Pressure in Britain Over What to Do With Bailed-Out Banks

The archbishop of Canterbury, a former chancellor of the Exchequer and the outgoing governor of the Bank of England are unusual comrades in arms.

Yet, the three stalwarts of the British establishment â€" Justin Welby, Nigel Lawson and Mervyn King â€" are all calling for the breakup of the part-nationalized Royal Bank of Scotland.

They are part of a growing debate in Britain about what to do with the bank and its rival, the Lloyds Banking Group, which received more than $103 billion combined in rescue bailouts during the financial crisis.

Now, nearly five years after British taxpayers first took stakes in the lenders, the government is preparing to reduce its holdings before the next general election, which is expected in early 2015. The government owns 81 percent of R.B.S. and 39 percent of Lloyds.

Yet, unlike the share sales in financial giants like Citigroup that allowed the United States government to make a profit, the prospective offerings in Britain may be more difficult.

The two banks are still cleaning up their balance sheets and selling off unwanted assets that could put off new investors. Both continue to come under political pressure to increase potentially risky lending to the struggling British economy. And the timing of any share sale, which could come as early as next year, may lead to losses for British taxpayers â€" potentially angering voters.

“As we move closer to an election, the share prices of R.B.S. and Lloyds will become more scrutinized,” said Peter Hahn, a banking professor at the Cass Business School in London. “Whoever is in government, selling shares in these banks will be a top priority.”

Liz Morley, a representative for UKFI, the government agency that is in charge of managing the bank holdings, declined to comment for this article.

The British government’s quandary over the banks stands in contrast with the experience of the United States Treasury Department, which reduced the government’s stakes in the big banks more quickly.

Elisabeth Rudman, an analyst with credit rating firm DBRS, said the two British banks were in much worse shape because of the financial crisis than their American counterparts. R.B.S. was not only burdened by its participation in the acquisition of the Dutch lender ABN Amro, but it had large exposure to imploding real estate markets like Ireland.

The critical element in the British government’s effort to shed its banks stakes is timing. Later this month, George Osborne, the current chancellor of the Exchequer, will present his strategy to return the two banks to the private sector. His plan will come soon after the findings of a British parliamentary committee in the middle of June that will outline how the firms could be privatized. Lawmakers remain divided over how the banks’ should be privatized, with many of the committee members calling for the breakup of R.B.S. to carve out the most risky assets.

Those in favor of a split say that freeing R.B.S. from its worst-performing assets would allow the bank to lend more, strengthen the banking system and help Britain’s economic recovery. Those against the breakup argue that it would cost both time and money that would be better spent letting the bank continue with its planned overhaul.

To connect banks with local communities could involve “recapitalizing at least one of our major banks and breaking it up into regional banks,” Archbishop Welby, a former oil executive who sits on the parliamentary committee, said in a speech on April 21.

For Mr. Osborne, planning the offerings will be precarious.

If the British government sells its stakes too soon, it could book a loss that might not sit well with voters. But if the government waits too long to sell, it could deter potential investors from buying the shares. It also may reverse the firms’ recent share price rise that have made the banks’ stocks some of the best performers in the FTSE 100-stock index over the last 12 months.

“I get confused by all the talk about waiting,” said Ian Gordon, a banking analyst with Investec in London, adding that the British government should sell the stakes tomorrow. “Can we sell the shares now? Of course we can.”

The fortunes of the two British banks have certainly improved since they received multibillion-dollar bailouts.

R.B.S. has been gradually digging itself out of its ill-judged ABN Amro acquisition in 2007. The bank, based in Edinburgh, has shed billions of dollars from its balance sheet and cut around 40,000 jobs over the last five years. The firm has also slashed its investment banking operations, which came under scrutiny this year after R.B.S. was forced to pay a $612 million fine connected to a rate-rigging scandal.

Lloyds, which already is Britain’s largest mortgage lender, has refocused its efforts on the British retail banking sector. The bank’s chief executive, António Horta-Osório, announced a £1.5 billion net profit in the first quarter of 2013, compared with a £5 million loss in the same period last year.

Analysts say the rise in earnings is mostly driven by cost reductions, a fall in delinquent loans and fast-tracked asset sales like the disposal of a portfolio of real estate-backed securities in the United States for £3.3 billion last month to a number of American investors, including Goldman Sachs.

Market participants are now centering their attention on when the British government will start to reduce it stakes.

R.B.S.’s chairman, Philip Hampton, has said the bank would like the British government to start selling shares from the middle of next year, though the firm’s current share price is around 35 percent below what British taxpayers paid for their holding. Lloyds’ stock price is slightly above the government’s so-called break-even point, though bankers caution that any offering will be dependent on the health of the broader financial markets.

“Bringing too many shares to market could easily scare off investors,” said a prominent investment banker at a rival firm in London, who spoke on the condition of anonymity because he was not authorized to speak publicly. “When it comes to reducing the government’s stake, timing will be everything.”

Some leading voices in Britain are also calling for restraint.

Alistair Darling, the former chancellor of the Exchequer who led the bailouts of R.B.S. and Lloyds, said the government would make a mistake if it were to rush a sale of shares before the next election. Mr. Darling, a Labour politician who opposes the breakup of R.B.S., said the current government could wait at least another 18 months before selling off its stakes, but must clarify its plans to avoid creating confusion with potential investors.

“A clear statement is needed,” Mr. Darling said. “The longer this drags on, the worse this is going to get.”

For any prospective share sale in the two banks to be a success, the British government must convince voters that the offerings would benefit the economy after taxpayers spent billions of dollars to rescue the two lenders.

Just outside an R.B.S. branch in central London on Thursday, many seemed unconvinced that privatizing the bank would help to jump-start Britain’s recovery.

“I can’t see it making much difference,” said Sarah Mulligan, an I.T. consultant on her way to a meeting in London’s financial district. “Changing who owns the banks won’t necessarily get them lending again.”

Art Imitates I.R.S., or Vice Versa

Yet another Internal Revenue Service training video has surfaced, this one a thinly veiled parody of the hit television show “Mad Men.”

In the noirish video, an actor appears to echo the character of Don Draper, the besuited advertising executive of the show who dreams up campaigns for cigarettes, airlines and bras. Shot in black and white, with a horn-heavy soundtrack, the four-and-a-half minute video reaches deep for art-world metaphors to describe how I.R.S. employees can assist confused taxpayers.

“Whether you are a conductor guiding a symphony in a concert, or an artist creating a breathtaking work of art, or a museum curator preserving the archives of history, you are an essential artisan who makes a difference every day,” the dark-haired figure intones. “Our customer service is an incredible work of art. Your film directors encourage you to give your best performance.”

The undated production, labeled “IRS Training Video,” comes amid growing scrutiny by Congress of the beleaguered agency, now nearly a month into a scandal that began with accusations that it flagged conservative tax-exempt groups for special scrutiny. Since then, the fallout has turned to a Treasury watchdog report on wasteful spending on conferences and videos of questionable purpose.

Previous I.R.S. training and leadership videos have included parodies of “Gilligan’s Island” and “Star Trek” and a clip of employees in the Small Business/Self Employed unit performing the Cupid Shuffle, a line dance. (In the latter, a frustrated I.R.S. employee bemoans her clumsy underlings, saying, “It’s so challenging to teach them, even though the moves are the directions to the dance!”)

On Thursday, Faris Fink, the commissioner of the agency’s small business and self-employed division, told lawmakers at a congressional hearing that he regretted having played the character Spock in the “Star Trek” parody, which cost more than $50,000 to make. “It’s embarrassing. I apologize,” Mr. Fink said.

In the latest video, the Don Draper-like figure declares at one point that “we, as administrative support employees, are the curators of customer service” and pauses twice to introduce Leslye Baronich, at the time the agency’s director of field assistance in the wage and investment division. Ms. Baronich, described last fall in an I.R.S. publication as the acting director of the earned income tax credit program, does not appear in the video.

An I.R.S. spokesman said he was not able to comment immediately.

The I.R.S. has long referred to its efforts to assist and guide taxpayers as “customer service,” a concept first heavily promoted by a former commissioner, Mark Everson, and embraced by the previous acting commissioner, Douglas Shulman, who was forced out last month over the scandal involving the tax-exemption applications. The National Taxpayer, an independent position within the I.R.S., routinely faults the agency for delays and misinformation in its customer service unit.

The “Mad Men”-themed video does not appear on the agency’s YouTube channel, which was started in April 2011. Instead, it was uploaded to the site by Michael R. Davis, the professional actor hired to play “Mr. Draper.” Mr. Davis, whose stage roles include Danny in “Grease” and the dentist in “Little Shop of Horrors,” has made films for other government agencies, including the Federal Bureau of Investigation, according to a Web site promoting a short film in which he appears. He could not immediately be reached for comment.

Art Imitates I.R.S., or Vice Versa

Yet another Internal Revenue Service training video has surfaced, this one a thinly veiled parody of the hit television show “Mad Men.”

