty, which first filed to go public last May, has considered an I.P.O. for some time. But it put aside those plans last year to pursue a $10.7 billion hostile bid for Avon Products Inc., its much bigger rival.

Despite having the backing of Coty’s parent, Joh. A. Benckiser, and no less than Berkshire Hathaway itself, the offer failed amid strong opposition from Avon’s board. Within days of withdrawing the offer, Coty lined up investment banks to prepare an initial public offering.

But it put those plans on hold last year amid the whipsawing of the markets. With major stock indexes reaching record highs, the company will try again to pull off an I.P.O.

Over its 108 years, Coty has grown from perfumes into a global purveyor of fragrances and high-end nail polishes, with products endorsed by the likes of Beyoncé and Jennifer Lopez.

Its offering is being led by Bank of America Merrill Lynch, JPMorgan Chase and Morgan Stanley.

News of the potential size of the offering and its timing was reported earlier by The Financial Times online.



Ruling Clears Way for A.I.G. Suit Against Bank of America

Ruling Clears Way for A.I.G. Suit Against Bank of America

Brendan McDermid/Reuters

The California judge’s finding may be bad news for other banks that sold troubled mortgage securities to A.I.G.

A California judge has opened the door for the American International Group to pursue a fraud claim of more than $7 billion against Bank of America for losses it suffered on mortgage securities sold under duress after the federal government rescued A.I.G. in 2008.  

The ruling, issued late Monday, is a setback for Bank of America, which has been trying to rid itself of numerous legal claims from investors who bought mortgage securities issued by the bank’s Countrywide Financial and Merrill Lynch units. In the California case, in which A.I.G., the giant insurance company, sued Bank of America over fraudulent mortgage securities, the bank had argued that A.I.G. had no standing to sue because it had transferred that right when it sold the instruments to the Federal Reserve Bank of New York in the fall of 2008.  

Mariana R. Pfaelzer, a federal judge in the central district of California, disagreed. She sided with A.I.G. in a ruling that also raised questions about the role of the Federal Reserve Bank of New York in the wake of its efforts to contain the huge damage from the financial crisis that erupted when Lehman Brothers was forced into bankruptcy in September 2008.

A.I.G. said in a statement that the company was “pleased by the court’s decision and looks forward to proceeding to the merits of its case.”

Asked to comment on the judge’s decision, Lawrence Grayson, a spokesman for Bank of America, said the court ruling allowed it to “pursue additional discovery before the matter is fully decided.” He added that the bank believed it has strong defenses to A.I.G.’s accusations.

New York Fed officials, testifying earlier on behalf of Bank of America, maintained that they had intended to receive the rights to bring fraud claims related to the mortgage securities purchased by Maiden Lane II, the investment vehicle set up to complete the A.I.G. bailout.

But in depositions in March, Fed officials could produce no evidence that the fraud claims had been specifically transferred under the deal, as required under New York law. Judge Pfaelzer wrote: “To the extent that the Federal Reserve Bank of New York intended for Maiden Lane II to acquire these claims, its intentions were not expressed to A.I.G.”

The Fed’s view on who held the legal claims for fraudulent mortgages in Maiden Lane II has shifted over time. In October 2011, Thomas C. Baxter Jr., the general counsel at the New York Fed, said in a letter to A.I.G. that he and his colleagues “agree that A.I.G. has the right to seek damages” under securities laws for the instruments it sold to Maiden Lane II.

But after A.I.G. sued Bank of America, that opinion changed. Last December, James M. Mahoney, a vice president at the New York Fed who said he had principal responsibility for the Maiden Lane II transaction, testified that the New York Fed intended to receive litigation claims associated with the troubled mortgage securities. Bank of America filed Mr. Mahoney’s testimony in support of its position that A.I.G. had no standing to sue.

Yet in a deposition three months later, Mr. Mahoney was asked if he could recall discussing the assignment of fraud claims from A.I.G. to the Fed. He answered: “No, I do not.”

The New York Fed never filed any claims against banks relating to the A.I.G. rescue that might have benefited taxpayers. New York Fed officials agreed to testify on behalf of Bank of America as part of a confidential settlement with the bank that came to light in February. Under the terms of the deal, the New York Fed released Bank of America from all fraud claims on mortgage securities the Fed had bought.

A spokesman for the New York Fed declined to comment on the ruling. Previously, the New York Fed said it had agreed to testify in the case because doing so helped it obtain the best possible settlement for Maiden Lane II.

While Judge Pfaelzer’s ruling added to the legal claims faced by Bank of America, it emerged after the bank successfully disposed of several others. On Monday, in the latest such effort, the bank agreed to pay $1.7 billion to settle a long-running dispute with MBIA, a mortgage bond insurer.

The bank could erase another claim on May 30 if a judge in New York State court allows an $8.5 billion settlement struck between Countrywide and a group of big investors in 2011 to be completed. Investors objecting to the deal say the amount of the settlement is insufficient.

