Hedge Fund Impresario Plays Host in Las Vegas

LAS VEGAS â€" Just outside the grand ballroom at the Bellagio hotel early Wednesday morning, Anthony Scaramucci, the backslapping host of the country’s largest hedge fund conference, spotted Gregory J. Fleming, president of Morgan Stanley Investment Management and one of Mr. Scaramucci’s most important business relationships.

“Is your kid still in town? Does he want to meet Train?” Mr. Scaramucci asked, referring to the adult-contemporary rock band performing at the event. “It’s great to have you here; it really means a lot to me.”

The hedge fund faithful, more than 1,800 strong, have come here for the SkyBridge Alternatives Conference, or SALT. Held over four days, SALT is a Wall Street schmooze-fest. This year’s lineup of speakers features the investors Daniel S. Loeb and John Paulson, the politicians Nicolas Sarkozy and Leon Panetta, and the entertainers Oliver Stone and Al Pacino.

It is also a matchmaking service, with funds peddling their services to the world’s richest investors, and the world’s richest investors seeking out the next superstar manager. And this being Sin City, it is, perhaps above all else, a good time.

The ringmaster of this spectacle is Mr. Scaramucci, a Goldman Sachs alumnus with a Harvard Law degree whom many simply call “the Mooch.” In an industry known for reclusive traders and math geeks, the boyish Mr. Scaramucci, 49, is Wall Street’s first hedge fund impresario, a P. T. Barnum in a Ferragamo tie. In a gilded industry that has preferred to stay below the radar, Mr. Scaramucci embraces the white-hot center of it all.

A relentless self-promoter, Mr. Scaramucci is ubiquitous, especially to the stock traders and market aficionados who stare at Bloomberg terminals all day and fix their flat screens to business television.

He appears regularly on CNBC, jawboning about stocks. He wedged his way into a cameo in Mr. Stone’s 2010 sequel to the movie “Wall Street.” He has written two books: the first, “Goodbye Gordon Gekko,” is part memoir, part self-help manual about “how to find your fortune without losing your soul”; the second, “The Little Book of Hedge Funds,” is a primer on the investment vehicles that have made him rich.

“Mutual funds are the propeller plane,” writes Mr. Scaramucci in his primer, “while hedge funds are the fighter jets.”

That analogy has not worked well lately. The ascent of SALT, and Mr. Scaramucci, comes in a challenging time for hedge funds, which are expensive investment vehicles that promise outsize returns in up and down markets. The explosive growth experienced by the industry a decade ago has plateaued. For four consecutive years, the average hedge fund has failed to beat the Standard & Poor’s 500-stock index.

Despite the weak performance, hedge funds, which have a total of about $2.5 trillion in assets, are still attracting money, taking in $15.2 billion in the first quarter of this year, according to Hedge Fund Research.

The SALT crowd can thank the Federal Reserve’s persistent near-zero interest rate policy for their continued good fortune. Managers are also seeing money flood into debt-trading strategies as the world’s largest banks have retrenched from those risky investments under greater regulation.

Tepid industry performance cannot stop Mr. Scaramucci, whose irrepressible salesmanship seeks to elevate the SkyBridge Capital brand. A manager of a portfolio of hedge funds â€" a “fund of funds,” in Wall Street lingo â€" the New York-based firm has about $4.6 billion under management. It also oversees another roughly $3 billion in a business that advises pensions and other large institutions on hedge-fund-manager selection.

Mr. Scaramucci has built SkyBridge on the belief that hedge funds are not just the domain of giant pension funds and the Forbes 400 list of the wealthiest Americans.

SkyBridge’s flagship product is structured for “the mass affluent,” requiring a net worth of $1 million and a minimum investment of $25,000. Sold through brokers at big banks like Morgan Stanley and Merrill Lynch, SkyBridge has more than 24,000 clients. A typical customer is a dentist with a million or two in the bank and a desire to spice up his or her portfolio with a dollop of hedge fund exposure.

“I’m a middle-class kid from Long Island, and neither of my parents went to college,” said Mr. Scaramucci, a father of three who grew up in Port Washington, N.Y., and now lives just a couple of miles away in Manhasset. “Why shouldn’t more people have access to this industry?”

The access doesn’t come cheap. On top of the usual 2 percent management fee and a 20 percent cut of the profits charged annually by the hedge funds in SkyBridge’s portfolio, the firm adds a 1.5 percent yearly fee, along with a one-time placement charge paid to the broker that runs as high as 3 percent.

Not everyone buys what Mr. Scaramucci is selling. Critics decry the hefty fees that they say eat into the performance of funds of funds.

“Hedge funds tend to be a losing game for most investors,” said Mebane T. Faber, co-founder of Cambria Investment Management. “With fund of funds, it is even more of a losing game because of the layers upon layers of fees.”

Yet Skybridge’s main fund, which profited from a concentrated bet on managers investing in beaten-down mortgages, returned 20.2 percent last year net of fees, handily outperforming the S.& P. But over a 10-year stretch, the fund has slightly underperformed the index.

“Reversion to the mean is a very powerful force,” said Jack Bogle, founder of Vanguard and evangelist for low-cost funds that track the indexes. “These hedge fund products might work in the short term, but I can absolutely guarantee that they won’t work forever.”

SkyBridge almost didn’t work right out of the gate. Mr. Scaramucci started the firm in 2005 after spending seven years at Goldman and then co-founding a money-management firm that he sold to Neuberger Berman. He originally formed SkyBridge to seed and incubate start-up hedge fund managers. But after the financial crisis crushed SkyBridge’s portfolio of nascent funds, Mr. Scaramucci sought to reinvent the business.

He soon sniffed out an opportunity. When a sickly Citigroup sought to jettison its hedge fund unit, he negotiated a deal in June 2010 for SkyBridge to pay for the business with a small upfront payment and a revenue-sharing agreement with the bank that expires next month.

With the Citigroup acquisition, Mr. Scaramucci not only added several billion dollars in assets, but also acquired Citigroup’s Raymond C. Nolte, a veteran hedge fund executive who now oversees SkyBridge’s investments. Mr. Nolte also brought with him a respectable track record that Mr. Scaramucci could promote.

The SALT conference, too, came out of the financial crisis. After President Obama warned Wall Street banks in early 2009 against throwing junkets on the taxpayers’ dime, several banks canceled their Las Vegas conferences. Mr. Scaramucci decided to fill the void, holding the first SALT conference at the Wynn, with 400 people in attendance.

SALT has become the main engine of the SkyBridge marketing machine, though Mr. Scaramucci is quick to point out that it is not a SkyBridge event but an industrywide conclave. The conference is profitable, he says, but not as profitable as it would be if its organizers did not pour so much money back into it, paying top dollar for prominent speakers among other expenses.

Appearing at this year’s event are Ehud Barak, the former Israeli prime minister; Mike Krzyzewski, the Duke University men’s basketball coach; and Barney Frank, the former Massachusetts congressman.

Most of the talks take place in the main ballroom, but much of the real action happens behind the scenes at V.I.P. events. On Wednesday night, Mr. Scaramucci was holding a dinner for about 20, with Mr. Panetta, Mr. Pacino and others, where they were to eat a meal catered by Jean-Georges Vongerichten’s ABC Kitchen, featuring organic chicken and collard greens paired with a polished Peay Vineyards syrah.

On Thursday, SkyBridge’s top 20 clients will have breakfast with Matt Bissonnette, who under the pseudonym Mark Owen wrote “No Easy Day,” the first-person account of the raid that killed Osama bin Laden.

SALT has become so larded with famous names that Mr. Scaramucci acknowledges the problem of having to live up to the agendas of previous conferences. He has set a high bar with past keynote speeches by former presidents Bill Clinton and George W. Bush, as well as Mitt Romney. (Mr. Scaramucci was Mr. Romney’s national finance co-chairman in the last election.)

That challenge is evident with this year’s entertainment. On Thursday evening, Train will perform, arguably a downgrade from last year’s concert by the pop superstars Maroon 5. Mr. Scaramucci staunchly defended this year’s musical act.

“I’ll tell you a little secret” Mr. Scaramucci said. “Middle-aged white men? They love Train.”

Einhorn Is Beaten to the Punch

Just days before David Einhorn was to present his latest investment idea, another hedge fund manager stole his thunder.

But that didn’t stop Mr. Einhorn, president of Greenlight Capital, from making his presentation on Wednesday at the Sohn Investment Conference in Manhattan, where he outlined an optimistic argument on OIS, a company that provides services to oil and gas companies.