In the noirish video, an actor appears to echo the character of Don Draper, the besuited advertising executive of the show who dreams up campaigns for cigarettes, airlines and bras. Shot in black and white, with a horn-heavy soundtrack, the four-and-a-half minute video reaches deep for art-world metaphors to describe how I.R.S. employees can assist confused taxpayers.

“Whether you are a conductor guiding a symphony in a concert, or an artist creating a breathtaking work of art, or a museum curator preserving the archives of history, you are an essential artisan who makes a difference every day,” the dark-haired figure intones. “Our customer service is an incredible work of art. Your film directors encourage you to give your best performance.”

The undated production, labeled “IRS Training Video,” comes amid growing scrutiny by Congress of the beleaguered agency, now nearly a month into a scandal that began with accusations that it flagged conservative tax-exempt groups for special scrutiny. Since then, the fallout has turned to a Treasury watchdog report on wasteful spending on conferences and videos of questionable purpose.

Previous I.R.S. training and leadership videos have included parodies of “Gilligan’s Island” and “Star Trek” and a clip of employees in the Small Business/Self Employed unit performing the Cupid Shuffle, a line dance. (In the latter, a frustrated I.R.S. employee bemoans her clumsy underlings, saying, “It’s so challenging to teach them, even though the moves are the directions to the dance!”)

On Thursday, Faris Fink, the commissioner of the agency’s small business and self-employed division, told lawmakers at a congressional hearing that he regretted having played the character Spock in the “Star Trek” parody, which cost more than $50,000 to make. “It’s embarrassing. I apologize,” Mr. Fink said.

In the latest video, the Don Draper-like figure declares at one point that “we, as administrative support employees, are the curators of customer service” and pauses twice to introduce Leslye Baronich, at the time the agency’s director of field assistance in the wage and investment division. Ms. Baronich, described last fall in an I.R.S. publication as the acting director of the earned income tax credit program, does not appear in the video.

An I.R.S. spokesman said he was not able to comment immediately.

The I.R.S. has long referred to its efforts to assist and guide taxpayers as “customer service,” a concept first heavily promoted by a former commissioner, Mark Everson, and embraced by the previous acting commissioner, Douglas Shulman, who was forced out last month over the scandal involving the tax-exemption applications. The National Taxpayer, an independent position within the I.R.S., routinely faults the agency for delays and misinformation in its customer service unit.

The “Mad Men”-themed video does not appear on the agency’s YouTube channel, which was started in April 2011. Instead, it was uploaded to the site by Michael R. Davis, the professional actor hired to play “Mr. Draper.” Mr. Davis, whose stage roles include Danny in “Grease” and the dentist in “Little Shop of Horrors,” has made films for other government agencies, including the Federal Bureau of Investigation, according to a Web site promoting a short film in which he appears. He could not immediately be reached for comment.

Elan Finds Creative ‘Poison Pill’ to Defend Against a Hostile Bid

Elan’s fervent efforts to fight off Royalty Pharma’s $6.4 billion hostile bid are driven by the simple fact that it is relatively defenseless. Blame Ireland.

Elan, a developer of drugs and drug-delivery systems, is an Irish company and its stock is listed in Ireland. This means that while it has American depositary receipts listed in the United States, its primary regulator is the Irish Takeover Panel, which administers the Irish takeover code.

It also means that any bid for Elan is going to play out quite differently than one for a company in the United States. The main reason is that the states where American companies are organized freely allow companies to adopt takeover defenses, like a poison pill.

But Ireland, like Britain, takes a different approach. Takeover defenses are generally prohibited. Instead, companies are exposed to a hostile takeover and are forced to fight these bids by lobbying shareholders directly.

Faced with this difficulty, Elan has had to get creative in order to challenge Royalty Pharma’s bid, which the pharmaceutical company says “significantly undervalues Elan.”
Elan first fought a short-term battle to try to highlight what it called “misrepresentations” by Royalty Pharma concerning its plans for Elan. The basic issue here is that the American federal securities laws require bidders making tender offers to disclose their plans for the company once the tender offer is completed. The Irish Takeover Rules contains similar disclosure requirements in connection with a shareholder vote.

Note that even though Elan is an Irish company, because it has A.D.R.’s listed in the United States, the Williams Act regulating tender offers and its anti-fraud provisions still apply to Royalty Pharma’s offer.

Elan sued in Irish and United States courts, saying that because Royalty Pharma was bidding only for 50 percent plus one shares, Royalty had failed to make sufficient disclosure about what it would do if it did not acquire all of Elan and Elan was still publicly traded with a minority stub.

In the last week, Elan was able to get judges in two continents to agree with its position. In Ireland, the Irish High Court enjoined Royalty Pharma from distributing a proxy statement in opposition to Elan’s acquisition proposals until a corrective disclosure had been made about Royalty Pharma’s plans for Elan. Similarly in the United States, a federal judge in the United States District Court for the Southern District of New York enjoined Royalty Pharma from closing its tender offer until similar disclosure had been made.

This is a minor victory for Elan. In both cases, Royalty Pharma will just make additional disclosure and be on its way. So there is really nothing of significant consequence to this courtroom skirmish, though it does highlight the potential that a significant minority of Elan’s shares could still remain outstanding after Royalty Pharma’s acquisition.
It also points out that Royalty Pharma is willing to proceed even if it has to have a minority stub left with Elan’s shareholders if it doesn’t reach the 90 percent threshold to summarily squeeze out all outstanding shares. Eventually, Royalty would be able to get there by replacing Elan’s directors and subsequent attempts, but that may take time.

Elan’s main defense has been instead to make what others have called “poison pill” acquisitions, or deals that, in essence, act like a poison pill to make the company more expensive and thereby discouraging a hostile takeover.

In May, Elan announced that it would pay $1 billion for a 21 percent stake in a royalty stream related to four respiratory treatments held by the biotech firm Theravance in partnership with GlaxoSmithKline. Elan also announced that it had agreed to acquire AOP Orphan, an Austrian company that focuses on rare diseases, for $340 million. A third deal was the $40 million acquisition of a 48 percent ownership interest in NewBridge Pharmaceuticals, a Dubai-based specialty therapeutics company. Elan has also announced that it would spin off its anti-amyloid treatment to a newly created company, Speranza Therapeutics, which would be 18 percent owned by Elan.

To top off, Elan has proposed a $200 million share buyback and the issuance of $800 million in new debt.

The Theravance acquisition is particularly controversial. In a note to clients, the Sanford C. Bernstein analyst Ronny Gal calculated that Elan had severely overpaid for the drugs, stating that it was “tough to see how the assets acquired, risk discounted, would command such a value.” Mr. Gal added that the “purchase acts as ‘poison pill’ by adding assets Royalty Pharma may not want to buy.”

All of these acquisitions and movements are being portrayed by Royalty Pharma as an attempt to halt its bid by making it too expensive and foolhardy to acquire a changed Elan.

In the United States though, there would be little Royalty Pharma could do to counter the purchases. Delaware, where most public companies are incorporated, does not require that companies take a shareholder vote for a cash acquisition. Royalty Pharma would be stuck.

However, in Ireland, significant acquisitions are required to be approved by shareholders. Thus shareholders will be voting on June 17 on the Theravance, AOP Orphan and NewBridge transactions. They will also be voting on the share buyback.

In the United States, much hay has also been made about the fact that Elan did not negotiate a fiduciary clause out, which would allow the board to change its recommendation to shareholders. But this seems to be a battle over nothing, because in the United States, the Elan board wouldn’t have even had to hold a shareholder vote. Moreover, it is hard to see the Irish Takeover Panel allowing this recommendation change provision to stand if there were facts that required Elan to change its recommendation.
The vote has turned into a referendum on the Royalty Pharma bid with the parties battling back and forth.

Institutional Shareholder Services has recommended that shareholder vote against all four proposals, stating “In aggregate, the inconsistent management of cash return to shareholders, the time frame over which the Theravance, AOP Orphan and NewBridge transactions were negotiated, and the lack of a fiduciary out in the Theravance transaction, don’t readily support a conclusion that this was a coherent process designed to create shareholder value.” In other words, I.S.S. agrees that this looks like an attempt at a quasi-poison pill.

Meanwhile, Royalty Pharma has specifically conditioned its buyout offer for Elan on all of the proposals being voted down by Elan’s shareholders. Royalty Pharma has also stated it will not waive these conditions.

Knowing the vote is so important, Elan has also taken steps that may benefit the company. Elan initially advised A.D.R. holders that the record date for this meeting would be on June 13, but later changed to a May 23 record date for A.D.R. holders, and June 15 for holders of Irish shares to qualify to vote on June 17.

Elan is the rare foreign company where a significant percentage of its shares, about 87 percent, are held in the United States via its A.D.R. program. Complaints have been made to the Securities and Exchange Commission and New York Stock Exchange over the change in the vote dates. But neither of these are likely to act because the federal proxy rules do not apply to foreign companies.