The California judge’s finding that A.I.G. has standing to sue Bank of America may also be bad news for other banks that sold troubled mortgage securities to the insurer. A.I.G. has not yet sued other institutions related to the securities that went into Maiden Lane II; at least $11 billion in losses involve other banks.

“We are eager to start discovery,” said Michael Carlinsky, a partner at Quinn Emanuel Urquhart & Sullivan who led the arguments for A.I.G., “and get the case before a jury.”



Pleased by Apple’s Move, Einhorn Raises His Bet

When Apple agreed to extensively expand its stock buyback program last month, David Einhorn was pleased.

So pleased, in fact, that he has increased his stake in the iPad maker.

During an earnings call for another company that his hedge fund owns, Mr. Einhorn said that his firm, Greenlight Capital, raised the size of its Apple holdings. The hedge fund owned about 1.3 million shares as of Dec. 31, making it Apple’s 75th-largest investor.

Last month, Apple announced that it would quintuple the size of its share buybacks, to $60 billion, and would increase its dividend by 15 percent. The moves came after Mr. Einhorn publicly pushed Apple to pay out some of its enormous war chest â€" now totaling some $145 billion â€" to shareholders.

Here’s what Mr. Einhorn said on Tuesday:

Apple took a major step forward by issuing debt and announcing it will return $100 billion to shareholders over the next three years. This is a vastly more shareholder-friendly capital allocation policy then where Apple stood a few months ago. We have added to our Apple position. Now we just wait for the release of Apple’s next blockbuster product.



O’Melveny & Myers Hires Away 3 Senior Bankruptcy Lawyers

Three partners in the bankruptcy group at the law firm Cadwalader Wickersham & Taft are leaving to join O’Melveny & Myers.

O’Melveny announced Tuesday that it hired the co-chairs of the bankruptcy practice, John Rapisardi and George Davis, as well as Peter Friedman, a Cadwalader partner based in Washington.

The move highlights an accelerating revolving door at the country’s largest law firms, with partners increasingly hopping from firm to firm. It was about six years ago that the lawyers joined Cadwalader from Weil, Gotshal & Manges.

The hiring is a coup for O’Melveny. The Cadwalader team has handled a number of high-profile assignments in recent years, including representing the United States Treasury Department and President Obama’s task force in the bankruptcies of Chrysler and General Motors.

They also served as counsel to LyondellBasell in the petrochemical giant’s bankruptcy proceeding.

O’Melveny has been an aggressive hire of lateral partners, including its acquisition last year of five corporate partners from Dewey & LeBoeuf, the law firm that collapsed last year. It also brought on Michael J. Schiavone, a capital markets lawyer formerly at Shearman & Sterling.

Based in New York, Mr. Rapisardi and Mr. Davis will become global heads of O’Melveny’s bankruptcy and restructuring practice. Mr. Friedman will continue to work out of Washington.

Their departure comes just a few months after the firm brought on James C. Woolery, a former senior investment banker at JPMorgan Chase and onetime partner at Cravath, Swaine & Moore, as its deputy chairman.

Cadwalader issued a statement wishing their departing partners well, and announcing that Gregory M. Petrick and Mark C. Ellenberg would become the bankruptcy department’s new co-chairs.



Hasty Deal to Save Chrysler in Depths of Crisis Returns to Haunt

All deal makers have a number they want to hit. In the case of Chrysler, the United Automobile Workers union has one number, and Sergio Marchionne, the chief executive of both Chrysler and Fiat, has another.

Alas, they are $6 billion apart.

Fiat and the union workers’ health care trust are fighting over that yawning gulf in a court in Delaware, arguing over buyout arrangements struck in the depths of the financial crisis when Chrysler was arguably worthless. It’s a lesson in how deals struck hastily in the heat of crisis can come back to haunt in unexpected ways.

In 2009, Steven Rattner and his team at the Treasury Department ably brokered what could only be described as a prayer. Chrysler would be thrown into bankruptcy. Afterward, Fiat would own 20 percent, the Treasury Department would get 10 percent, and the Canadian government, 2 percent. The remaining 68 percent of Chrysler was given to the union workers’ health care trust, formed to pay out Chrysler health care benefits to retirees. In addition to a majority ownership of Chrysler, the trust was also given a $4.59 billion note from Chrysler to eliminate the company’s obligation to provide any further health benefits to retirees.

The deal was viewed as a bargain for a federal government desperate to save the automaker. At the time, Chrysler was a loser that most thought could not be saved. There were no buyers other than Fiat. And so the government was happy to give Fiat control, even though the Italian company had only a 20 percent stake. For this, Fiat paid nothing, instead offering its expertise.

As for the health care trust, the Treasury Department used the bankruptcy process to jump it ahead in priority. In a normal bankruptcy, the trust would most likely have been left with nothing. Instead, the government arranged for the trust to receive more than it otherwise would and more than almost all of Chrysler’s creditors. The reason was to ensure employee peace. The government could do this because it was the only lender in town, putting up $8.5 billion of taxpayer money in the bankruptcy alone.