Jana Partners, an activist hedge fund, disclosed a 9.1 percent stake in the company last week.

The market, Mr. Einhorn said, was not properly valuing OIS’s varied mix of businesses, which include well-site services, tubular services and accommodations.

OIS is trading at a multiple of 6.9 times Ebitda, or earnings before interest, taxes, depreciation and amortization, Mr. Einhorn said. He argued that it should be trading at a multiple of 8.6 times Ebitda, and estimated a target price for the stock of $118.

Shares of OIS, which closed at $95.47, rose nearly 5 percent in trading after hours.

The company’s accommodations business, Mr. Einhorn said, is like the “Club Med of remote exploration facilities.” If the company were to spin off that business, as Jana is advocating, the stock could be worth $155 a share, Mr. Einhorn said.

Mr. Einhorn acknowledged that the investment idea might sound familiar, but he said he had completed the “fifth or sixth draft of this presentation” when he learned that Jana, which is run by Barry Rosenstein, had filed a form disclosing its OIS stake.

“Someone in our office said, ‘Please tell me Barry Rosenstein isn’t speaking at Ira Sohn.’” Mr. Einhorn recalled.

Luckily for Greenlight, Mr. Rosenstein wasn’t on the agenda.

“It sounds like the Jana folks may be on to something,” Mr. Einhorn said. “We wish them luck in making this happen, and we will sit back and enjoy the ride.”

Tesla’s Disappearing Data

Tesla Motors regularly gave out a crucial number that gave the public a good idea of how much demand existed for its electric cars.

On Wednesday, the company said it was no longer going to provide that data, explaining that it was “no longer a meaningful metric.”

The figure in question is how many reservations existed for Tesla’s cars at the end of each quarter. The reservation number was useful because it could be analyzed to calculate how many orders were coming in each quarter for its cars.

Outsiders valued that visibility because, over all, it’s hard to gauge how much demand exists for Tesla’s automobiles.

The company’s supporters say the market for its products could be substantial. They contend that Tesla’s sedan, the Model S, is so good that it will change how people view electric vehicles. In turn, that could generate even more demand for its products.

The doubters, however, think there may not be that many buyers of Tesla’s cars beyond the electric car enthusiasts who have swooped in early. As a result, an early surge in sales could soon wane, they argue.

In explaining its decision to stop giving out the reservation data, Tesla said that as its production line had become more reliable, potential buyers would not have to get in line for their cars in quite the same way as before. Now, customers in North America will place their order online rather than “placing a generic reservation in a queue.”

Supporters of the company may not be too concerned about the disappearance of the reservation data. They may interpret it as a sign that the company is managing to sell a substantial number of cars soon after they come off the production line. In other words, Tesla is moving into a sweet spot, where its factory is keeping up with strong demand.

But the skeptics may conclude that the decision to pull the reservation data is a sign that new orders aren’t coming in at a strong rate. Reducing disclosure has never been a positive when it comes to public companies, they might argue.

A Tesla spokeswoman did not return an e-mail seeking comment. On a public conference call with Wall Street analysts on Wednesday, Tesla executives were not pressed for more details about their decision to stop providing the reservation numbers. But they were asked whether potential buyers still had to make reservations and put down deposits.

On the call, Elon Musk, Tesla’s chief executive, added some details about the new buying process. His explanation suggested that customers still had to reserve a car and put down money.

Another way to assess future demand for the car is to look at its sales projections. But those don’t appear to show a big rise in demand. Tesla recognized sales of 4,900 vehicles in its first quarter. On Wednesday, it said it expected to deliver 4,500 cars in North America in the second quarter. Tesla did forecast that it would produce 5,000 cars in the second quarter, but some of those were for Europe and would not show up in sales numbers until the third quarter.

On Wednesday, investors seemed not to care that they won’t be getting reservation data. Tesla’s shares soared 25 percent in trading after the close of the regular market. If that gain holds when the stock opens on Thursday, Tesla stock will have doubled so far this year.

For Ackman, a Day Without Drama

For a hedge fund manager who has had his share of drama in recent months, William A. Ackman was notably subdued in a presentation on Wednesday.

Mr. Ackman, head of Pershing Square Capital Management, focused on Procter & Gamble in his remarks at the Sohn Investment Conference in Manhattan, a closely watched annual gathering where prominent investors share their ideas.

Though Procter & Gamble is one of the biggest holdings of his hedge fund, it is not nearly as controversial as Herbalife â€" which Mr. Ackman said in December was an illegal pyramid scheme â€" or J.C. Penney â€" whose flagging sales led the company to replace the chief executive, Ron Johnson, whom Mr. Ackman had supported.

Speaking softly and with little flourish, Mr. Ackman explained that he had not yet had a chance to expound publicly on his Procter & Gamble investment.

“I needed something to talk about at Ira Sohn,” he said.

In the presentation, he highlighted the strong brands of P.&G. and called it the “biggest emerging-market company in the world.” He argued that the company’s gross margins were lower than they should be and said the company had recognized the need to improve efficiency.

The investor also criticized the chief executive, Robert A. McDonald, saying he serves on 21 boards in addition to P.&G.’s, a commitment that likely takes up a significant amount of his time.

Some in the audience noted that, for Mr. Ackman, the presentation was relatively light on excitement.

It has been an action-packed few months for him. In January, the month after disclosing his short-selling position on Herbalife, Mr. Ackman engaged in a heated argument on live television with Carl C. Icahn, a longtime nemesis.

Mr. Icahn, taking the other side of Mr. Ackamn’s bet, quickly built up a stake in Herbalife and gained two seats on the company’s board.

In February, an article in Vanity Fair described an episode in which Mr. Ackman became badly fatigued in an aggressive bike ride with another hedge fund manager.

All the while, Mr. Ackman’s position in Penney was suffering. In April, the company ousted Mr. Johnson after 17 tumultuous months as chief executive.

So, perhaps it was not surprising that on Wednesday, Mr. Ackman’s presentation did not seem designed to generate many headlines.

Eisman Is Gloomy on Canadian Housing

The hedge fund manager Steven Eisman rose to prominence in the financial crisis after betting against mortgages in the United States. On Wednesday, he turned his focus to Canada.

Mr. Eisman, whose wager against subprime mortgages was described in “The Big Short” by Michael Lewis, warned on Wednesday of weakness in the Canadian housing market and said lenders were vulnerable.

Speaking at the 18th Annual Sohn Investment Conference in Manhattan, Mr. Eisman, founder of Emrys Partners, said the rise in Canadian home prices in recent years was being fueled by the Canadian Mortgage and Housing Corporation, a mortgage finance entity that guarantees half of the country’s mortgages.

The corporation’s mortgage portfolio, Mr. Eisman said, is approaching a $600 billion cap recently imposed by the government, raising questions about whether it can continue supporting the market.

“When something gets that big, even governments get nervous,” he said.

What is more, he said, mortgage-underwriting standards are beginning to tighten. It’s a worrisome situation for banks, which hold “zero” capital against loans guaranteed by the mortgage finance giant, Mr. Eisman said.

“It’s like owning a sovereign bond,” he said. “We know where that got us.”

He focused in particular on the Home Capital Group, a mortgage originator specializing in “nonprime” loans. Mr. Eisman said half of the company’s $8.8 billion portfolio of these loans dated to the last two years, when prices were relatively high.

But Mr. Eisman was much more upbeat about the situation in the United States.

He singled out Ocwen Financial as a mortgage company that seemed undervalued, arguing that it would generate more than $1 billion of cash flow next year. The company’s stock, he said, represents a “powerful” and “counterintuitive” bet on housing.

Ocwen’s stock climbed as much as 3 percent after the remarks, and then gave up some gains to close up 1.6 percent, at $39.76 a share.

“Once in a while you come across a stock that is just completely and utterly mispriced, and that company is Ocwen,” he said.

In Latest Foreclosure Glitch, Some Checks Come Up Short

When homeowners discovered that an account that was supposed to compensate them for foreclosure abuses lacked sufficient funds to cash their checks, the consulting firm at the center of the mishap promised that the problem was fixed and that the checks were valid.

But three weeks later, that promise fell short.

This time, according to officials briefed on the matter, the consulting firm, Rust, issued a raft of checks with wrong amounts. The mistake, officials said, cheated struggling homeowners out of thousands of dollars.

Federal authorities are now ordering Rust to fix its mistake, the officials said, though the problems continued as of Wednesday afternoon.

Rust did not immediately return calls for comment.