Citigroup is Elan’s adviser but is also the A.D.R. depositary. Citigroup has shut down conversion of A.D.R.’s into ordinary shares to block A.D.R. holders that bought after May 23 from converting their A.D.R.’s into Irish shares so that they can vote on the deal. Nice.

So, we are having something that we seldom have in the United States. Shareholders will get to decide if a takeover happens on a fairly expedited basis because Royalty Pharma announced its offer in February. The only thing is that this June 17 vote is not about is the offer itself. Chalk it up to this being Ireland.

SAP Paying Top Dollar in a Buying Spree

If you can’t make it, buy it.

Europe’s largest software maker, SAP, has been following this principle with the vigor of a late convert. The German company ditched its longstanding penchant for organic growth only a few years ago. Since then, it has been buying, spending about $9 billion on acquisitions, about 10 percent of its current market value, in the last 18 months.

So far, the deals have made strategic sense, mainly strengthening SAP’s market position in cloud computing. The prices are another matter. This week’s acquisition of Hybris, a privately held Swiss rival, confirms both patterns.

Hybris offers a new generation of customer relationship management software. It sells to industry leaders like Procter & Gamble, Nespresso and Levi’s. Hybris’s core strength is the ability to provide a similar customer experience on all distribution channels, from smartphones to Web sites.

The acquisition will cover up a hole in the SAP line. Parts of its existing C.R.M. software rank poorly with industry experts like Forrester Research and have been losing ground. According to research by the consulting firm Gartner, SAP lost the top position in C.R.M. to Salesforce.com. That matters in an $18 billion global market that grew by 12.5 percent last year.

SAP isn’t saying, but Reuters cites sources putting the price at $1 billion or more. That would be a sky-high valuation, at least 10 times annual revenue of about $110 million. Starmine data show the average sales multiple for listed software companies is 3.5. Just this week, I.B.M. and Salesforce.com bought cloud computing companies at sales multiples between 5 and 9.

SAP can point out that Hybris’s revenue nearly doubled in 2012 and that other bidders were interested. In any case, it must now integrate the acquisition and retain key staff members. SAP has not been particularly good at the latter, having lost the founders of Sybase and SuccessFactors, two recent acquisitions.

It looks as if SAP has shown something like hubris, overbearing arrogance, in the price it was willing to pay for Hybris. It will take something more like humility to make the deal work.

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

SAP Paying Top Dollar in a Buying Spree

If you can’t make it, buy it.

Europe’s largest software maker, SAP, has been following this principle with the vigor of a late convert. The German company ditched its longstanding penchant for organic growth only a few years ago. Since then, it has been buying, spending about $9 billion on acquisitions, about 10 percent of its current market value, in the last 18 months.

So far, the deals have made strategic sense, mainly strengthening SAP’s market position in cloud computing. The prices are another matter. This week’s acquisition of Hybris, a privately held Swiss rival, confirms both patterns.

Hybris offers a new generation of customer relationship management software. It sells to industry leaders like Procter & Gamble, Nespresso and Levi’s. Hybris’s core strength is the ability to provide a similar customer experience on all distribution channels, from smartphones to Web sites.

The acquisition will cover up a hole in the SAP line. Parts of its existing C.R.M. software rank poorly with industry experts like Forrester Research and have been losing ground. According to research by the consulting firm Gartner, SAP lost the top position in C.R.M. to Salesforce.com. That matters in an $18 billion global market that grew by 12.5 percent last year.

SAP isn’t saying, but Reuters cites sources putting the price at $1 billion or more. That would be a sky-high valuation, at least 10 times annual revenue of about $110 million. Starmine data show the average sales multiple for listed software companies is 3.5. Just this week, I.B.M. and Salesforce.com bought cloud computing companies at sales multiples between 5 and 9.

SAP can point out that Hybris’s revenue nearly doubled in 2012 and that other bidders were interested. In any case, it must now integrate the acquisition and retain key staff members. SAP has not been particularly good at the latter, having lost the founders of Sybase and SuccessFactors, two recent acquisitions.

It looks as if SAP has shown something like hubris, overbearing arrogance, in the price it was willing to pay for Hybris. It will take something more like humility to make the deal work.

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

Despite Tax Rules, Companies Stick With U.S.

The tactics that multinational companies like Apple, Microsoft and Hewlett-Packard use to avoid paying corporate income taxes might make one wonder why they incorporate in the United States in the first place. Why not Ireland?

Advocates of a territorial-based tax system often point out that taxing United States companies on their worldwide income creates an incentive for new companies to incorporate abroad instead. Many countries tax income earned only within their borders. The United States, by contrast, purports to tax companies on their worldwide income, with credits for any foreign taxes paid.

It’s easy to incorporate as a foreign company even if a company is truly based in the United States. According to the tax code, residency is determined by a company’s place of legal incorporation, not by the location of its headquarters, employees or activities. A company that is incorporated in Delaware or California must pay corporate income tax in the United States, regardless of the size of its operations here.

A company that is legally incorporated abroad â€" say, in Ireland or the Cayman Islands â€" has to pay tax in the United States only on income derived from United States sources. The sourcing rules are notoriously complicated, but they often understate the extent to which a company actually earns money here.

Because corporate residence is, in effect, elective, it is surprising that nearly all new companies with headquarters here elect to incorporate in the United States and pay tax here.

Two new papers by a University of Texas law professor, Susan Morse, help explain why. The first, “Tax Haven Incorporation for U.S.-Headquartered Firms: No Exodus Yet,” with Eric Allen of the University of Southern California, confirms that new companies are not avoiding the United States in favor of tax havens. Among 918 new companies identified as multinationals with headquarters in the United States, just 27 were legally incorporated in tax havens.

Why no exodus yet? In a second paper, Professor Morse takes the perspective of a new company with global ambitions and interviews founders, lawyers and investors in Silicon Valley about how they make the decision about where to incorporate.

The first reason is hiding in plain sight. Because the United States corporate income tax is so leaky, the benefits of avoiding it are smaller than they would appear to be in theory. For technology companies in particular, multinationals based here can obtain low effective tax rates on foreign income. Professor Morse reports estimates of effective tax rates of 3 percent to 6 percent a year on this foreign income.
And, as Apple and others have demonstrated, it is often possible to shift economic income from the United States to tax havens abroad, further reducing tax liability here.

The second reason is that there continue to be significant nontax advantages to incorporating in the United States. Incorporating in Delaware is fast, easy and cheap. Venture capitalists and other investors like the security and predictability of Delaware law, and companies can rely on United States courts to enforce intellectual property rights. Minority investors might be nervous about enforcing their contractual and shareholder rights in a court in Bermuda, British Virgin Islands or Ireland.

We can also learn something by studying the companies that do incorporate abroad. Professor Morse explains that a significant number of these companies are insurance carriers, which benefit from an “extremely favorable” set of tax rules that support incorporating in Bermuda. Insurance premiums collected in the United States and paid to a Bermuda parent are subject neither to income tax nor the usual withholding tax that would apply to such payments. Instead, they are subject to an excise tax of 4 percent or less.

Nontax legal factors, which normally favor the United States, can also sometimes drive companies to legally organize abroad. Commercial shipping companies, passenger cruise lines and online gambling sites are three examples. Other decisions to incorporate abroad appear to be driven by historical links with foreign jurisdictions.

What remains unclear from the research is what would happen if the United States tightened its international tax rules and eliminated deferral of foreign earnings. The nontax factors, or frictions, that encourage incorporation in the United States are substantial but not limitless. I wouldn’t walk across a hot sidewalk in bare feet to pick up a nickel, but I might do it for a $20 bill.

For a time, increasing numbers of British companies were incorporating in Jersey (as in the Channel Islands, not the shore) and moving corporate headquarters to Dublin to avoid high British taxes. In the United States, “anti-inversion” rules make it difficult for existing companies to reincorporate abroad. But no legal rule prevents start-ups from incorporating in Ireland, Bermuda or other havens.

Silicon Valley start-ups, known for being nimble and innovative, are remarkably stodgy when it comes to legal matters. Professor Morse points out that start-up founders rarely have more than a few thousand dollars to spend on legal fees, and it would cost thousands more to set up a parent company in a foreign tax haven. It is only a matter of time, however, before the global legal marketplace makes it easier, faster and cheaper for start-ups to incorporate abroad. Our best hope is that if patching our international tax rules makes incorporating abroad more attractive, founders and venture capitalists continue to focus on the short-term costs of legal innovation instead of the long-term benefits of tax avoidance.

For further readings, see Susan C. Morse, Startup Ltd., Florida Tax Review (forthcoming), and Eric Allen & Susan Morse, Tax Haven Incorporation for U.S.-Headquartered Firms: No Exodus Yet, 66 National Tax Journal (forthcoming).

For further discussion of why nontax business considerations often lead firms to organize as corporations instead of partnerships, see Victor Fleischer, The Rational Exuberance of Structuring Venture Capital Start-Ups, 57 Tax Law Review 137 (2004).