If it succeeded with Chrysler, Fiat wanted a clear path to acquire all of the company. So, Fiat negotiated an option to acquire 40 percent of the interests held by the health care trust and all of the interests held by the government. Starting in July 2012, the Italian company was allowed to purchase up to 20 percent of these covered interests every six months. Fiat also negotiated a series of arrangements that allowed it to increase its stake by making improvements to Chrysler.

These deals, which were cut in dark times, are coming back to bite.

Chrysler has since recovered and is now profitable. In the gloomy European market, Fiat is struggling.

To save Fiat, Mr. Marchionne wants to put the two automakers together. In 2011, Fiat took a step in this direction by purchasing the stakes held by the United States and Canadian governments for $640 million.

Now, it’s the turn of the U.A.W.’s health care trust, known as the voluntary employee beneficiary association, or VEBA. But with real money at stake this time, the parties are ready to fight Detroit-style.

Last fall, Fiat exercised its option to buy 3.3 percent of Chrysler from the trust. Fiat calculated the price from the option agreement, and came to $139.7 million, valuing all of Chrysler at about $4.2 billion.

VEBA protested, asserting that Fiat misread the agreement. According to the trust, Fiat’s calculations have a number of flaws, which means that this purchase should be at least $342 million and perhaps more, valuing Chrysler at more than $10 billion.

That means there is a $6 billion difference in value arising from each side’s interpretation of the agreement.

The parties are litigating this gap, and the future of Mr. Marchionne’s vision for Chrysler hangs in the balance. If the Delaware court rules for Fiat, Mr. Marchionne will continue to build his stake in Chrysler with an eye toward a buyout of the company.

If the court finds for VEBA, however, Mr. Marchionne may halt his pursuit, unable to find the billions to pay the trust. Still, at a minimum, it would mean billions more for Chrysler’s retirees.

There is some irony in the dispute, given that the goal of the options was to get a value of what Chrysler was worth and avoid disputes.

But there is a big hole in the language spelling out how the option price works. The health care trust is claiming that the value of Chrysler should be calculated without counting the $4.5 billion note issued to it by the company. Fiat disputes this because the note reduces the value of Chrysler by about $4.5 billion.

Why the lawyers didn’t specifically address this in the contract is a mystery. Whatever the reason, the lawyers used a term that talked about “debt for borrowed money,” and health care trust argues that the note wasn’t for money and so should be excluded.

Perhaps we should call it a $4.5 billion drafting error.

At a hearing before the Delaware judge a few weeks ago, VEBA also adopted another strategy â€" stall. The health care trust threw up all sorts of problems with the purchase price calculation, and also said a trial was needed.

The strategy is simple. The longer the delay, the more likely that Mr. Marchionne will cave and come to the negotiating table, paying more money.

As for those legal arguments and the dispute over the purchase price language, they highlight how small details can prove to be very important. Billions of dollars now turn on a single phrase and other items the lawyers didn’t define or include in the contract.

This is where the fate of Chrysler and the health care trust sit as they await guidance from the Delaware court.

VEBA is underfunded by billions of dollars. It needs the money. (Coincidentally, the 2009 arrangements capped the trust’s profits from Chrysler at about $4.5 billion, turning the rest over to the government. The government sold that right in 2011 to Fiat for $75 million. So, the maximum profit the trust can get from its Chrysler stake is $4.5 billion).

The union and the trust know that Fiat wants to deal, but things may not be so rosy in the future. Both Chrysler and Fiat face pressure to bring on new models from competitors. And remember, this deal affects only 40 percent of the health care trust’s share. The rest still needs to be bought out, and the trust doesn’t have to sell. The trust will use this additional leverage to aim for that $4.5 billion, because anything else goes back to Fiat.

It is ripe territory for a deal â€" if only a price can be agreed upon.



New York State Investigating Pension-Advance Firms

New York’s top banking regulator has begun an investigation into pension-advance firms, the lenders that woo retirees to sign over their monthly pension checks in return for cash.

The regulator, the Department of Financial Services, sent subpoenas to 10 companies in the business on Tuesday.

Federal and state authorities say that such advances are actually loans that require customers to sign over all or portion of their monthly pension checks in exchange for a lump sum payment. The high-cost loans, the authorities say, threaten to erode the retirement savings of a growing number of older Americans, thrusting retirees deep into debt.

Benjamin M. Lawsky, who heads the agency, calls the pension advances, which were the subject of an article in The New York Times, “nothing more than payday loans in sheep’s clothing.”

A review by The New York Times of more than two dozen loan contracts found that the loans, once fees are factored in, can come with effective interest rates ranging from 27 to 106 percentâ€"critical information that is not disclosed either in the ads or the contracts.

In its investigation, the Department of Financial Services is examining whether the companies have flouted state usury laws and whether the loans violate a federal law that restricts how military pensions can be used, according to the people with knowledge of the matter. The agency is also investigating whether the lenders dupe retirees into signing up for the loans by disguising the soaring interest rates, the people said.