The incident once again cast a harsh spotlight on Rust. Despite a mixed track record, it was selected as the distributor of checks as part of a $3.6 billion settlement deal between federal regulators and the nation’s largest banks. The settlement deal, struck in January, came after regulators accused the 13 lenders, including JPMorgan Chase and Bank of America, of wrongful evictions, bungled loan modifications and other abuses.

The continued problems at Rust raise questions about the government’s oversight of the firmâ€" and the wisdom of hiring it in the first place. With more than three dozen government contracts to its name, and its own political action committee spreading campaign donations across Washington, the Minnesota-based firm has become a favored middleman for class-action lawsuits and government settlements.

When at least one bank suggested an alternative consulting firm for the foreclosure settlement, regulators balked, according to people briefed on the matter. The regulators instead suggested that the banks hire Rust.

But problems emerged soon after the settlement was announced in January. The consulting firm, officials said, delayed the checks for weeks as it struggled to gear up for the payments. Once Rust issued the first round of checks in April, it failed to move money into the bank account used for the settlement, preventing some homeowners from cashing their checks, according to a report in The New York Times.

More recently, homeowners have complained about clerical errors at Rust, problems like sending checks to the wrong addresses and issuing checks to deceased borrowers.
Norma Gammon, 54, said she thought things couldn’t get much worse after her home in Evansville, Ind., was sold at foreclosure auction in June. But then she started dealing with Rust. After contacting Rust at least six times to update her address, Ms. Gammon said, she learned that the firm sent the check to her foreclosed property. To receive another payment, Ms. Gammon has to fill out a new form. But Rust says the form has been sent three times, apparently to the wrong address.

“It’s so frustrating that I just want to cry,” she said.

The firm’s latest mistake â€" sending out checks in the wrong amounts â€" could also prove difficult to remedy.

The problem stems from last week, when Rust issued checks to customers of Morgan Stanley and Goldman Sachs. Unlike the other banks involved in the settlement, Goldman and Morgan’s foreclosures were not part of a long independent assessment by outside auditors. As such, the banks agreed to pay some of its customers an extra sum.

But Rust, according to the officials briefed on the matter, failed to follow Goldman and Morgan’s payout plan. Instead, it issued checks to Morgan and Goldman customers based on a metric adopted by the 11 other banks.

The misstep deprived the homeowners of thousands of dollars. For example, some customers in bankruptcy who were evicted wrongfully deserved $4,650. But they received $3,750 instead.
It is unclear how many of the 220,000 Morgan Stanley and Goldman Sachs customers received the wrong amount. But one person briefed on the matter described the problem as “huge.” It most likely affected every borrower who was entitled to more money under the Goldman and Morgan plan.

Regulators detected the problem on Tuesday, when a concerned borrower called the Federal Reserve to complain, according to a person briefed on the matter. Since then, the Fed has ordered Rust to devise a solution “fast,” the person briefed on the matter said, adding that the Fed expected to announce a resolution to the problem soon.

Regulators have also noted that many consumers have had no trouble cashing their checks. By the end of Tuesday, regulators say, homeowners successfully cashed or deposited about two million checks, or slightly more than half of the total checks issued.

Still, that leaves nearly two million people who have either delayed cashing the check or have had problems doing so. Cynthia Singerman, a staff lawyer with Housing and Economic Rights Advocates, said that some of the problems morph from seemingly simple clerical fixes into a persistent problem for struggling homeowners. One of Ms. Singerman’s clients whose home in Pleasanton, Calif., is in foreclosure, can’t cash the $1,000 check she received from Rust on April 12. The problem, Ms. Singerman said, is that the check is made out to the homeowner’s husband, who died more than three years ago.

Enron’s Skilling Strikes Deal for Shorter Sentence

Jeffrey K. Skilling‘s fight for early release from prison is all but over.

The former Enron chief executive has reached a deal with the Justice Department to lop off as much as a decade off his prison sentence, to 14 years, according to a court filing on Wednesday.

In return, Mr. Skilling has agreed to waive his rights to any further appeals, as well as to allow more than $40 million of forfeited assets to be distributed to victims of the collapsed energy giant.

If approved by the federal judge overseeing the case, the agreement would conclude a years-long battle by Mr. Skilling to reduce his sentence. Convicted in 2006 of fraud and conspiracy, the onetime Enron leader was the highest ranking executive of the energy company to serve a prison sentence.

But he has waged an aggressive campaign, using a number of legal tactics to press his case.

Last month, the Justice Department disclosed that it was in talks with Mr. Skilling’s lawyers to reduce his sentence.

Daniel M. Petrocelli, a lawyer for Mr. Skilling, said in a statement: “The proposed agreement brings certainty and finality to a long painful process. Although the recommended sentence for Jeff would still be more than double any other Enron defendant, all of whom have long been out of prison, Jeff will at least have the chance to get back a meaningful part of his life.”

Peter Lattman contributed reporting.

The Foreign Bribery Law Comes to Wall Street

It was almost inevitable that the government’s crackdown on bribery would hit a Wall Street firm.

Federal prosecutors filed charges on Tuesday against two brokers working for Direct Access Partners, a Miami-based affiliate of a New York brokerage firm. In an interesting twist, the government also charged a foreign official, something not done under the Foreign Corrupt Practices Act, the law that is applied to such bribery cases these days.

The three defendants were arrested on May 3 in Miami and will make their way to Manhattan to appear in Federal District Court for the Southern District of New York.

A criminal complaint accuses two brokers, Tomas Clarke and Jose Alejandro Hurtado, of using bribery to obtain the securities investment business of the Venezuela’s state-controlled development bank, Banco de Desarrollo Economico y Social de Venezuela, or Bandes. The complaint says the two funneled about $5 million in kickbacks to a vice president of the bank, Maria de los Angeles Gonzalez.

The charges include not only violations of the Foreign Corrupt Practices Act but also the Travel Act and the money laundering statute. This shows how aggressive federal prosecutors have become in pursuing foreign bribery cases by using two laws originally intended to focus on organized crime.

The prosecution grew out suspicious transactions that the Securities and Exchange Commission found during an inspection in 2010 of the New York brokerage firm. A particularly noticeable trade involved the Venezuelan development bank buying and selling almost $100 million of the same bonds in a single day that resulted in markups generating more than $10 million in profits. That type of round-trip trading is a major red flag for possible fraud and led to a broader investigation.

According to an affidavit filed with the Justice Department’s criminal complaint, the government found evidence of Mr. Clarke and Mr. Hurtado making payments to Ms. Gonzalez in a number of different ways, including by commissions paid to her husband and via two wire transfers between Swiss bank accounts. Two spreadsheets attached to e-mails sent to Ms. Gonzalez outlined the payments due to her from the commissions generated by the bank’s trading.

Another spreadsheet from Mr. Hurtado to Ms. Gonzalez listed the amount of income taxes he wanted reimbursed for the portion of the commission that he received and then kicked back to her.

As the S.E.C. noted in filing parallel civil fraud charges against Mr. Clarke, Mr. Hurtado and two others, the defendants showed there is no honor among thieves. In the spreadsheets sent to Ms. Gonzalez, they deliberately underreported the amount of the commission they received from the trading, thus reducing her share of the profits.

Ms. Gonzalez is not charged with violating the Foreign Corrupt Practices Act, but Mr. Clarke and Mr. Hurtado are.

While the law allows prosecutors to pursue Americans they believe paid bribes, foreign officials do not come under the law as any prosecution of them is usually left to their own governments. It is often the case that a foreign government would be unwilling to extradite one of its own officials to the United States to face charges.

The Justice Department, however, took a much more aggressive approach in this case by charging Ms. Gonzalez with violating other federal statutes that permit the prosecution of any defendant, including foreign officials.

Congress adopted the Travel Act in 1961 at the request of Robert F. Kennedy, then the attorney general, to aid in the government’s fight against organized crime that spread across a number of states. The title of the law is something of a misnomer because it does not actually require any travel but covers the use of “any facility in interstate or foreign commerce.”

In addition to the usual crimes of violence associated with organized crime, the statute allows for a federal prosecution of conduct involving a violation of state bribery laws.
The charges against Ms. Gonzalez claim that the kickbacks she received violated New York State’s commercial bribery law, and that the wiring of money between the Swiss bank accounts brings this crime under the Travel Act.

The money laundering charges are also built on the transfer of money, and under this law, the government has to prove the transfers were the “proceeds” of “specified unlawful activity.” In a neat trick to get around the Foreign Corrupt Practices Act’s limitation on not charging the foreign official, the government is only claiming that the act was violated as the predicate crime generating the proceeds, which were then transferred to Ms. Gonzalez’s Swiss bank account.