Victor Fleischer is a professor at the University of Colorado Law School, where he teaches partnership tax, tax policy and deals. Twitter: @vicfleischer

Former Interior Secretary Salazar Joins WilmerHale

Ken Salazar, who recently stepped down as interior secretary, is joining WilmerHale as a partner, the law firm announced on Thursday.

Mr. Salazar, a Colorado native who was named head of the Interior Department at the start of the Obama administration, will anchor WilmerHale’s planned office in Denver. In his new job, he will advise clients on matters of law, business and public policy.

Before leading the Interior Department, Mr. Salazar represented Colorado in the Senate starting in 2005. He was Colorado’s attorney general before going to Washington. A graduate of Colorado College, Mr. Salazar received his law degree from the University of Michigan.

“I look forward to leading WilmerHale’s entry into the Rocky Mountain region, which is integral to the growing national and global economy,” Mr. Salazar said in a statement.

Mr. Salazar is the latest retired politician to take a senior position at a law firm. Separately on Thursday, Joseph I. Lieberman, the former Connecticut senator and vice presidential nominee, said he had started at the law firm of Kasowitz Benson Torres & Friedman. Others to follow a similar path include Scott Brown, who joined Nixon Peabody in Boston after losing a Senate race, and Jon Kyl of Arizona, who joined Covington & Burling.

In September, the Financial Industry Regulatory Authority announced that its vice chairman, Stephen Luparello, was joining WilmerHale in Washington.

At WilmerHale, Mr. Salazar “adds to the firm’s rich tradition of lawyers who have served at the highest levels of government,” Robert Novick, the law firm’s co-managing partner, said in a statement.

Mr. Salazar, a blunt-spoken rancher, took over the Interior Department when it was riddled with scandal. His greatest setback, the BP oil spill that exposed flaws in the agency, came near the beginning of his tenure.

“I’ve had a glorious and joyful run,” Mr. Salazar told The New York Times in April. “Coming to work, I’ve just been living the dream every day.”

Concerns About Dashlane, and Answers

In my column in Thursday’s paper, I reviewed Dashlane, a very cool, free program that automatically enters your names, passwords, credit card information and other details on Web sites.

As usual when something terrific and free comes along, many readers’ primary reaction was suspicion, sometimes verging on paranoia. When the topic is as touchy as privacy, well, multiply that by 10.

Here are some of the most frequently e-mailed concerns about Dashlane â€" and their answers:

You forgot to explain what we can do to recover our passwords when our laptop disk crashes, or the Dashlane program itself gets corrupted.

That’s not a Dashlane question. That’s a “Why don’t you back up your computer?” question. If you don’t back up, you should probably subscribe to the $20-a-year Dashlane Premium, which backs up your password stash online, automatically. Or, worst case, you could go to each Web site and click the “I forgot my password” link. The site sends you a temporary new password by e-mail.

What happens if someone steals my laptop? Now they have access to all my Web sites.

As noted in the column, you can’t use Dashlane without entering the master password each day. So your password collection would be useless to a thief. But you can also remotely disable the stolen laptop’s copy of Dashlane at Dashlane.com. Any access to your data from this device will then be denied.

My wife and I share a computer. We have separate user names for bank, credit card, airline and other accounts. How does Dashlane differentiate multiple user names for the same Web site?

As noted in the column, Dashlane can store multiple name/password combinations for each site. When you arrive at the log in page, Dashlane offers a simple list. Click the one you want.

How does Dashlane make money? You should have addressed this question.

As noted in the column, Dashlane charges $20 a year for the premium plan. (And by the way: I don’t object to Dashlane charging. I would, however, prefer a one-time fee, like most software, to an annual fee forever.)

They don’t have iPad app? I know I can use the iPhone app on iPad, but it’s annoying.

Yes, the Dashlane iPad app should be out soon.

When I die, how will my wife or kids get to all my accounts, especially the financial ones?

You could share the master password with your wife and children. Worst case, again, your survivors could use the “I forgot my password” link on each Web site.

What happens if one uses more than one computer? For example, I have a PC at work and a couple of Macs at home.

If you sign up for Dashlane Premium ($20 a year), your password vault is synched across all your Macs, PCs, iPhones and Android phones. Alternatively, you could install the free copy on each machine, and just export your password collection from one computer to the other, using the steps on the Dashlane Web site.

I like LastPass! I like Roboform! I like 1Password! Don’t make me feel threatened by liking Dashlane!

(I’m paraphrasing your questions here.) For various reasons, I think Dashlane is better (it’s free; it works on your phone too; it requires fewer steps to use; it’s much nicer looking). But you should use whichever program you prefer.

How can we be absolutely, 100 percent certain that Dashlane is itself 100 percent secure? They say they don’t have access to our passwords, but couldn’t they be lying?

There is no way to know 100 percent. There is also no way to be 100 percent sure that your phone company isn’t listening in to your calls, that your credit company isn’t laughing at your list of purchases, that your G.P.S. device isn’t tracking your every move, that your house isn’t bugged, that the government isn’t slowly poisoning you, or that aliens aren’t puppeteering you from distant planets.

You could take comfort in knowing that if a company really were accessing your secrets, and that behavior came to light, the company would be out of business instantly. You might also take comfort that no bank or credit card company will hold you responsible for purchases made by someone who stole your numbers. Otherwise, if this sort of thing plagues you, you have two choices: take a deep breath, have a modicum of faith and live life â€" or renounce technology and move to the Amish country.

S.E.C. Freezes Assets of Thai Trader in Smithfield Inquiry

Another international deal appears to have an insider trading problem.

The Securities and Exchange Commission on Thursday froze the assets of a trader based in Bangkok, as it investigates a purported insider trading scheme tied to Smithfield Foods’ $4.7 billion sale to a Chinese meat processor.

In a complaint filed in federal district court in Chicago, the S.E.C. contended that illicit trades by Badin Rungruangnavarat, a 30-year-old employee of a plastics company in Thailand, made before the deal was announced last week made $3.2 million in unrealized gains.

The complaint calculates his investment return at over 3,400 percent.

It is the second instance of significant suspicious trading ahead of a cross-border merger this year. Investigators continue to examine a series of big purchases of call options tied to H. J. Heinz ahead of the ketchup maker’s $23 billion takeover by Berkshire Hathaway and the Brazilian-backed investment firm 3G Capital.

According to the S.E.C. complaint filed on Thursday, Mr. Rungruangnavarat first sought to open a trading account at Interactive Brokers on May 10, succeeding six days later. Between May 21 and May 28, the day before the Smithfield deal was announced, the trader bought 3,000 call options tied to the American pork processor’s stock, which were exercisable at prices between $29 and $30 a share.

At the time, Smithfield’s shares were trading below $26.50 apiece, rendering the options out of the money. But the purchases comprised the vast majority of trading volume in Smithfield options for that week and for all of May, essentially cornering the market in those securities.

He also bought 2,580 single-stock futures contracts and 100 common shares of Smithfield. All told, Mr. Rungruangnavarat paid about $95,450.84, though he also posted over $1.3 million in margin.

On May 29, Smithfield announced its deal with Shuanghui International of China, which agreed to pay shareholders $34 apiece. Smithfield shares quickly leaped on the news, rising to $33.35 by day’s end.

Behind the S.E.C.’s actions is the agency’s belief that Mr. Rungruangnavarat was tipped off to a potential sale of Smithfield. The regulator noted in its complaint that one of the defendant’s Facebook friends is an employee of a Thai investment bank that was advising Charoen Pokphand Foods, a large food conglomerate that had held discussions with Smithfield.

Though Mr. Rungruangnavarat is based abroad, the proceeds of his trading are based in an American brokerage account. According to the S.E.C., he sought on June 3 to transfer over $3 million from that account, prompting the agency’s move.

“As alleged in our complaint, not only did the defendant trade out of the money Smithfield call options, he further pumped up his profits by purchasing single-stock futures, thereby reaping a total unrealized return on his investment of 3,400 percent in the span of eight days,” Merri Jo Gillette, the director of the S.E.C.’s Chicago office, said in a statement.

The agency is seeking the disgorgement of the trading gains, as well as financial penalties.

Making Windows 8 Better

Windows 8 has been something of a flop. It’s selling even worse than the much-loathed Windows Vista did, and the entire PC industry is feeling the pain.

Microsoft is listening. It’s hard at work on Windows 8.1, which it says will be much better. It’s expected this October.

You can see a video of Windows 8.1’s highlights. As you’ll discover, there’s not much new in Windows 8 â€" just the tiniest tweaks. Incredibly, forehead-slappingly, Microsoft seems to be completely ignoring the two elephants in the room. It won’t bring back the Start menu (you’ll still have to install one of the free third-party Start-menu-restoration apps), and it won’t split up the desktop and TileWorld environments.

Yes, two. To understand these two halves of Windows 8, you can read my review. But the gist is this:

“TileWorld is fantastic for touch screens… Conversely, Desktop Windows is obviously designed for the mouse. Most of the menus, window controls and buttons are too small for finger operation. Unfortunately, in Windows 8, you can’t live exclusively in one world or the other.”