As the vast baby boomer generation heads toward retirement and a growing number of older Americans shoulder crippling debt burdens, the pension-advance firms are aggressively courting military veterans, teachers, firefighters, police officers and others with a hard to resist pitch: convert tomorrow’s pension income into hard cash.

Much like payday loans, which typically target lower-income borrowers, pension loans can aggravate the distress of the vulnerable elderly who already are grappling with dwindling savings.

“Using deceptive practices to cheat people out of their pensions by enrolling them in backdoor high-interest loans will not be tolerated in our state,” New York Gov. Andrew M. Cuomo said in a statement.

The lenders, which operate largely outside of state and federal banking regulations, are drawing fresh scrutiny. The investigation by the Department of Financial Services follows examinations by the Consumer Financial Protection Bureau and the Senate’s Committee on Health, Education, labor and Pensions.

To escape state usury laws that put a ceiling on loan rates, some pension advance firms insist their products are advances, not loans, according to the firms’ Web sites and federal and state lawsuits.

The advance firms, which evolved from a fleet of different lenders, zero in on military members, according to lawyers for service members. To go after the military members, the lenders have to skirt a federal law that bars veterans from turning over pension payments to third parties. In order to sidestep the prohibition, the pension-advance firms, typically urge veterans to set up separate bank accounts, controlled by the firms, where the pension checks are deposited before being sent to the lenders, according to a review of the firms’ advertisements.

“These companies are literally harvesting the-hard earned pensions of seniors, military veterans and other hard working New Yorkers,” Mr. Cuomo said. He cautioned that “anyone seeking to prey on New Yorkers should know that we will use every tool at our disposal to aggressively pursue and put stop this fraud.”

The pension advance firms, which largely advertise on the internet, are located in states in California, Florida, Delaware, Indiana, Michigan and Washington.



The Challenges Ahead for HSBC

HSBC is digging in for a low-interest-rate world. Economic malaise in the West has depressed demand for loans. Central bank money printing is weighing on the lender’s large deposit base. With no pickup in sight, HSBC’s returns depend on its ability to keep cutting costs.

The bank’s balance sheet at the end of March sums up the challenge. Gross customer loans of almost $974 billion were lower than at the end of December. Granted, the effect of the stronger dollar and the decision to earmark some businesses for sale explain the decline. HSBC’s U.S. subprime loan portfolio also continues to shrink. But even then, loan growth was largely restricted to pockets of Asia, the Middle East and Latin America.

This malaise comes as no surprise: it’s the reason central banks are keeping interest rates low and accumulating ever-larger stockpiles of assets. HSBC’s problem, however, is that it has roughly $3 in loans for every $4 of customer deposits. Low rates squeeze the margin between what it has to pay to attract those deposits and what it can charge for the loans.

Granted, quantitative easing has its benefits. Investors’ appetite for yield will help the bank to offload some of its unwanted U.S. mortgages at better prices than previously anticipated. Record bond issuance powered a 31 percent revenue jump in HSBC’s capital markets business. And HSBC’s capital base is sufficiently strong that it can afford to increase both lending and dividends.

The cycle will turn at some point. Yet for now HSBC’s financial performance depends heavily on cost-cutting, weeding out underperforming businesses, and shrinking bad debts. These three factors were largely responsible for the 34 percent jump in underlying pre-tax profit in the first quarter.

The question is how many more strings HSBC has to pull. In the two years since unveiling his strategy to make the bank smaller and simpler, its chief executive, Stuart Gulliver, has shrunk the bank’s work force by 38,000 and shed more than 50 businesses. The bank has scheduled a strategy update for May 15. The suspicion is that, at a bank HSBC’s size, there are always more costs to trim. Mr. Gulliver will have to show that he has enough fresh ideas to keep economic malaise at bay.

Peter Thal Larsen is Asia editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.



China\'s Changing Internet Landscape

China was on vacation much of last week for the May 1 Worker's Day holiday, but executives at two of China's most important online companies were busy completing a deal that could reshape the country's Internet.

Alibaba, China's largest e-commerce and online payments firm, announced that it had bought an 18 percent stake in Sina's Weibo subsidiary for $586 million in a deal expected to jump-start Sina's revenue through social commerce. Weibo, a microblogging service somewhat akin to Twitter, is one of China's biggest social networks. Think Amazon or eBay investing in Twitter.

China's top three Internet companies, known as the BATs, are Baidu, Alibaba and Tencent. Baidu, listed on the Nasdaq market, has a market capitalization of just under $30 billion. Alibaba is private but an eventual initial public offering, likely in either the United States or Hong Kong, could make the company one of the most valuable Internet firms in the world. Tencent is listed in Hong Kong and is worth nearly $65 billion, or almost as much as Facebook.