The benefit of a money laundering charge is the substantial penalty available for a violation: up to 20 years in federal prison. This increases the pressure on the defendants to cooperate because a conviction for money laundering brings with it a much higher recommended sentence under the federal sentencing guidelines than a violation of the Foreign Corrupt Practices Act or the Travel Act.

The Justice Department has been pursuing a growing number of cases under the Foreign Corrupt Practices Act, and has been increasingly focusing on individuals over their roles in paying bribes to foreign officials. The prosecution of Ms. Gonzalez for directing the trades through a Wall Street firm sends a message that those officials are not necessarily immune from prosecution in the United States because prosecutors can use other laws that do not have the same limitations.

Go Daddy Poaches an Executive From K.K.R., as Company Eyes Growth

When Scott Wagner stepped up as the Go Daddy Group’s interim chief executive last summer, he viewed the move as temporary. He already had a day job, as a senior executive at an arm of Kohlberg Kravis Roberts.

But nine months later, he has changed his mind.

Mr. Wagner instead will leave the private equity firm to join Go Daddy full time as its chief operating officer and chief financial officer, he told DealBook in an interview.

“This is part of the extended family,” Mr. Wagner said. “It’s just a nice second step.”

It’s a little unusual for a private equity executive to leave for a position at one of his firm’s portfolio companies. Mr. Wagner has worked for K.K.R.’s Capstone unit for 13 years, both advising the buyout shop’s companies and sometimes temporarily filling in positions.

His latest assignment was filling in as Go Daddy’s chief executive last year, following the resignation of Warren Adelman. He had already focused on expanding the Internet registrar’s international operations, particularly in India.

The move was one of the latest spurred on by Go Daddy’s owners, K.K.R., Silver Lake and Technology Crossover Ventures. Mr. Wagner said that the company had grown since the leveraged buyout, reporting $1.3 billion in sales last year, up from $1.1 billion in the last fiscal year before its leveraged buyout in mid-2011.

But soon after bringing in Blake Irving as Go Daddy’s new leader late last year, Mr. Wagner began to consider staying on at the Internet company on a fulltime basis. The two already agreed on a broader vision: filling in small business’ Internet needs, from designing Web sites to setting up their e-mail and backoffice services.

It also meant continuing moving Go Daddy beyond its current image, built largely on provocative advertising with scantily clad spokeswomen like racecar driver Danica Patrick. Mr. Irving said in an interview that the company was looking for a different image, less reliant on “too hot for TV” commercials.

“It’s an evolution of a company that understands its customer better,” he said. “When 58 percent of small businesses in the U.S. are run by women, you have to change the advertising so it’s more appropriate.”

At a dinner at Kierland Commons in Go Daddy’s hometown of Scottsdale, Ariz., Mr. Irving brought up the idea of a tighter partnership. By that point, the idea of staying on permanently seemed almost natural.

“We started finishing each other’s sentences,” Mr. Wagner said. he later added, “I remember telling my wife that he’s the perfect match.”

And over the next several weeks, the two found a working rhythm, with Mr. Irving focusing on strategy and new products and Mr. Wagner on keeping the company running.

Though leaving K.K.R. was difficult, deciding to stay on at Go Daddy made sense. And the feeling appears to be mutual.

“As one of our first operationally-focused executives, Scott has been instrumental in building K.K.R. Capstone into a global value creation resource for our private equity portfolio companies,” Dean Nelson, Capstone’s head, said in a statement.

“We are grateful to Scott for his many contributions to K.K.R. and our portfolio companies and we look forward to working with him in his continued capacity at Go Daddy.”

Calpers Calls JPMorgan’s Combined Top Roles a ‘Fundamental Conflict’

As shareholders consider whether to press for splitting JPMorgan Chase’s top two roles, one big investor has made it very clear where it stands.

Calpers, the big California public pension plan, plans to vote in favor of a nonbinding proposal to split JPMorgan’s chief executive and chairman roles, both of which are now held by Jamie Dimon.

To Anne Simpson, the pension plan’s director for corporate governance, the move is rooted in the belief that systemically important institutions need plenty of oversight. And it is a conviction that developed even before the country’s two biggest proxy advisory firms â€" Institutional Shareholder Services and Glass, Lewis â€" recommended that shareholders vote in favor of a split.

“There’s a fundamental conflict in combining the roles of chairman and C.E.O.,” she told DealBook in an interview on Tuesday. “It’s all thrown into stark relief when you’re dealing with a company that’s too big to fail.”

Both proxy advisory firms also recommended withholding votes for or voting against several of JPMorgan’s directors, particularly those on the bank’s risk committee. Ms. Simpson said that Calpers is reviewing its potential votes on the matter.

The issue of a split at the top has been a chief concern for Calpers for some time. To Ms. Simpson, the board’s single most important job is to oversee its chief executive. Vesting one person with both roles weakens that mission.

“If the person leading that oversight is the overseen, it’s a fundamentally flawed system,” she said.

It is of special importance when the chief executive is as confident as Mr. Dimon, Ms. Simpson added.

Calpers first met with him to discuss splitting the roles in 2010. At that meeting and in other conversations, JPMorgan stressed that it had top-notch risk management systems that would keep the business in check.

Nevertheless, Calpers voted to split the JPMorgan roles at last year’s shareholder meeting â€" which took place even before the disclosure of the multibillion-dollar trading loss at the bank’s chief investment office. That incident, which racked up about $6 billion in losses, has only reinforced the need for tighter oversight in Calpers’s view.

The trading loss also reinforced to Ms. Simpson another belief: that the nation’s biggest banks must have tighter oversight in the wake of the financial crisis. The possibility of a large institution risking collapse, even despite new rules meant to forestall another 2008-type government bailout, means that bank boards must be strengthened significantly, she said.

Calpers hasn’t focused solely on JPMorgan. It has held conversations with several large institutions, including Bank of America and Goldman Sachs. The former now keeps the chairman and chief executive roles separate; the latter reached a pact with shareholders earlier this year to keep the status quo.

“This is simply an inappropriate model for a major financial institution,” she said. “This is something of systemic importance.”

Manchester United Investors See Risk in Manager’s Exit

LONDON - When a successful chief executive finally bows out, investors often fret that his replacement won’t be able to replicate past glories.

On Wednesday, shareholders of Manchester United - one of the world’s most successful soccer teams - faced similar worries after Alex Ferguson, the club’s 71-year-old manager, abruptly announced his retirement at the end of the season.

In early morning trading in New York on Wednesday, shares of the English club, which went public last year, tumbled as much 4.7 percent â€" putting the premium placed on Mr. Ferguson as worth some $146 million. Later in the morning, the shares recovered a bit, trading down a bit less than 2 percent.

While rumors abounded for years that Mr. Ferguson, who has won 13 English Premier League titles since taking over at Manchester United in 1986, would call it quits, the announcement, made early on Wednesday morning, caught many off guard.

During the most recent English soccer season, which finishes later this month and has seen Manchester United being crowned as champions for the 20th time, the club’s Scottish manager had given several interviews stating that he was not ready to retire.

On Wednesday, all that changed.

“The decision to retire is one that I have thought a great deal about and one that I have not taken lightly,” Mr. Ferguson said in a statement. “It is the right time.”

Investors and the club’s global fan base must now turn their attention to who will replace one of the most successful soccer managers of all time.

The decision could have a direct impact on Manchester United’ financial performance. Before the team raised $232 million in an initial public offering last year, it raised concerns that the club’s success over the last two decades could not be guaranteed when Mr. Ferguson eventually retired.

“We are highly dependent on members of our management, coaching staff and our players,” the soccer team cautioned in its I.P.O. prospectus in August. “Any successor to our current manager may not be as successful as our current manager.”

Mr. Ferguson’s shoes will be hard to fill.

Since becoming a manager in Scotland in the 1970’s, he has won almost 50 trophies, including 13 English Premier League titles and two Champions League trophies, with several British clubs.

In comparison, Matt Busby, Manchester United’s legendary post-war manager, won five league titles and a European Cup.

By the afternoon on Wednesday, British bookmakers had slashed the odds of José Mourinho, currently the manager of the Spanish club Real Madrid, becoming the new head of Manchester United, while David Moyes, the manager of the Liverpool club Everton, also remained a favorite to take the helm at Manchester United.

Manchester United Investors See Risk in Manager’s Exit

LONDON - When a successful chief executive finally bows out, investors often fret that his replacement won’t be able to replicate past glories.