Each of the two environments, on its own, is very good for its intended purpose; Microsoft’s big mistake was to mash them together. The solution, I wrote, is simple:

“You know what would have been perfect? Keeping the two operating systems separate. Put TileWorld and its universe of new touch screen apps on tablets. Put Windows 8 on mouse-and-keyboard PCs. Presto: all the confusion would evaporate. And the good work Microsoft did on both of these individual operating systems would shine.”

That was more or less a pie-in-the-sky suggestion. I didn’t really think that Microsoft would take it seriously, after having put so many millions of dollars and hours into creating and marketing this FrankenOS in the first place. Best case, I figured, Microsoft might have the chance to split up the two systems in a couple of years â€" in Windows 9, for example. Or maybe Microsoft was counting on the mouse and keyboard and the desktop to go away entirely, leaving only TileWorld (formerly known as Metro) to soldier on.

But this week, InfoWorld took the radical step of analyzing Windows 8 and figuring out how it really could be fixed â€" in this fall’s Windows 8.1.

Now, InfoWorld isn’t some general-interest publication for consumers. Its mission statement doesn’t include striving to be entertaining, as mine does. It’s for hard-core technology professionals â€" system administrators, network geeks.

Imagine my surprise, then, when I discovered that the first item in InfoWorld’s “How to Fix Windows 8” feature was this:

“Eliminate the duality of Metro and Desktop on every device. They don’t work well together, and shouldn’t be mixed together. Instead, PCs run a modified version of the Desktop and tablets run a modified version of Metro.”

It made me think: What, realistically, would the downside be of busting up Windows 8 into its two component environments, to be installed separately?

Well, part of the problem is that there are now two categories of software programs. Category 1: the four million existing Windows desktop programs (Photoshop, Quicken, iTunes, and so on). Category 2: the new breed of TileWorld apps, like iPad apps â€" full-screen, no menus, no overlapping windows, generally simpler than desktop apps. What happens to all those apps?

InfoWorld suggests that in Windows 8.1, TileWorld apps would run in their own windows on the desktop, so you’d really lose nothing. In fact, you’d gain something: the ability to run them alongside your desktop apps without having to switch into a different environment.

But what about Microsoft Office? Right now, these are desktop apps that don’t have TileWorld versions. If you had a tablet (which would run TileWorld), how would you run Office?

InfoWorld suggests that Microsoft should cook up a TileWorld version of Office. Problem solved.

What about the learning curve? Now you’d have two operating systems to learn: one on your touch-screen device (Windows TileWorld) and one on your laptop (Windows Desktop).

Well, actually, guess what? In Windows 8, you have to learn them both anyway. If Microsoft split up the two operating systems, you’d have to learn only one version of Windows. You’d have to learn both only if you owned two machines, one touch-screen and one not â€" and that, as iPad owners have discovered, is really no big deal.

I have a feeling that InfoWorld was, in part, going for blue-sky, headline-grabbing thinking here. (For example, it calls its hypothetical Windows 8.1 “Windows Red,” a spoof of Windows 8.1’s actual code name, “Windows Blue.”) Did the editors there really imagine that corporate, slow-moving, conservative old Microsoft would take a step as radical as busting up Windows 8?

Who knows? What matters is that the idea is out there. It’s solid. It’s doable. The only serious downside to splitting up Windows is the huge servings of crow and humble pie that Microsoft would have to consume.

But you know what? Ask the makers of New Coke, or Apple Maps. Sometimes, the best thing for your customers and your company is to admit you’ve committed a colossal blunder â€" and set to work undoing it.

Making Windows 8 Better

Windows 8 has been something of a flop. It’s selling even worse than the much-loathed Windows Vista did, and the entire PC industry is feeling the pain.

Microsoft is listening. It’s hard at work on Windows 8.1, which it says will be much better. It’s expected this October.

You can see a video of Windows 8.1’s highlights. As you’ll discover, there’s not much new in Windows 8 â€" just the tiniest tweaks. Incredibly, forehead-slappingly, Microsoft seems to be completely ignoring the two elephants in the room. It won’t bring back the Start menu (you’ll still have to install one of the free third-party Start-menu-restoration apps), and it won’t split up the desktop and TileWorld environments.

Yes, two. To understand these two halves of Windows 8, you can read my review. But the gist is this:

“TileWorld is fantastic for touch screens… Conversely, Desktop Windows is obviously designed for the mouse. Most of the menus, window controls and buttons are too small for finger operation. Unfortunately, in Windows 8, you can’t live exclusively in one world or the other.”

Each of the two environments, on its own, is very good for its intended purpose; Microsoft’s big mistake was to mash them together. The solution, I wrote, is simple:

“You know what would have been perfect? Keeping the two operating systems separate. Put TileWorld and its universe of new touch screen apps on tablets. Put Windows 8 on mouse-and-keyboard PCs. Presto: all the confusion would evaporate. And the good work Microsoft did on both of these individual operating systems would shine.”

That was more or less a pie-in-the-sky suggestion. I didn’t really think that Microsoft would take it seriously, after having put so many millions of dollars and hours into creating and marketing this FrankenOS in the first place. Best case, I figured, Microsoft might have the chance to split up the two systems in a couple of years â€" in Windows 9, for example. Or maybe Microsoft was counting on the mouse and keyboard and the desktop to go away entirely, leaving only TileWorld (formerly known as Metro) to soldier on.

But this week, InfoWorld took the radical step of analyzing Windows 8 and figuring out how it really could be fixed â€" in this fall’s Windows 8.1.

Now, InfoWorld isn’t some general-interest publication for consumers. Its mission statement doesn’t include striving to be entertaining, as mine does. It’s for hard-core technology professionals â€" system administrators, network geeks.

Imagine my surprise, then, when I discovered that the first item in InfoWorld’s “How to Fix Windows 8” feature was this:

“Eliminate the duality of Metro and Desktop on every device. They don’t work well together, and shouldn’t be mixed together. Instead, PCs run a modified version of the Desktop and tablets run a modified version of Metro.”

It made me think: What, realistically, would the downside be of busting up Windows 8 into its two component environments, to be installed separately?

Well, part of the problem is that there are now two categories of software programs. Category 1: the four million existing Windows desktop programs (Photoshop, Quicken, iTunes, and so on). Category 2: the new breed of TileWorld apps, like iPad apps â€" full-screen, no menus, no overlapping windows, generally simpler than desktop apps. What happens to all those apps?

InfoWorld suggests that in Windows 8.1, TileWorld apps would run in their own windows on the desktop, so you’d really lose nothing. In fact, you’d gain something: the ability to run them alongside your desktop apps without having to switch into a different environment.

But what about Microsoft Office? Right now, these are desktop apps that don’t have TileWorld versions. If you had a tablet (which would run TileWorld), how would you run Office?

InfoWorld suggests that Microsoft should cook up a TileWorld version of Office. Problem solved.

What about the learning curve? Now you’d have two operating systems to learn: one on your touch-screen device (Windows TileWorld) and one on your laptop (Windows Desktop).

Well, actually, guess what? In Windows 8, you have to learn them both anyway. If Microsoft split up the two operating systems, you’d have to learn only one version of Windows. You’d have to learn both only if you owned two machines, one touch-screen and one not â€" and that, as iPad owners have discovered, is really no big deal.

I have a feeling that InfoWorld was, in part, going for blue-sky, headline-grabbing thinking here. (For example, it calls its hypothetical Windows 8.1 “Windows Red,” a spoof of Windows 8.1’s actual code name, “Windows Blue.”) Did the editors there really imagine that corporate, slow-moving, conservative old Microsoft would take a step as radical as busting up Windows 8?

Who knows? What matters is that the idea is out there. It’s solid. It’s doable. The only serious downside to splitting up Windows is the huge servings of crow and humble pie that Microsoft would have to consume.

But you know what? Ask the makers of New Coke, or Apple Maps. Sometimes, the best thing for your customers and your company is to admit you’ve committed a colossal blunder â€" and set to work undoing it.

Lloyd Blankfein’s Horatio Alger Story for New Graduates

Lloyd C. Blankfein, the chief executive and chairman of Goldman Sachs, tried out a new role on Thursday: inspirational speaker.

In a commencement address to graduating students of LaGuardia Community College, Mr. Blankfein drew on his own journey - from a housing project in Brooklyn to the top of one of Wall Street’s mightiest firms - to offer life advice.

“My struggle to get to and through college turned out to be an advantage for me,” Mr. Blankfein said in the speech in the Jacob K. Javits Convention Center in Manhattan. “The disadvantages you have had become part of your personal history and track record, all advantages in your later life. So confidence is justified.”

The speech was the latest example of the public relations recovery that Goldman Sachs has undertaken in recent months. Pilloried in the news media and on Capitol Hill in the immediate aftermath of the financial crisis, Goldman and its leader have recently been making efforts to show their softer side.