Mobile Internet usage is growing rapidly in China, in large part because of the proliferation of Google's Android and cheap smartphones made in China. Sunday's CCTV Evening News dedicated the first three minutes of the broadcast to a report about surging smartphone use and the benefits to China's economy from the increasing consumption that the mobile Internet is expected to drive.

Weibo's several hundred million users now access the service more from mobile devices than from PCs. The deal with Sina is part of Alibaba's strategy, along with other initiatives like developing a new mobile operating system, Alibaba Mobile OS, to become the leading mobile firm in China. According to a report in Monday's issue of Caixin, one of China's top business magazines, Baidu was also negotiating with Sina for a Weibo deal. A Baidu representative declined to comment on that claim.

Tencent has its own Weibo service (weibo is the Chinese word for microblogging) as well as WeChat, a mobile messaging and social networking service that has several hundred million registered users. In December, this column cited WeChat as one of the eight trends to keep an eye on in 2013.

All this activity and wealth creation is happening inside of what the Economist magazine, in an excellent recent report on China's Internet, termed a “giant cage.” But there are recent signs that the government is concerned the cage may need strengthening.

The previous column noted that the government appears to be reining in the more salacious online exposes of corruption that occurred over the last few months in favor of channeling them into official outlets.

On May 2, China's State Internet Information Office declared war against online rumors because they “have impaired the credibility of online media, disrupted normal communication order, and aroused great aversion among the public.” One report suggests the regulators have some of the most influential users of Sina Weibo, those with millions or tens of millions of followers, in their sights. Online rumors have been a real problem, but crackdowns against them can be used for broader goals.

Last week's announcement follows a new rule to tighten media controls, especially in regards to Weibo, issued in April, and an essay titled “How Is the Party to Manage the Media Well in the New Era?” by a propaganda official who in 2010 wrote the influential book “The Art of Guiding Public Opinion.”

There have been campaigns against online rumors before. The most concerted efforts to reign in Weibo began after the sixth plenum of the 17th Party Congress in October 2011 when official media declared that “Internet rumors are like drugs” and propaganda work should focus on “strengthening the channeling and control of social media and real-time communication tools.” That campaign was followed by the December 2011 requirement for real name registration of Weibo users.

Strict implementation does not always follow rule promulgation in China, and the real name registration requirement was largely ignored. Sina admitted as much in its 2011 and 2012 20-F annual filings with the Securities and Exchange Commission. Here is what the company wrote in the recent 2012 filing:

We are required to, but have not, verified the identities of all of our users who post on Weibo, and our noncompliance exposes us to potentially severe penalty by the Chinese government.

The regulators may not always succeed the first time, but it would be a mistake to assume they will not keep pushing the issue, especially when propaganda work and ideology are so core to the party's control. At the end of March, the State Council released its task list for the next five years, and one of the items is an Internet real name registration system by June 30, 2014.

The Alibaba deal is about strengthening mobile positioning and spurring social commerce. The government would probably be pleased to see Weibo shift from being a hotbed of social and political commentary and critiques to more of an online shopping arcade that, through integrated online payment functionality, has the voluntary real name registrations of many users.

Just as China's leadership is clear it will pursue economic reform without structural political reform, so it also appears intent on building a commercially vibrant yet managed Internet, an “Internet with Chinese characteristics.” Given the scale of business activity and wealth creation on the Chinese Internet, the cage looks quite gilded and may prove far more robust than many expect.



Canada Pension Plan Buys Airport Business for $1.4 Billion

  • Proceeds of approximately EUR 1.1 billion, subject to closing adjustments
  • Acquisition with retroactive effect as of January 1, 2013
  • Closing of transaction planned for second half of 2013
    • HOCHTIEF Aktiengesellschaft, Essen, Germany, has on May 7, 2013 entered into a sale and purchase agreement with a subsidiary of the Public Sector Pension Investment Board, Canada (PSP Investments) for the sale of all shares in HOCHTIEF AirPort GmbH, Essen. The transaction will have retroactive economic effect as of January 1, 2013. HOCHTIEF AirPort is one of the leading airport investors and managers in the world and holds participations in the airports of Athens, Budapest, Düsseldorf, Hamburg, Sydney and Tirana. Combined, these airports handle approximately 95 million passengers annually.The transaction effects a deconsolidation of assets in the value of approximately EUR 1.5 billion. This includes minority inter ests of some EUR 0.4 billion. The transaction proceeds are approximately EUR 1.1 billion, subject to closing adjustments. HOCHTIEF expects no significant extraordinary earnings impact from the transaction. The transaction is subject to certain conditions precedent, including approval by the competent authorities if required and other required approvals. Closing is expected in the second half of 2013."The transaction is the result of a very competitive tendering process. We will use the released funds as planned to reduce debt and to invest in the operating infrastructure business. The transaction will further strengthen HOCHTIEF's financial and competitive position," says Marcelino Fernández Verdes, CEO of HOCHTIEF."HOCHTIEF AirPort is passing into the hands of a long-term and trustworthy investor which will continue to support the airports business in a responsible manner. We have, thus, also achieved our goal of offering a perspective to the employees. We are particularly happy about this," adds Peter Sassenfeld, member of the Executive Board of HOCHTIEF, Chief Financial Officer and Labor Director of the Group. 