On Wednesday, shareholders of Manchester United - one of the world’s most successful soccer teams - faced similar worries after Alex Ferguson, the club’s 71-year-old manager, abruptly announced his retirement at the end of the season.

In early morning trading in New York on Wednesday, shares of the English club, which went public last year, tumbled as much 4.7 percent â€" putting the premium placed on Mr. Ferguson as worth some $146 million. Later in the morning, the shares recovered a bit, trading down a bit less than 2 percent.

While rumors abounded for years that Mr. Ferguson, who has won 13 English Premier League titles since taking over at Manchester United in 1986, would call it quits, the announcement, made early on Wednesday morning, caught many off guard.

During the most recent English soccer season, which finishes later this month and has seen Manchester United being crowned as champions for the 20th time, the club’s Scottish manager had given several interviews stating that he was not ready to retire.

On Wednesday, all that changed.

“The decision to retire is one that I have thought a great deal about and one that I have not taken lightly,” Mr. Ferguson said in a statement. “It is the right time.”

Investors and the club’s global fan base must now turn their attention to who will replace one of the most successful soccer managers of all time.

The decision could have a direct impact on Manchester United’ financial performance. Before the team raised $232 million in an initial public offering last year, it raised concerns that the club’s success over the last two decades could not be guaranteed when Mr. Ferguson eventually retired.

“We are highly dependent on members of our management, coaching staff and our players,” the soccer team cautioned in its I.P.O. prospectus in August. “Any successor to our current manager may not be as successful as our current manager.”

Mr. Ferguson’s shoes will be hard to fill.

Since becoming a manager in Scotland in the 1970’s, he has won almost 50 trophies, including 13 English Premier League titles and two Champions League trophies, with several British clubs.

In comparison, Matt Busby, Manchester United’s legendary post-war manager, won five league titles and a European Cup.

By the afternoon on Wednesday, British bookmakers had slashed the odds of José Mourinho, currently the manager of the Spanish club Real Madrid, becoming the new head of Manchester United, while David Moyes, the manager of the Liverpool club Everton, also remained a favorite to take the helm at Manchester United.

Manchester United Investors See Risk in Manager’s Exit

LONDON - When a successful chief executive finally bows out, investors often fret that his replacement won’t be able to replicate past glories.

On Wednesday, shareholders of Manchester United - one of the world’s most successful soccer teams - faced similar worries after Alex Ferguson, the club’s 71-year-old manager, abruptly announced his retirement at the end of the season.

In early morning trading in New York on Wednesday, shares of the English club, which went public last year, tumbled as much 4.7 percent â€" putting the premium placed on Mr. Ferguson as worth some $146 million. Later in the morning, the shares recovered a bit, trading down a bit less than 2 percent.

While rumors abounded for years that Mr. Ferguson, who has won 13 English Premier League titles since taking over at Manchester United in 1986, would call it quits, the announcement, made early on Wednesday morning, caught many off guard.

During the most recent English soccer season, which finishes later this month and has seen Manchester United being crowned as champions for the 20th time, the club’s Scottish manager had given several interviews stating that he was not ready to retire.

On Wednesday, all that changed.

“The decision to retire is one that I have thought a great deal about and one that I have not taken lightly,” Mr. Ferguson said in a statement. “It is the right time.”

Investors and the club’s global fan base must now turn their attention to who will replace one of the most successful soccer managers of all time.

The decision could have a direct impact on Manchester United’ financial performance. Before the team raised $232 million in an initial public offering last year, it raised concerns that the club’s success over the last two decades could not be guaranteed when Mr. Ferguson eventually retired.

“We are highly dependent on members of our management, coaching staff and our players,” the soccer team cautioned in its I.P.O. prospectus in August. “Any successor to our current manager may not be as successful as our current manager.”

Mr. Ferguson’s shoes will be hard to fill.

Since becoming a manager in Scotland in the 1970’s, he has won almost 50 trophies, including 13 English Premier League titles and two Champions League trophies, with several British clubs.

In comparison, Matt Busby, Manchester United’s legendary post-war manager, won five league titles and a European Cup.

By the afternoon on Wednesday, British bookmakers had slashed the odds of José Mourinho, currently the manager of the Spanish club Real Madrid, becoming the new head of Manchester United, while David Moyes, the manager of the Liverpool club Everton, also remained a favorite to take the helm at Manchester United.

Deciding on Dimon’s Dual Role

A little-known firm in London could play a crucial role in determining the fate of Jamie Dimon, the chief executive of JPMorgan Chase. The firm, Governance for Owners, has been tasked with voting the shares of BlackRock, the bank’s largest shareholder, on the question of whether to strip Mr. Dimon of his role as chairman, Susanne Craig and Jessica Silver-Greenberg report in DealBook.

In advance of the vote on May 21, JPMorgan shareholders are deciding whether the board’s lead director, Lee Raymond, a former chief of Exxon Mobil, is a strong enough counterbalance to Mr. Dimon. To BlackRock, having a strong independent director has been important, and the firm has previously said it supports companies without an independent chairman if the lead director has certain powers. Last year, some 40 percent of JPMorgan’s shares supported dividing the chairman and chief executive roles, though BlackRock did not.

BlackRock, which has a stake in JPMorgan of approximately 6.5 percent, outsourced its voting because of a provision in the Bank Holding Company Act. “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,” DealBook writes.

On Tuesday, Glass, Lewis & Company, a shareholder advisory firm, called for splitting the top roles, and also urged investors to withhold support for six of the bank’s 11 directors. That report, and the one on Friday from Institutional Shareholder Services, raised questions about the independence and qualifications of several board members.

KLEINER PERKINS, HUMBLED, ADJUSTS STRATEGY  |  The venture capital firm Kleiner Perkins Caufield & Byers was once a symbol of Silicon Valley, with an ability seemingly to mint money. But the firm has hit a rough patch over the last decade, with unsuccessful investments in clean technology and a catch-up effort with social media companies, Randall Smith reports in DealBook. The firm has held meetings with 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.

Mr. Smith reports: “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 latest setback is the difficulty at Fisker Automotive, the green-car start-up backed by Kleiner that has laid off staff and hired bankruptcy advisers.

CHRYSLER HAUNTED BY CRISIS-ERA DEAL  |  “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,” Steven M. Davidoff writes in the Deal Professor column. “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.”

ON THE AGENDA  |  Hedge fund titans including William A. Ackman, Kyle Bass, James Chanos, Stanley Druckenmiller and David Einhorn are speaking at the Sohn Investment Conference in New York. Tesla, Groupon and Green Mountain Coffee Roasters report earnings on Wednesday evening. Michael Novograntz of the Fortress Investment Group is on Bloomberg TV at 10:30 a.m. Anthony Scaramucci of SkyBridge Capital is on CNBC at 12:30 p.m. H. Rodgin Cohen of Sullivan & Cromwell is on Bloomberg TV at 2 p.m.

YAHOO SAID TO LOOK AT HULU  |  Marissa Mayer, Yahoo’s chief executive, “recently met with top execs at Hulu, the premium video service whose media company owners have been considering selling it for some months,” Kara Swisher and Peter Kafka of AllThingsD report, citing unidentified people close to the situation. Yahoo is “in the process” but has not made a formal bid, the report said. “Sources said Mayer also had an extensive getting-to-know-you meeting, which was apparently not held at Hulu’s offices in Santa Monica, Calif., along with C.O.O. Henrique De Castro. The discussion is taking place in the wake of Yahoo’s failed bid â€" largely engineered by De Castro â€" to purchase a majority stake in France Télécom’s Dailymotion video service, after a government official in the countrysaid Yahoo could not own 75 percent of the company.”