In that vein, Goldman chose LaGuardia in 2010 as a partner in the firm’s 10,000 Small Businesses program, which aims to train entrepreneurs. In a statement, Gail O. Mellow, president of LaGuardia, which is part of the City University of New York system, called Mr. Blankfein a “stalwart supporter of small businesses and community colleges.”

Mr. Blankfein, dressed in a black academic robe with a pink-fringed hood, slipped comfortably into an avuncular role on Thursday, delivering the message that life is unpredictable and success comes from persistence.

“What are the chances that a kid from the projects would run one of the great financial institutions in the world?” Mr. Blankfein said, a velvet tam and gold tassel atop his head. “You just never know.”

“You have the ambition, you have the smarts and you have the toughness,” he said. “So, turn the page on your biography - you have just started a new chapter in your lives.”

The Goldman chief recalled his upbringing in the East New York section of Brooklyn, where his father sorted mail for the post office and his mother worked as a receptionist at a burglar alarm company. Looking back, he said, it was a “world of unlimited opportunity.”

But at the time, he wanted to get out. The young Mr. Blankfein was accepted to Harvard, which struck him as an “intimidating place.” He felt “insecure,” he said.

He didn’t find his footing right away. After Harvard Law School, Mr. Blankfein went to work at a law firm but quit when he found he wasn’t passionate about the work. He eventually landed at J. Aron, a small financial firm that was bought by Goldman Sachs.

In tone, Mr. Blankfein’s speech was different from one delivered in 2009 by the No. 2 at Goldman, Gary D. Cohn, at the Kogod School of Business at American University.

“You are competing. Every day you are competing and every day you are playing to win,” Mr. Cohn, the president and chief operating officer of Goldman, said in a commencement address given not long after the financial crisis. “So remember, wake up every morning and figure out how to win.”

In his remarks on Thursday, Mr. Blankfein emphasized the importance of loving one’s work. He has observed a certain passion in other chief executives, he said.

“While they may be wealthy and powerful, their passion goes beyond money and power,” Mr. Blankfein said. “I won’t stand here and tell you those are bad things. They can be pretty good, but only if you have a larger purpose in mind.”

Lloyd Blankfein’s Horatio Alger Story for New Graduates

Lloyd C. Blankfein, the chief executive and chairman of Goldman Sachs, tried out a new role on Thursday: inspirational speaker.

In a commencement address to graduating students of LaGuardia Community College, Mr. Blankfein drew on his own journey - from a housing project in Brooklyn to the top of one of Wall Street’s mightiest firms - to offer life advice.

“My struggle to get to and through college turned out to be an advantage for me,” Mr. Blankfein said in the speech in the Jacob K. Javits Convention Center in Manhattan. “The disadvantages you have had become part of your personal history and track record, all advantages in your later life. So confidence is justified.”

The speech was the latest example of the public relations recovery that Goldman Sachs has undertaken in recent months. Pilloried in the news media and on Capitol Hill in the immediate aftermath of the financial crisis, Goldman and its leader have recently been making efforts to show their softer side.

In that vein, Goldman chose LaGuardia in 2010 as a partner in the firm’s 10,000 Small Businesses program, which aims to train entrepreneurs. In a statement, Gail O. Mellow, president of LaGuardia, which is part of the City University of New York system, called Mr. Blankfein a “stalwart supporter of small businesses and community colleges.”

Mr. Blankfein, dressed in a black academic robe with a pink-fringed hood, slipped comfortably into an avuncular role on Thursday, delivering the message that life is unpredictable and success comes from persistence.

“What are the chances that a kid from the projects would run one of the great financial institutions in the world?” Mr. Blankfein said, a velvet tam and gold tassel atop his head. “You just never know.”

“You have the ambition, you have the smarts and you have the toughness,” he said. “So, turn the page on your biography - you have just started a new chapter in your lives.”

The Goldman chief recalled his upbringing in the East New York section of Brooklyn, where his father sorted mail for the post office and his mother worked as a receptionist at a burglar alarm company. Looking back, he said, it was a “world of unlimited opportunity.”

But at the time, he wanted to get out. The young Mr. Blankfein was accepted to Harvard, which struck him as an “intimidating place.” He felt “insecure,” he said.

He didn’t find his footing right away. After Harvard Law School, Mr. Blankfein went to work at a law firm but quit when he found he wasn’t passionate about the work. He eventually landed at J. Aron, a small financial firm that was bought by Goldman Sachs.

In tone, Mr. Blankfein’s speech was different from one delivered in 2009 by the No. 2 at Goldman, Gary D. Cohn, at the Kogod School of Business at American University.

“You are competing. Every day you are competing and every day you are playing to win,” Mr. Cohn, the president and chief operating officer of Goldman, said in a commencement address given not long after the financial crisis. “So remember, wake up every morning and figure out how to win.”

In his remarks on Thursday, Mr. Blankfein emphasized the importance of loving one’s work. He has observed a certain passion in other chief executives, he said.

“While they may be wealthy and powerful, their passion goes beyond money and power,” Mr. Blankfein said. “I won’t stand here and tell you those are bad things. They can be pretty good, but only if you have a larger purpose in mind.”

Former Senator Lieberman Joins Kasowitz Benson

Joseph I. Lieberman, the former senator from Connecticut, has joined the law firm Kasowitz Benson Torres & Friedman.

The onetime vice presidential candidate will start his new job on Thursday, serving as senior counsel at the firm. He will be based in New York. Mr. Lieberman, 71, retired from the senate in January after representing Connecticut in Washington for nearly a quarter-century.

Before being elected to the senate in 1988, Mr. Lieberman served as the attorney general in Connecticut for six years. Before that, he was a state senator in Connecticut for a decade. Born in Stamford, Connecticut, Mr. Lieberman, 71, is a graduate of Yale College and Yale Law School.

In a statement, Mr. Lieberman said he was “excited to return to my roots as a lawyer and counselor with the opportunity to use the independent investigative skills I learned as Attorney General and during many Senate investigations.”

Mr. Lieberman is the latest in a long line of retired politicians that take senior counsel roles at big law firms. In March, Scott Brown, who lost the Senate race in Massachusetts to Elizabeth Warren last year, joined Nixon Peabody in Boston. And two other recently retired senators, Jon Kyl from Arizona and Kay Bailey Hutchinson from Texas, joined Covington & Burling and Bracewell & Giuliani, respectively.

In Kasowitz Benson, Mr. Lieberman joins a litigation powerhouse that has in recent years has entered the ranks of the country’s most profitable law firms. Started two decades ago as a spinoff of Mayer Brown, the firm has recently become known for taking on the large banks, representing plaintiffs in financial-crisis and mortgage-backed securities related litigation.

The firm’s managing partner, Marc Kasowitz, is a Connecticut native and goes way back with Mr. Lieberman. He first met Mr. Lieberman when working on his state senate campaign in 1970, and for a time they belonged to the same synagogue in New Haven. Mr. Kasowitz has also long provided financial support to Mr. Lieberman’s senate campaigns.

Why the Tumblr Deal Is a Disaster for Entrepreneurs

Every upstart technology chief executive is going to try to win the next lottery the way Tumblr did. And about 99 percent will fail, Cliff Oxford, the founder of the Oxford Center for Entrepreneurs, writes on the You're the Boss blog.

SAC Says It Will Survive

SAC Capital Advisors has told its employees that it will survive a wave of investor withdrawals amid the government’s insider trading investigation, DealBook’s Peter Lattman reports. Investors in the hedge fund, which is owned by Steven A. Cohen, have asked to withdraw a significant amount of money by a quarterly deadline on Monday, according to an internal e-mail sent by SAC’s president, Thomas J. Conheeney. The amount, though not disclosed, was said to be more than the $1.7 billion taken out earlier this year, meaning SAC would be left with a fraction of the $6 billion in outside capital with which it began the year, Mr. Lattman reports.

SAC is putting up a confident front, reiterating in the e-mail that there were no plans to significantly reduce the staff of roughly 1,000. Mr. Cohen’s fortune accounts for roughly $8 billion of the fund’s $15 billion in assets. “Yet the exodus of investors is a humbling blow to Mr. Cohen and his firm,” Mr. Lattman writes. “Until recently, elite investors had clamored to get into the top-performing hedge fund, despite fees that are among the highest in the industry. Now, the investor departures underscore the reputational damage caused by the spate of criminal cases involving former SAC employees â€" as well as the authorities’ push to build a criminal case against the fund, and possibly Mr. Cohen.”

LOSS FOR JPMORGAN IN ALABAMA DEBT DEAL  |  JPMorgan Chase will face a big loss under the deal to settle the bankruptcy of Jefferson County, Ala., Mary Williams Walsh reports in DealBook. The bank, which many in the county hold responsible for the financial collapse in the first place, will have given up nearly $1.6 billion when the dust finally settles. The deal calls for the bank to forfeit $842 million on the $1.22 billion of sewer debt that it holds, on top of $647 million it forgave in termination fees on derivatives contracts with the county and a $75 million penalty it paid to settle a complaint by the Securities and Exchange Commission, Ms. Walsh writes. The county will drop a lawsuit against JPMorgan if the deal goes through.