    Societe Generale Announces New Cuts as Profit Falls 50%

    Paris â€" The French bank Société Générale announced on Tuesday that it was planning a new-cost cutting drive that would result in hundreds of job losses in France, as its first-quarter net income fell sharply.

    The bank said first-quarter net income fell 50 percent, to 364 million euros ($476 million), from the period a year earlier. That was well below the 674.6 million euro profit expected by analysts surveyed by Reuters.

    Société Générale, the second-largest French lender, said it planned 900 million euros of cost reductions through 2015, adding to the 550 million euros of cuts last year. Severin Cabannes, the bank's deputy chief executive, told CNBC television that the bank was in talks with its unions about eliminating 600 to 700 jobs at its headquarters, but added that there would be “no forced layoffs.”

    French companies, faced with tough restrictions on firing employees, typically use buyouts and early retirement programs to cut jobs.

    Société Générale, based in Paris, said its profit fell largely because it took a charge of around 1 billion euros to revalue the cost of its own debt. The firm's net banking income fell 19 percent, to 5.1 billion euros.

    The bank said that excluding the debt revaluation, legacy assets and one-time charges, it would have had “solid” net profit of 852 million euros. Debt revaluation - in which a bank accounts for changes in the market value of its own debt - flatters a firm's results when it comes under stress in the market, but makes results appear worse when the debt rises in value.

    Société Générale said its corporate and investment banking business, in particular, “turned in a very satisfactory performance.” The unit reported that net income rose 41 percent, to 494 million euros, as the equity division posted strong results as global stock markets rebounded in the first quarter.

    Like its larger rival, BNP Paribas, which last week reported a 45 percent decline in first-quarter net income, Société Générale is facing a moribund European economy and a record-high unemployment rate of 12.1 percent in the euro zone. The ongoing slump subdues demand for loans, even as historically low interest rates hold down the profitability of the credit that it does extend to customers.

    Société Générale's chairman and chief executive, Frédéric Oudéa, said in a statement that the bank's latest cost-cutting plan would help it to generate a return on equity, a measure of profitability, of 10 percent by the end of 2015, compared with 7.4 percent in the first quarter this year.

    Mr. Oudéa also said the bank had reached a ‘‘Basel III'' core Tier 1 capital ratio of 8.7 percent, putting it on schedule to reach the 9.5 percent level that it has targeted for the end of the year. Capital ratios provide an indication of a financial institution's ability to withstand financial shocks.

    While Société Générale announced a new round of cuts on Tuesday, Crédit Agricole, whose first-quarter revenue fell 26 percent, to 3.9 billion euros, benefited from finally shedding its exposure to troubled assets in Greece. Crédit Agricole said net profit rose 51 percent, to 469 million euros.

    In February, Crédit Agricole “deconsolidated” Emporiki Bank, based in Athens, cutting 15.5 billion euros of risk-weighted assets from its balance sheet. Crédit Agricole paid 2.2 billion euros for the Greek bank in 2006, but its losses ballooned to well over 5 billion euros as the Greek economy imploded. Crédit Agricole sold Emporiki last year to another Greek lender, Alpha Bank, for a symbolic 1 euro.

    Jean-Paul Chifflet, Crédit Agricole's chief executive, said in a statement that the results reflected “resilient revenues and income in the group's core businesses, a persistently moderate cost of risk and a steady decline in expenses, in a mediocre economic environment.”

    Shares of Crédit Agricole rose 1.2 percent in Paris on Tuesday, while Société Générale shares rose 4.1 percent.



    Pondering a Berkshire Without Buffett

    At the Berkshire Hathaway annual meeting, Warren E. Buffett rejected the notion that the company would go the way of Teledyne, a conglomerate that was broken up after its leader, Henry E. Singleton, stepped down as chief executive. Mr. Singleton, who might be called the Buffett of his time, decided Teledyne had become too big and unwieldy for a single manager to effectively oversee and expand, Andrew Ross Sorkin writes in the DealBook column. A breakup of Berkshire, “I'm convinced would create a poorer result,” Mr. Buffett said.

    But Charles Munger, Berkshire's vice chairman, acknowledged a truism: “You look at companies that got really big in the world, the record is not very good. We think we'll do a little better than the giants in the past. Maybe we have a better system.” The question, Mr. Sorkin writes, is how much is “a little better”? As Mr. Buffett put it, “There's no question that we cannot do as well as in the past, and size does matter.”

    Following Mr. Buffett will not be easy. “Mr. Buffett's successor will have to be not just a great investor and operator, which is difficult enough, but a legendary one that people will rally around,” Mr. Sorkin writes. “As time passes, and Berkshire looks more like the conglomerate that it is without the special ingredient that is Mr. Buffett, it is likely to become more challenging for his successor.”