Mergers & Acquisitions »

Saudi Prince Has an Appetite for Big Deals  |  The Financial Times reports: “Prince Alwaleed bin Talal, the billionaire Saudi Arabian investor, is prepared to offer more shares in his Kingdom Holding investment company to fund a big acquisition to expand his sprawling banking-to-hotels empire.” FINANCIAL TIMES

Icahn and Southeastern May Team Up Over Dell  |  The Wall Street Journal reports: “Southeastern Asset Management Inc. and investor Carl Icahn are talking about teaming up to nominate directors to the Dell Inc. board as part of an effort to derail the computer maker’s $24.4 billion leveraged buyout, people familiar with the matter said.” WALL STREET JOURNAL

Solvay to Divest PVC Unit in Deal With Ineos  |  Solvay of Belgium agreed on Tuesday to contribute its PVC unit to a joint venture with Ineos, which would eventually take full control of the business within four to six years of the deal’s closing. DealBook »

J.C. Penney Sales Fall Again  |  But investors found cause for optimism in the earnings report.
REUTERS

Berkshire May Increase Stake in DaVita HealthCare Partners  | 
REUTERS

INVESTMENT BANKING »

Hedge Funds Expand in Credit Trading as Banks Pull Back  |  Hedge funds that trade debt are adding employees as banks cut back in the face of new regulations, Bloomberg News writes. BLOOMBERG NEWS

GE Capital Embarks on a Cross-Country Ad Campaign  |  GE Capital, which accounts for a significant share of General Electric’s total earnings, is going on a six-month roadshow across the United States to promote lending to midsize businesses, The New York Times writes. NEW YORK TIMES

Rothschild Reflects on Troubled Coal Venture  |  Nathaniel Rothschild told Bloomberg Markets magazine about his ill-fated partnership with the Bakrie family in the coal mining company Bumi. “I am the first to admit we made a terrible mistake,” he said. BLOOMBERG MARKETS

Standard Chartered Says First-Quarter Profit Likely Declined  | 
REUTERS

The Challenges Ahead for HSBC  |  The chief executive has sought to make the bank simpler and smaller. The question now is how many more strings he has left to pull, Peter Thal Larsen of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

PRIVATE EQUITY »

Investors and Founders of Apollo Plan to Sell Shares  |  Big investors of Apollo Global Management, in addition to two of the founders of the private equity firm, are selling a portion of their shares, Reuters reports. REUTERS

China Dairy to Buy $410 Million Stake in Milk Producer  |  China Mengniu Dairy is buying a stake of 26.92 percent in China Modern Dairy Holdings from K.K.R. and CDH Investments, Reuters reports. REUTERS

HEDGE FUNDS »

Pleased by Apple’s Move, Einhorn Raises His Bet  |  David Einhorn said on Tuesday that his firm had raised the size of its Apple holdings. The move came after Apple agreed to quintuple the size of its stock buyback program and increase its dividend. DealBook »

A Word of Caution on Tips From Hedge Fund Gurus  |  “Investors who bought on the basis of top tips from one of New York’s most celebrated hedge fund conferences last year spectacularly failed to beat the market,” The Financial Times writes. FINANCIAL TIMES

I.P.O./OFFERINGS »

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. It is likely to seek to go public within the next month. DealBook »

ING Plans I.P.O. of European Insurance Unit  |  The Dutch financial services firm ING Group said on Wednesday that it was planning an initial public offering of its European insurance business in 2014. DealBook »

VENTURE CAPITAL »

Khosla Ventures Invests in Health Technology Company  |  HealthTap, whose service connects people with doctors, said on Wednesday that it raised a $24 million financing round led by Khosla Ventures. PRESS RELEASE

LEGAL/REGULATORY »

White Makes Case for Bigger S.E.C. Budget  |  Mary Jo White testified before a Senate Appropriations subcommittee to outline her agency’s need for a bigger budget. DealBook »

Ruling Clears Way for A.I.G. Suit Against Bank of America  |  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, Gretchen Morgenson reports for The New York Times. DealBook »

Oreck Files for Bankruptcy  |  The vacuum maker Oreck filed to begin a process that could give control of the company back to its founder, David Oreck, and his family, The Wall Street Journal writes. WALL STREET JOURNAL

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. DealBook »

More Support for European Bank Plan  |  “Two top E.U. finance officials gave a push forward to efforts to overhaul governance of the region’s banks, easing concerns that the bloc is failing to move swiftly enough to avoid future crises that could sink the euro,” The New York Times reports. NEW YORK TIMES

O’Melveny & Myers Hires 3 Senior Bankruptcy Lawyers  |  O’Melveny announced on Tuesday that it had hired John Rapisardi and George Davis, the co-chairs of the bankruptcy practice of the law firm Cadwalader Wickersham & Taft, as well as Peter Friedman, a Cadwalader partner based in Washington. DealBook »

A Settlement for Investors in Fannie Mae  |  The New York Times reports: “Fannie Mae, the government-sponsored mortgage finance company, and KPMG, its former auditor, have agreed to pay $153 million to investors who bought Fannie’s stock from 2001 to 2004, a period when Fannie’s regulator determined the firm had overstated its income and violated generally accepted accounting principles.” NEW YORK TIMES

Vacuum Maker Oreck Files for Bankruptcy

NASHVILLE, Tenn. -- Oreck Corp., the Nashville-based manufacturer of upright vacuums and cleaning products, has filed for Chapter 11 bankruptcy protection, and could reach an agreement to sell its assets in a matter of days, according to court filings.

A Chapter 11 filing will allow Oreck to consolidate its assets and restructure its finances as part of an effort to sell the business, the company said in a statement released Tuesday.

The statement provided few details and the company didn't respond to interview requests, but Oreck's bankruptcy filings paint a picture of a struggling company fighting to survive amid management departures and falling sales.

STORY: Oreck revmps marketing strategy

According to court filings, Oreck, along with eight affiliated entities that filed for Chapter 11, "are in a precarious financial position." The company is losing money, sales "are quickly deteriorating," the filing states, and it "simply cannot generate cash fast enough to cover expenses as they arise."

Oreck's former CEO Doug Cahill said he left in March after making several unsuccessful attempts to buy the company from its owner, Black Diamond Capital Management, an asset management firm with offices in Connecticut and Illinois. Cahill said he felt the firm wasn't supportive of the strategy he wanted to pursue.

"I didn't like the direction they were taking or how they were dealing with us," Cahill said, "so I resigned."

He said he was saddened by what was happening.

"It's hard to believe a 50-year-old company can be in this bad of shape in 50 days," he said.

Black Diamond could not be reached for comment Tuesday evening.

To ma! intain operations, Oreck intends to borrow $11 million through debtor-in-possession financing, a special form of financing provided for financially distressed companies under Chapter 11.

The company said in filings that it could reach an agreement to sell "substantially all" of its assets in the next several days, but that the deal was not a certainty. "If a deal is not reached," a filing says, "it is possible that a liquidation and wind down of the Debtors may ensue."

Oreck said in its statement that the company will continue daily operations without interruption.

"Oreck will continue to operate in the ordinary course of business while the sale process takes place, with authorized and exclusive dealers and other trade customers continuing to receive product for sale to ultimate consumers," the company said.

According to a forecast it submitted in its filings, Oreck expects to have a negative cash flow of nearly $3.2 million during the next three months.

Oreck laid off an undiclosed number of employees at the end of January, as well as in October 2012. At the time, Cahill said the layoffs weren't a cost-cutting maneuver, and were instead a result of a shift away from the company's traditional emphasis on direct sales.

Oreck has about 70 employees in the corporate office in Nashville, and it employs 250 workers at its plant in Cookeville. The company also has about 325 employees at its 96 company-owned retail stores.

Oreck was founded in in 1963 by David Oreck, who started by selling vacuum cleaners by mail. He started the company by buying an abandoned design for an upright vacuum cleaner from Whirlpool.

He eventually built a distribution and manufacturing facility in New Orleans, where the company was based for several decades.

Oreck sells its products in hundreds of Oreck Clean Home Centers, through major retailers, and through phone and online direct sales. The company distributes products in the U.S., Canada and parts of Europe.

Vacuum Maker Oreck Files for Bankruptcy

NASHVILLE, Tenn. -- Oreck Corp., the Nashville-based manufacturer of upright vacuums and cleaning products, has filed for Chapter 11 bankruptcy protection, and could reach an agreement to sell its assets in a matter of days, according to court filings.

A Chapter 11 filing will allow Oreck to consolidate its assets and restructure its finances as part of an effort to sell the business, the company said in a statement released Tuesday.

The statement provided few details and the company didn't respond to interview requests, but Oreck's bankruptcy filings paint a picture of a struggling company fighting to survive amid management departures and falling sales.

STORY: Oreck revmps marketing strategy

According to court filings, Oreck, along with eight affiliated entities that filed for Chapter 11, "are in a precarious financial position." The company is losing money, sales "are quickly deteriorating," the filing states, and it "simply cannot generate cash fast enough to cover expenses as they arise."

Oreck's former CEO Doug Cahill said he left in March after making several unsuccessful attempts to buy the company from its owner, Black Diamond Capital Management, an asset management firm with offices in Connecticut and Illinois. Cahill said he felt the firm wasn't supportive of the strategy he wanted to pursue.

"I didn't like the direction they were taking or how they were dealing with us," Cahill said, "so I resigned."