But to some county residents, the proposed concessions are not enough. “The deal will force Jefferson County to return to the scene of the crime that crippled it: the bond market,” John Archibald, a columnist for The Birmingham News, wrote in an article published online Wednesday. “Lucifer spells his name JPMorgan,” he added.

THAIN’S BIG REGRET  |  “I wouldn’t have taken the Merrill job,” John A. Thain, former chief executive of Merrill Lynch, tells The Wall Street Journal in a rare interview about the events surrounding the financial crisis. “I regret having to sell Merrill Lynch to Bank of America.”

Mr. Thain, now the head of the CIT Group, is overseeing a turnaround at the lender that may involve opening its first bank branch, in Salt Lake City. His current office, half a block from Bank of America’s New York headquarters, is nothing special, Mr. Thain suggested to the newspaper. That may be a contrast with Merrill, where one particular item, a $35,000 commode, became a symbol of Wall Street excess.

ON THE AGENDA  |  The chief executive of Goldman Sachs, Lloyd C. Blankfein, gives a commencement address to LaGuardia Community College. The Bank of England and European Central Bank release decisions on interest rates. The analyst Meredith Whitney, who has a new book out called “Fate of the States: The New Geography of American Prosperity,” is on Bloomberg TV at 7 a.m. Gary Gensler of the Commodity Futures Trading Commission is on Bloomberg TV at 11:45 a.m.

COUNTRIES SEEK SILICON VALLEY ENTREPRENEURS  |  In a sassy billboard over a highway that runs through the heart of the technology industry, Canada makes an invitation to foreigners having trouble getting temporary visas. “H-1b problems?” it reads. “Pivot to Canada,” where the country offers a new so-called start-up visa with the prospect of permanent residency. Somini Sengupta writes in The New York Times: “Canada is not alone in reaching out to foreign entrepreneurs. In a bid to create their own versions of Silicon Valley, Britain and Australia have dangled start-up visas like this too. Chile is even offering seed money to lure foreigners to come to Santiago and get their start-ups off the ground. But the seductions of this Silicon Valley are hard to resist for the men and women who dream of building the next Google (or atleast being the next Google acquisition). This is where they want to be.”

Mergers & Acquisitions »

PepsiCo Said to Be in Talks to Buy SodaStream  |  PepsiCo is in talks to buy SodaStream International, an Israeli company that sells machines for making soda, for around $2 billion, a report in the Calcalist newspaper said, according to Reuters. REUTERS

Another Senator Urges Caution on Smithfield’s Sale to Chinese Company  |  Senator Debbie Stabenow, the Democratic chairwoman of the Senate Agriculture Committee, said on Wednesday that she still had concerns about any potential effect that the deal may have on food safety in the United States. DealBook »

Dell Files Mathematical Argument Against Icahn Plan  |  Dell calculated that the special dividend called for by Southeastern Asset Management and Carl C. Icahn would leave the company with a nearly $4 billion cash shortfall. DealBook »

Dell’s Board Puts Investors in a Bind  |  Emphasizing how poorly the company is doing runs the risk of everyone believing it, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Echoes of ‘Mad Men’ in Agency Merger  |  Two independent advertising agencies are merging in an effort to compete for larger accounts, a real-life story that mirrors a plotline in the AMC series “Mad Men,” Stuart Elliott writes in The New York Times. NEW YORK TIMES

INVESTMENT BANKING »

Dimon Predicts Greater Volatility as Rates Rise  |  “We should all hope for a normalization of interest rates â€" that’s a good thing,” Jamie Dimon, the chief executive of JPMorgan Chase, said in a panel discussion in China. “As we go back to normal, its going to be scary, and its going to be kind of volatile.” BLOOMBERG NEWS

Financial Fears Gain Credence in Turkey  |  “It is not often that the rock-throwing street protester and the seasoned bond investor see eye to eye,” Landon Thomas Jr. writes in The New York Times. “This curious happenstance â€" where both fear that the profusion of glass towers and shopping malls now overwhelming the classic Istanbul skyline is not only ugly but unsustainable â€" underlies the convulsive uprising in Taksim Square.” NEW YORK TIMES

Credit Suisse Expected to Have Leading Role in Alibaba I.P.O.  |  Reuters reports: “Credit Suisse is expected to take a leading role in the anticipated I.P.O. of China’s Alibaba Group, according to people familiar with the matter, a coveted position that would yield massive fees for the bank as rivals jostle for a role in the offer.” REUTERS

Bank of America Hires Senior Fixed-Income Traders  |  The moves seem to defy a trend in the industry, writes eFinancialCareers. EFINANCIALCAREERS

Bankers Say Their Co-Workers Are Overpaid  |  A survey found that most bank employees in Britain thought that some people at their companies were being paid too much, The Wall Street Journal reports. WALL STREET JOURNAL

In London, Investment Bank Associates Are in Demand  |  According to headhunters in London, big investment banks are looking to hire associates, who typically have three to six years of experience, The Wall Street Journal reports. WALL STREET JOURNAL

PRIVATE EQUITY »

CVC Announces I.P.O. of Belgian Postal Firm  |  The private equity firm CVC Capital Partners is aiming for a valuation of up to 3 billion euros ($3.9 billion) for bpost, a Belgian postal operator, according to a newspaper advertisement, Reuters reports. REUTERS

Legg Mason May Expand Into Private Equity  | 
BLOOMBERG NEWS

HEDGE FUNDS »

Procter & Gamble Reorganizes Business Into 4 Units  |  Procter & Gamble, one of the biggest holdings of the hedge fund manager William A. Ackman, made the first big change to its business since Alan G. Lafley returned as chief executive nearly two weeks ago, The Associated Press reports. ASSOCIATED PRESS

I.P.O./OFFERINGS »

Container Store Said to Prepare for an I.P.O.  |  The Container Store has begun to hire advisers to prepare for a potential initial public offering, a person briefed on the matter said on Wednesday, nearly five years after selling itself to the private equity firm Leonard Green & Partners. DealBook »

Huishang Bank Said to Plan $1 Billion I.P.O. in Hong Kong  | 
BLOOMBERG NEWS

Treasury Plans to Sell 30 Million G.M. Shares  |  The offering will be in conjunction with General Motors’ inclusion in the Standard & Poor’s 500-stock index this week. DealBook »

VENTURE CAPITAL »

MakerBot, a 3-D Printing Firm, Said to Be in Takeover Talks  |  MakerBot Industries, a start-up that makes 3-D printers, “was recently gauging its options for raising a new round of venture capital at a valuation of $300 million when the discussions led to interest from possible acquirers,” The Wall Street Journal reports, citing unidentified people familiar with the matter. WALL STREET JOURNAL

LEGAL/REGULATORY »

I.M.F. Concedes Missteps in Greek Bailout  |  In an internal report released on Wednesday, the International Monetary Fund sharply criticizes its first bailout program for Greece, saying it bent or broke three out of four of its own rules with the lending program, The New York Times reports. NEW YORK TIMES

Europe Considers Moving Libor Oversight Away From Britain  |  Bloomberg News reports: “The European Union is considering whether to hand oversight of the scandal-ridden London interbank offered rate to the European Securities and Markets Authority.” BLOOMBERG NEWS

Less Enthusiasm for Abe’s New Steps in Japan  |  The New York Times reports: “Prime Minister Shinzo Abe on Wednesday rolled out the next phase of his aggressive strategy to kick-start Japan’s economy, with plans to encourage foreign investment, nurture innovation and improve regulation. But almost immediately, a big question surfaced: Will they go far enough?” NEW YORK TIMES

Trial Date Set for Former SAC Trader in Insider Case  |  Federal prosecutors have accused Mathew Martoma of making more than $276 million in a combination of illegal profits and avoided losses trading in the shares of the pharmaceutical companies Elan and Wyeth. DealBook »

S.E.C. Proposes Changes in Money Funds  |  The Securities and Exchange Commission voted unanimously to move ahead with changes governing the money market fund industry, but the proposal still must go through a comment period and final vote. DealBook »

SAC Says It Will Survive

SAC Capital Advisors has told its employees that it will survive a wave of investor withdrawals amid the government’s insider trading investigation, DealBook’s Peter Lattman reports. Investors in the hedge fund, which is owned by Steven A. Cohen, have asked to withdraw a significant amount of money by a quarterly deadline on Monday, according to an internal e-mail sent by SAC’s president, Thomas J. Conheeney. The amount, though not disclosed, was said to be more than the $1.7 billion taken out earlier this year, meaning SAC would be left with a fraction of the $6 billion in outside capital with which it began the year, Mr. Lattman reports.

SAC is putting up a confident front, reiterating in the e-mail that there were no plans to significantly reduce the staff of roughly 1,000. Mr. Cohen’s fortune accounts for roughly $8 billion of the fund’s $15 billion in assets. “Yet the exodus of investors is a humbling blow to Mr. Cohen and his firm,” Mr. Lattman writes. “Until recently, elite investors had clamored to get into the top-performing hedge fund, despite fees that are among the highest in the industry. Now, the investor departures underscore the reputational damage caused by the spate of criminal cases involving former SAC employees â€" as well as the authorities’ push to build a criminal case against the fund, and possibly Mr. Cohen.”