    BANK OF AMERICA AND MBIA SETTLE MORTGAGE DISPUTE  |  Bank of America has reached a $1.7 billion agreement to settle a long-running legal dispute with the bond insurer MBIA over mortgage-backed securities that grew troubled. Under the deal, announced on Monday, Bank of America will pay $1.6 billion in cash to MBIA and lend the firm another $500 million. The bank also acquired warrants that could give it a 4.9 percent stake in the insurer, which was in danger of being unable to meet its obligations in a few weeks' time. The agreement cancels out the multibillion-dollar claims the institutions had against each other, dating to the financial crisis.

    Shares of MBIA rose 45 percent on word of the settlement. Bank of America shares surged 5 percent.

    In a separate matter, Bank of America faces a fresh legal headache. New York's attorney general, Eric T. Schneiderman, plans to sue Bank of America and Wells Fargo over claims they breached the terms of a $26 billion settlement intended to stop foreclosure abuses. Mr. Schneiderman on Monday said the banks did not follow guidelines for fielding and processing requests from homeowners trying to modify their mortgages.

    A BITCOIN BUTTONWOOD  |  A crowd of young men gathered on Monday in Union Square in Manhattan to buy and sell bitcoins, the digital crypto-currency. “The men â€" and there were only men â€" were brought together by an online posting from Josh Rossi, 31, a bitcoin aficionado who works in technology at the World Trade Financial Group,” Nathaniel Popper writes in DealBook.

    Reasoning that the online venues for buying and selling bitcoins had become too expensive and time consuming, Mr. Rossi proposed what he called Project Buttonwood, a reference to where the New York Stock Exchange had its beginning in 1792. “If I want to buy a hamburger, I want to be able to sell my bitcoins and get my money immediately so I can buy that hamburger,” said Mr. Rossi.

    ON THE AGENDA  |  Walt Disney and Whole Foods report earnings on Tuesday evening. The European Commission has a conference on economic and monetary reform. Bill Gates is on Bloomberg TV at 8:30 a.m. The SALT conference kicks off in Las Vegas.

    ‘MAD MEN' AND CORPORATE FINANCE  |  The most recent episode of “Mad Men” provided a lesson in advertising agency deal-making, circa 1968, DealBook's Michael J. de la Merced writes. (Warning to readers: spoiler alert.) The episode involves Sterling Cooper Draper Pryce's weighing a potential initial public offering, and “banker proposes selling 400,000 shares to the public at $9 a share. Given Sterling Cooper's existing 1.5 million outstanding shares, that would have valued the agency at $17.1 million - or about $114.4 million in today's dollars,” Mr. de la Merced writes.

    “By May 1968, when the episode is set, seven ad agencies had held initial stock offerings, according to Ad Age. Among them were Wells Rich Greene and Papert, Koenig, Lois,” Mr. de la Merced continues. “Behind the flood of offerings was the booming '60s stock market, which prompted bankers to seek ever more companies to pitch to investors. Services companies like ad agencies became hot commodities, playing off the allure of Madison Avenue and its mad admen.”

     

    Mergers & Acquisitions '

    China's Baidu to Pay $370 Million for Internet Video Business  |  China's biggest search engine company said acquiring the Internet video business of PPStream would provide more television shows and movies for users and expand its offerings for advertisers. DealBook '

    Canada Pension Plan Buys Airport Business for $1.4 Billion  |  The Canada Pension Plan Investment Board agreed on Tuesday to buy the airport management division of the German construction company Hochtief for $1.4 billion. DealBook '

    Diageo Appoints New Chief Executive  |  “Diageo, the British maker of Smirnoff vodka and Johnnie Walker Scotch, on Tuesday appointed its chief operating officer, Ivan M. Menezes, to replace its chief executive, Paul S. Walsh, who will retire,” The New York Times reports. NEW YORK TIMES

    SoftBank's President to Meet With Sprint Shareholders in U.S.  |  The trip comes as SoftBank finds its bid for Sprint Nextel challenged by Dish Network. REUTERS

    A Test for Dell's Lead Director  |  Alex Mandl, a veteran of the telecommunications business, is overseeing talks over Dell's future, as the lead director of the computer maker, The Wall Street Journal writes. WALL STREET JOURNAL

    Investor Group Buys BMC for $6.9 Billion  |  BMC Software agreed on Monday to sell itself to a group of investors led by Bain Capital and Golden Gate Capital for about $6.9 billion, completing a campaign by an activist hedge fund to push the company into a deal. DealBook '

    BMC Deal Shows How an Activist Strategy Can Work  |  The hedge fund Elliott Management has again successfully pushed a technology firm into selling itself, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

    Crestwood to Merge With Inergy to Create $7 Billion Firm  |  The combined company will provide pipeline and other services in some of the biggest oil and gas drilling areas in North America. DealBook '

    INVESTMENT BANKING '