He said he was saddened by what was happening.

"It's hard to believe a 50-year-old company can be in this bad of shape in 50 days," he said.

Black Diamond could not be reached for comment Tuesday evening.

To ma! intain operations, Oreck intends to borrow $11 million through debtor-in-possession financing, a special form of financing provided for financially distressed companies under Chapter 11.

The company said in filings that it could reach an agreement to sell "substantially all" of its assets in the next several days, but that the deal was not a certainty. "If a deal is not reached," a filing says, "it is possible that a liquidation and wind down of the Debtors may ensue."

Oreck said in its statement that the company will continue daily operations without interruption.

"Oreck will continue to operate in the ordinary course of business while the sale process takes place, with authorized and exclusive dealers and other trade customers continuing to receive product for sale to ultimate consumers," the company said.

According to a forecast it submitted in its filings, Oreck expects to have a negative cash flow of nearly $3.2 million during the next three months.

Oreck laid off an undiclosed number of employees at the end of January, as well as in October 2012. At the time, Cahill said the layoffs weren't a cost-cutting maneuver, and were instead a result of a shift away from the company's traditional emphasis on direct sales.

Oreck has about 70 employees in the corporate office in Nashville, and it employs 250 workers at its plant in Cookeville. The company also has about 325 employees at its 96 company-owned retail stores.

Oreck was founded in in 1963 by David Oreck, who started by selling vacuum cleaners by mail. He started the company by buying an abandoned design for an upright vacuum cleaner from Whirlpool.

He eventually built a distribution and manufacturing facility in New Orleans, where the company was based for several decades.

Oreck sells its products in hundreds of Oreck Clean Home Centers, through major retailers, and through phone and online direct sales. The company distributes products in the U.S., Canada and parts of Europe.

Deciding on Dimon’s Dual Role

A little-known firm in London could play a crucial role in determining the fate of Jamie Dimon, the chief executive of JPMorgan Chase. The firm, Governance for Owners, has been tasked with voting the shares of BlackRock, the bank’s largest shareholder, on the question of whether to strip Mr. Dimon of his role as chairman, Susanne Craig and Jessica Silver-Greenberg report in DealBook.

In advance of the vote on May 21, JPMorgan shareholders are deciding whether the board’s lead director, Lee Raymond, a former chief of Exxon Mobil, is a strong enough counterbalance to Mr. Dimon. To BlackRock, having a strong independent director has been important, and the firm has previously said it supports companies without an independent chairman if the lead director has certain powers. Last year, some 40 percent of JPMorgan’s shares supported dividing the chairman and chief executive roles, though BlackRock did not.

BlackRock, which has a stake in JPMorgan of approximately 6.5 percent, outsourced its voting because of a provision in the Bank Holding Company Act. “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,” DealBook writes.

On Tuesday, Glass, Lewis & Company, a shareholder advisory firm, called for splitting the top roles, and also urged investors to withhold support for six of the bank’s 11 directors. That report, and the one on Friday from Institutional Shareholder Services, raised questions about the independence and qualifications of several board members.

KLEINER PERKINS, HUMBLED, ADJUSTS STRATEGY  |  The venture capital firm Kleiner Perkins Caufield & Byers was once a symbol of Silicon Valley, with an ability seemingly to mint money. But the firm has hit a rough patch over the last decade, with unsuccessful investments in clean technology and a catch-up effort with social media companies, Randall Smith reports in DealBook. The firm has held meetings with 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.

Mr. Smith reports: “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 latest setback is the difficulty at Fisker Automotive, the green-car start-up backed by Kleiner that has laid off staff and hired bankruptcy advisers.

CHRYSLER HAUNTED BY CRISIS-ERA DEAL  |  “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,” Steven M. Davidoff writes in the Deal Professor column. “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.”

ON THE AGENDA  |  Hedge fund titans including William A. Ackman, Kyle Bass, James Chanos, Stanley Druckenmiller and David Einhorn are speaking at the Sohn Investment Conference in New York. Tesla, Groupon and Green Mountain Coffee Roasters report earnings on Wednesday evening. Michael Novograntz of the Fortress Investment Group is on Bloomberg TV at 10:30 a.m. Anthony Scaramucci of SkyBridge Capital is on CNBC at 12:30 p.m. H. Rodgin Cohen of Sullivan & Cromwell is on Bloomberg TV at 2 p.m.

YAHOO SAID TO LOOK AT HULU  |  Marissa Mayer, Yahoo’s chief executive, “recently met with top execs at Hulu, the premium video service whose media company owners have been considering selling it for some months,” Kara Swisher and Peter Kafka of AllThingsD report, citing unidentified people close to the situation. Yahoo is “in the process” but has not made a formal bid, the report said. “Sources said Mayer also had an extensive getting-to-know-you meeting, which was apparently not held at Hulu’s offices in Santa Monica, Calif., along with C.O.O. Henrique De Castro. The discussion is taking place in the wake of Yahoo’s failed bid â€" largely engineered by De Castro â€" to purchase a majority stake in France Télécom’s Dailymotion video service, after a government official in the countrysaid Yahoo could not own 75 percent of the company.”

Mergers & Acquisitions »

Saudi Prince Has an Appetite for Big Deals  |  The Financial Times reports: “Prince Alwaleed bin Talal, the billionaire Saudi Arabian investor, is prepared to offer more shares in his Kingdom Holding investment company to fund a big acquisition to expand his sprawling banking-to-hotels empire.” FINANCIAL TIMES

Icahn and Southeastern May Team Up Over Dell  |  The Wall Street Journal reports: “Southeastern Asset Management Inc. and investor Carl Icahn are talking about teaming up to nominate directors to the Dell Inc. board as part of an effort to derail the computer maker’s $24.4 billion leveraged buyout, people familiar with the matter said.” WALL STREET JOURNAL

Solvay to Divest PVC Unit in Deal With Ineos  |  Solvay of Belgium agreed on Tuesday to contribute its PVC unit to a joint venture with Ineos, which would eventually take full control of the business within four to six years of the deal’s closing. DealBook »

J.C. Penney Sales Fall Again  |  But investors found cause for optimism in the earnings report.
REUTERS

Berkshire May Increase Stake in DaVita HealthCare Partners  | 
REUTERS

INVESTMENT BANKING »

Hedge Funds Expand in Credit Trading as Banks Pull Back  |  Hedge funds that trade debt are adding employees as banks cut back in the face of new regulations, Bloomberg News writes. BLOOMBERG NEWS

GE Capital Embarks on a Cross-Country Ad Campaign  |  GE Capital, which accounts for a significant share of General Electric’s total earnings, is going on a six-month roadshow across the United States to promote lending to midsize businesses, The New York Times writes. NEW YORK TIMES

Rothschild Reflects on Troubled Coal Venture  |  Nathaniel Rothschild told Bloomberg Markets magazine about his ill-fated partnership with the Bakrie family in the coal mining company Bumi. “I am the first to admit we made a terrible mistake,” he said. BLOOMBERG MARKETS

Standard Chartered Says First-Quarter Profit Likely Declined  | 
REUTERS

The Challenges Ahead for HSBC  |  The chief executive has sought to make the bank simpler and smaller. The question now is how many more strings he has left to pull, Peter Thal Larsen of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

PRIVATE EQUITY »

Investors and Founders of Apollo Plan to Sell Shares  |  Big investors of Apollo Global Management, in addition to two of the founders of the private equity firm, are selling a portion of their shares, Reuters reports. REUTERS

China Dairy to Buy $410 Million Stake in Milk Producer  |  China Mengniu Dairy is buying a stake of 26.92 percent in China Modern Dairy Holdings from K.K.R. and CDH Investments, Reuters reports. REUTERS

HEDGE FUNDS »

Pleased by Apple’s Move, Einhorn Raises His Bet  |  David Einhorn said on Tuesday that his firm had raised the size of its Apple holdings. The move came after Apple agreed to quintuple the size of its stock buyback program and increase its dividend. DealBook »

A Word of Caution on Tips From Hedge Fund Gurus  |  “Investors who bought on the basis of top tips from one of New York’s most celebrated hedge fund conferences last year spectacularly failed to beat the market,” The Financial Times writes. FINANCIAL TIMES

I.P.O./OFFERINGS »

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. It is likely to seek to go public within the next month. DealBook »

ING Plans I.P.O. of European Insurance Unit  |  The Dutch financial services firm ING Group said on Wednesday that it was planning an initial public offering of its European insurance business in 2014. DealBook »

VENTURE CAPITAL »