LOSS FOR JPMORGAN IN ALABAMA DEBT DEAL  |  JPMorgan Chase will face a big loss under the deal to settle the bankruptcy of Jefferson County, Ala., Mary Williams Walsh reports in DealBook. The bank, which many in the county hold responsible for the financial collapse in the first place, will have given up nearly $1.6 billion when the dust finally settles. The deal calls for the bank to forfeit $842 million on the $1.22 billion of sewer debt that it holds, on top of $647 million it forgave in termination fees on derivatives contracts with the county and a $75 million penalty it paid to settle a complaint by the Securities and Exchange Commission, Ms. Walsh writes. The county will drop a lawsuit against JPMorgan if the deal goes through.

But to some county residents, the proposed concessions are not enough. “The deal will force Jefferson County to return to the scene of the crime that crippled it: the bond market,” John Archibald, a columnist for The Birmingham News, wrote in an article published online Wednesday. “Lucifer spells his name JPMorgan,” he added.

THAIN’S BIG REGRET  |  “I wouldn’t have taken the Merrill job,” John A. Thain, former chief executive of Merrill Lynch, tells The Wall Street Journal in a rare interview about the events surrounding the financial crisis. “I regret having to sell Merrill Lynch to Bank of America.”

Mr. Thain, now the head of the CIT Group, is overseeing a turnaround at the lender that may involve opening its first bank branch, in Salt Lake City. His current office, half a block from Bank of America’s New York headquarters, is nothing special, Mr. Thain suggested to the newspaper. That may be a contrast with Merrill, where one particular item, a $35,000 commode, became a symbol of Wall Street excess.

ON THE AGENDA  |  The chief executive of Goldman Sachs, Lloyd C. Blankfein, gives a commencement address to LaGuardia Community College. The Bank of England and European Central Bank release decisions on interest rates. The analyst Meredith Whitney, who has a new book out called “Fate of the States: The New Geography of American Prosperity,” is on Bloomberg TV at 7 a.m. Gary Gensler of the Commodity Futures Trading Commission is on Bloomberg TV at 11:45 a.m.

COUNTRIES SEEK SILICON VALLEY ENTREPRENEURS  |  In a sassy billboard over a highway that runs through the heart of the technology industry, Canada makes an invitation to foreigners having trouble getting temporary visas. “H-1b problems?” it reads. “Pivot to Canada,” where the country offers a new so-called start-up visa with the prospect of permanent residency. Somini Sengupta writes in The New York Times: “Canada is not alone in reaching out to foreign entrepreneurs. In a bid to create their own versions of Silicon Valley, Britain and Australia have dangled start-up visas like this too. Chile is even offering seed money to lure foreigners to come to Santiago and get their start-ups off the ground. But the seductions of this Silicon Valley are hard to resist for the men and women who dream of building the next Google (or atleast being the next Google acquisition). This is where they want to be.”

Mergers & Acquisitions »

PepsiCo Said to Be in Talks to Buy SodaStream  |  PepsiCo is in talks to buy SodaStream International, an Israeli company that sells machines for making soda, for around $2 billion, a report in the Calcalist newspaper said, according to Reuters. REUTERS

Another Senator Urges Caution on Smithfield’s Sale to Chinese Company  |  Senator Debbie Stabenow, the Democratic chairwoman of the Senate Agriculture Committee, said on Wednesday that she still had concerns about any potential effect that the deal may have on food safety in the United States. DealBook »

Dell Files Mathematical Argument Against Icahn Plan  |  Dell calculated that the special dividend called for by Southeastern Asset Management and Carl C. Icahn would leave the company with a nearly $4 billion cash shortfall. DealBook »

Dell’s Board Puts Investors in a Bind  |  Emphasizing how poorly the company is doing runs the risk of everyone believing it, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

Echoes of ‘Mad Men’ in Agency Merger  |  Two independent advertising agencies are merging in an effort to compete for larger accounts, a real-life story that mirrors a plotline in the AMC series “Mad Men,” Stuart Elliott writes in The New York Times. NEW YORK TIMES

INVESTMENT BANKING »

Dimon Predicts Greater Volatility as Rates Rise  |  “We should all hope for a normalization of interest rates â€" that’s a good thing,” Jamie Dimon, the chief executive of JPMorgan Chase, said in a panel discussion in China. “As we go back to normal, its going to be scary, and its going to be kind of volatile.” BLOOMBERG NEWS

Financial Fears Gain Credence in Turkey  |  “It is not often that the rock-throwing street protester and the seasoned bond investor see eye to eye,” Landon Thomas Jr. writes in The New York Times. “This curious happenstance â€" where both fear that the profusion of glass towers and shopping malls now overwhelming the classic Istanbul skyline is not only ugly but unsustainable â€" underlies the convulsive uprising in Taksim Square.” NEW YORK TIMES

Credit Suisse Expected to Have Leading Role in Alibaba I.P.O.  |  Reuters reports: “Credit Suisse is expected to take a leading role in the anticipated I.P.O. of China’s Alibaba Group, according to people familiar with the matter, a coveted position that would yield massive fees for the bank as rivals jostle for a role in the offer.” REUTERS

Bank of America Hires Senior Fixed-Income Traders  |  The moves seem to defy a trend in the industry, writes eFinancialCareers. EFINANCIALCAREERS

Bankers Say Their Co-Workers Are Overpaid  |  A survey found that most bank employees in Britain thought that some people at their companies were being paid too much, The Wall Street Journal reports. WALL STREET JOURNAL

In London, Investment Bank Associates Are in Demand  |  According to headhunters in London, big investment banks are looking to hire associates, who typically have three to six years of experience, The Wall Street Journal reports. WALL STREET JOURNAL

PRIVATE EQUITY »

CVC Announces I.P.O. of Belgian Postal Firm  |  The private equity firm CVC Capital Partners is aiming for a valuation of up to 3 billion euros ($3.9 billion) for bpost, a Belgian postal operator, according to a newspaper advertisement, Reuters reports. REUTERS

Legg Mason May Expand Into Private Equity  | 
BLOOMBERG NEWS

HEDGE FUNDS »

Procter & Gamble Reorganizes Business Into 4 Units  |  Procter & Gamble, one of the biggest holdings of the hedge fund manager William A. Ackman, made the first big change to its business since Alan G. Lafley returned as chief executive nearly two weeks ago, The Associated Press reports. ASSOCIATED PRESS

I.P.O./OFFERINGS »

Container Store Said to Prepare for an I.P.O.  |  The Container Store has begun to hire advisers to prepare for a potential initial public offering, a person briefed on the matter said on Wednesday, nearly five years after selling itself to the private equity firm Leonard Green & Partners. DealBook »

Huishang Bank Said to Plan $1 Billion I.P.O. in Hong Kong  | 
BLOOMBERG NEWS

Treasury Plans to Sell 30 Million G.M. Shares  |  The offering will be in conjunction with General Motors’ inclusion in the Standard & Poor’s 500-stock index this week. DealBook »

VENTURE CAPITAL »

MakerBot, a 3-D Printing Firm, Said to Be in Takeover Talks  |  MakerBot Industries, a start-up that makes 3-D printers, “was recently gauging its options for raising a new round of venture capital at a valuation of $300 million when the discussions led to interest from possible acquirers,” The Wall Street Journal reports, citing unidentified people familiar with the matter. WALL STREET JOURNAL

LEGAL/REGULATORY »

I.M.F. Concedes Missteps in Greek Bailout  |  In an internal report released on Wednesday, the International Monetary Fund sharply criticizes its first bailout program for Greece, saying it bent or broke three out of four of its own rules with the lending program, The New York Times reports. NEW YORK TIMES

Europe Considers Moving Libor Oversight Away From Britain  |  Bloomberg News reports: “The European Union is considering whether to hand oversight of the scandal-ridden London interbank offered rate to the European Securities and Markets Authority.” BLOOMBERG NEWS

Less Enthusiasm for Abe’s New Steps in Japan  |  The New York Times reports: “Prime Minister Shinzo Abe on Wednesday rolled out the next phase of his aggressive strategy to kick-start Japan’s economy, with plans to encourage foreign investment, nurture innovation and improve regulation. But almost immediately, a big question surfaced: Will they go far enough?” NEW YORK TIMES

Trial Date Set for Former SAC Trader in Insider Case  |  Federal prosecutors have accused Mathew Martoma of making more than $276 million in a combination of illegal profits and avoided losses trading in the shares of the pharmaceutical companies Elan and Wyeth. DealBook »

S.E.C. Proposes Changes in Money Funds  |  The Securities and Exchange Commission voted unanimously to move ahead with changes governing the money market fund industry, but the proposal still must go through a comment period and final vote. DealBook »