    HSBC Profit Surges as Restructuring Plan Gains Traction  |  The British bank HSBC said first-quarter earnings almost doubled, to $8.43 billion, after the firm benefited from reduced costs and a decline in bad debts. DEALBOOK

    Societe Generale Announces New Cuts as Profit Falls 50%  |  The French bank Société Générale said it was planning a new cost-cutting drive that would result in hundreds of job losses in France, as first-quarter net income fell 50 percent, to $476 million. DealBook '

    Commerzbank Reports Quarterly Loss  |  The German bank reported a loss that was not as severe as analysts' estimates, after booking costs tied to staff reductions, Bloomberg News reports. BLOOMBERG NEWS

    In London's Financial Sector, Job Vacancies Rise  | 
    BLOOMBERG NEWS

    Big Shareholders of JPMorgan Said to Be Undecided on Vote  |  BlackRock, Vanguard and Fidelity “remain undecided” as to whether Jamie Dimon, the chief executive of JPMorgan Chase, should retain his role as chairman, according to The Wall Street Journal. WALL STREET JOURNAL

    PRIVATE EQUITY '

    Carlyle Said to Plan $2 Billion Fund for Japan  |  The Carlyle Group is looking to raise about $2 billion for a new fund focused on Japan, with the country's stock market climbing to new highs, Financial News reports. FINANCIAL NEWS

    TPG to Put Chinese Leasing Firm on the Block  |  A deal for UniTrust Finance and Leasing could be worth more than $800 million, The Wall Street Journal reports. WALL STREET JOURNAL

    Apollo's Profit Rose 72% in First Quarter  |  The private equity giant Apollo Global Management said first-quarter profit increased 72 percent, to $792 million, as the value of its holdings rose and the firm sold some of its investments. DealBook '

    HEDGE FUNDS '

    After Watson, Researcher Joins Bridgewater  |  David Ferrucci, the I.B.M. researcher who led the development of the artificial intelligence engine Watson, has joined the giant hedge fund Bridgewater Associates, the Bits blog writes. NEW YORK TIMES BITS

    Third Point Said to Hire Banks for I.P.O. of Reinsurance Arm  |  An I.P.O. of Third Point Re, the reinsurance business of the hedge fund Third Point, could come this year and raise around $250 million, Reuters reports. REUTERS

    I.P.O./OFFERINGS '

    Antero Resources, Backed by Warburg, Said to Plan I.P.O.  |  Antero Resources, which is controlled by the private equity firm Warburg Pincus, could be valued at as much as $10 billion in an initial public offering, Reuters reports. REUTERS

    In Hong Kong, Firms Bulk Up on Bankers to Bolster I.P.O.'s  |  As Hong Kong tries to spur a revival in a lackluster I.P.O. market, companies are hiring armies of underwriters to manage even midsize listings in a bid to maximize returns. DealBook '

    VENTURE CAPITAL '

    Already, Google Glass Draws Resistance  |  The product will not go on sale for many months, but businesses and lawmakers around the country are already moving toward banning Google Glass, The New York Times reports. NEW YORK TIMES

    LEGAL/REGULATORY '

    Friend of Former KPMG Partner to Plead Guilty in Insider Trading Case  |  Prosecutors unveiled charges in Federal District Court in Los Angeles on Monday against Bryan Shaw, a jeweler who has agreed to plead guilty to conspiracy to commit securities fraud after receiving inside information from a KPMG partner. DealBook '

    Senate Passes Bill to Expand Tax Collection Online  |  The New York Times reports: “A bipartisan coalition in the Senate easily passed legislation on Monday to force Internet retailers to collect sales taxes for state and local governments, sending the issue to the House, where antitax forces have vowed to kill it. But the 69-to-27 vote in the Senate will give the measure significant momentum.” NEW YORK TIMES

    S.E.C. Claims Harrisburg, Pa., Misled Bond Investors  |  The Associated Press reports: “The Securities and Exchange Commission on Monday accused Harrisburg, Pennsylvania's debt-laden capital, of violating federal antifraud rules for securities issuers by repeatedly giving misleading information that created risks for bond investors as the city's finances were rapidly deteriorating.” ASSOCIATED PRESS

    On Wall Street, Recovering Money From Rogue Employees  |  SAC Capital is one of several firms seeking to insert provisions in employment contracts allowing them to recover compensation from employees who violate the law, Peter J. Henning writes in the White Collar Watch column. DealBook '

    China's Changing Internet Landscape  |  China was on vacation much of last week for the May 1 Worker's Day holiday, but executives at two of China's most important online companies were busy completing a deal that might reshape the country's Internet, Bill Bishop writes in the China Insider column. DealBook '

    A New Leader for Housing Finance  |  Representative Melvin Watt, Democrat of North Carolina, whom President Obama chose to lead the Federal Housing Finance Agency, “has what it takes to explain and carry out policies to help revive credit and provide long overdue assistance to homeowners - if only the Senate will give him the chance,” The New York Times editorial board writes. NEW YORK TIMES



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