Khosla Ventures Invests in Health Technology Company  |  HealthTap, whose service connects people with doctors, said on Wednesday that it raised a $24 million financing round led by Khosla Ventures. PRESS RELEASE

LEGAL/REGULATORY »

White Makes Case for Bigger S.E.C. Budget  |  Mary Jo White testified before a Senate Appropriations subcommittee to outline her agency’s need for a bigger budget. DealBook »

Ruling Clears Way for A.I.G. Suit Against Bank of America  |  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, Gretchen Morgenson reports for The New York Times. DealBook »

Oreck Files for Bankruptcy  |  The vacuum maker Oreck filed to begin a process that could give control of the company back to its founder, David Oreck, and his family, The Wall Street Journal writes. WALL STREET JOURNAL

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. DealBook »

More Support for European Bank Plan  |  “Two top E.U. finance officials gave a push forward to efforts to overhaul governance of the region’s banks, easing concerns that the bloc is failing to move swiftly enough to avoid future crises that could sink the euro,” The New York Times reports. NEW YORK TIMES

O’Melveny & Myers Hires 3 Senior Bankruptcy Lawyers  |  O’Melveny announced on Tuesday that it had hired John Rapisardi and George Davis, the co-chairs of the bankruptcy practice of the law firm Cadwalader Wickersham & Taft, as well as Peter Friedman, a Cadwalader partner based in Washington. DealBook »

A Settlement for Investors in Fannie Mae  |  The New York Times reports: “Fannie Mae, the government-sponsored mortgage finance company, and KPMG, its former auditor, have agreed to pay $153 million to investors who bought Fannie’s stock from 2001 to 2004, a period when Fannie’s regulator determined the firm had overstated its income and violated generally accepted accounting principles.” NEW YORK TIMES

ING Plans I.P.O. of European Insurance Unit

8 May 2013

• Group 1Q13 underlying net profit rose to EUR 800 million from EUR 579 million in 1Q12 and EUR 483 million in 4Q12
• Net profit increased to EUR 1,804 million, or EUR 0.47 per share, after special items and net gains on divestments
• Bank underlying result before tax rose to EUR 1,169 million from EUR 1,151 million in 1Q12, EUR 283 million in 4Q12
• 1Q13 underlying result before tax reflects improvement in net interest margin and impact of cost-saving initiatives
• Net interest margin up to 1.38% on loan book repricing, lower average balance sheet and higher Financial Markets interest result
• Operating expenses were down 8.8% from 4Q12 and stable year-on-year; cost/income ratio improved to 55.2%
• Risk costs remained elevated at EUR 561 million, or 81 bps of average RWA, but improved from 85 bps in 4Q12
• Insurance EurAsia 1Q13 operating result EUR 79 million, versus EUR 129 million in 1Q12 and EUR 161 million in 4Q12
• Operating results continued to be affected by lower reinvestment yields and a decline in Non-life results in the Netherlands
• Investment spread declined to 94 bps from 99 bps in 4Q12, mainly reflecting the low yield environment
• Underlying result before tax improved versus both 1Q12 and 4Q12 to EUR 85 million due to lower impact of market-related items
• Sales were on par with 1Q12 but jumped 18.8% from 4Q12 driven by seasonally higher corporate pension renewals in NL
• Insurance ING U.S. 1Q13 operating result EUR 87 million, versus EUR 119 million in 1Q12 and EUR 137 million in 4Q12
• Solid quarter for ongoing Insurance/IM businesses with strong net inflows, higher AuM fees, and a resilient investment margin
• Funding costs increased as more long-term debt was issued replacing shorter-term and internal debt in preparation for the IPO
• Sales grew 15.1% from 1Q12 driven by the Retirement business and rose 15.7% from 4Q12 on seasonality in Employee Benefits
• Underlying result before tax was EUR -192 million reflecting losses on Closed Block VA equity hedges in place to protect capital
• ING maintained strong capital ratios; shareholders’ equity rose by EUR 2.7 billion to EUR 54.4 billion
• Bank core Tier 1 ratio strengthened from 11.9% to 12.3% on 1Q13; or 10.9% on a fully-loaded Basel III basis
• Insurance EurAsia IGD Solvency I ratio rose to 292% after divestments; US capitalisation targets estimated to be met at 31 March
• Successful NYSE listing of ING U.S. on 2 May 2013 raised EUR 0.5 billion of proceeds for the Group; reduced Group stake to 75%

Chairman’s Statement

“ING has demonstrated steady progress so far this year on the Group’s restructuring, culminating with the successful IPO of our US insurance business, which was completed last week. The transaction satisfied our agreement with the European Commission to sell 25% of the US business before the year-end deadline, while raising EUR 0.5 billion of proceeds for the Group,” said Jan Hommen, CEO of ING Group. “With that milestone completed, we are now accelerating preparations for the base case of an IPO of our European insurance company, with the aim of being ready to go to the market in 2014.”

“At the same time, the Bank has continued to show strong capital generation, with a Basel III core Tier 1 ratio of 10.9%, well above our 10% target, allowing us to plan another EUR 1.5 billion upstream to the Group in the second quarter. This, combined with the US IPO proceeds, is expected to reduce the double leverage in the holding company from EUR 7 billion to EUR 5 billion, taking us a step closer to completing the financial and governance separation of the banking and insurance businesses.”

“ING Bank is also making good progress on its strategic priorities. After taking major strides last year to optimise the balance sheet and de-risk the investment portfolio, we are now comfortably meeting our capital, funding and liquidity targets, giving us room to selectively grow our loan book. Net loan growth was a moderate EUR 2.5 billion in the quarter, following a contraction in the second half of 2012, while net funds entrusted grew by an impressive EUR 16.5 billion.”

“Earnings at the Bank rebounded from the fourth quarter, supported by a recovery in the net interest margin to 138 bps as the loan book reprices and lending margins improved. Expenses remained under control as we continued to implement our cost-saving initiatives, bringing the cost/income ratio down to 55.2% versus our target of 50-53% for 2015. Risk costs remained elevated amid the weak economic climate in Europe, but improved compared with the fourth quarter to 81 bps of average risk-weighted assets. The return on IFRS-EU equity for the Bank also improved to 9.0% in the first quarter, approaching our target range of 10-13% for 2015.”

“Total underlying net profit for the Group was EUR 800 million in the first quarter, up 38.2% from one year ago and 65.6% from the fourth quarter of 2012. Results from Insurance EurAsia remained under pressure amid the low yield environment. The ongoing businesses of ING U.S. posted solid operating results, driven by strong net inflows and growth in assets under management, while underlying results were dampened by hedge losses in the Closed Block VA as equity markets rose.”

“As we look to the months ahead, we will continue to focus on driving our operating performance as we prepare the companies for standalone futures, while keeping our customers at the heart of everything we do.”

Analyst and investor conference call

8 May 2013, at 9:00 a.m. CET

NL +31 20 794 8500,
UK +44 207 190 1537
US +1 480 629 9031

Listen to the investor conference call at www.ing.com

Media conference call

8 May 2013, at 11:00 a.m. CET

NL +31 20 531 5846
UK +44 203 365 3210

Listen to the media conference call at www.ing.com

Investor enquiries

T: +31 20 576 6396
E: investor.relations@ing.com

Press enquiries

T: +31 20 576 5000
E: media.relations@ing.com

DISCLAIMER

ING Group’s Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (‘IFRS-EU’).

In preparing the financial information in this document, the same accounting principles are applied as in the 1Q2013 ING Group Interim Accounts.

Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial makets, including developing markets, (3) consequences of a potential (partial) break-up of the euro, (4) the implementation of ING’s restructuring plan to separate banking and insurance operations, (5) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and counterparty creditworthiness, (6) the frequency and severity of insured loss events, (7) changes affecting mortality and morbidity levels and trends, (8) changes affecting persistency levels, (9) changes affecting interest rate levels, (10) changes affecting currency exchange rates, (11) changes in investor, customer and policyholder behaviour, (12) changes in general competitive factors, (13) changes in laws and regulations, (14) changes in the policies of governments and/or regulatory authorities, (15) conclusions with regard to purchase accounting assumptions and methodologies, (16) changes in ownership t! hat could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (17) changes in credit-ratings, (18) ING’s ability to achieve projected operational synergies and (19) the other risks and uncertainties detailed in the Risk Factors section contained in the most recent annual report of ING Groep N.V. Any forward-looking statements made by or on behalf of ING speak only as of the date they are made, and, ING assumes no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information or for any other reason. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities.