Albany May Tighten Rein on Banking Consultants

New York State’s top financial regulator is preparing to crack down on the consulting firms that banks hire to navigate legal problems like money laundering and wrongful foreclosures, according to people briefed on the plans.

In an attempt to force change upon a sector that operates with scant supervision and produces mixed results, Benjamin M. Lawsky, New York’s superintendent of financial services, plans to use an obscure state banking law to rein in banks’ use of consultants, these people said.

Among the aggressive moves under consideration, Mr. Lawsky is said to be weighing whether to ban temporarily at least one firm with a poor track record from advising banks chartered in New York. His office is also considering a new code of conduct for consultants, the people briefed on the plan said.

The state regulator’s plan is the latest threat to the multibillion-dollar consulting industry, which has already come under fire in Washington as it has evolved into something of a shadow regulator of Wall Street. In recent months, consulting firms have been faulted with inadequately handling several prominent bank regulatory problems. In a review of millions of home foreclosures nationwide, for example, consultants racked up more than $2 billion in fees while struggling to complete the assignment. In other cases, consulting firms have been accused of either underestimating the amount of tainted money routed through a bank or even enabling banks to escape regulatory scrutiny for wrongdoing.

The consulting industry, which includes some of the world’s largest accounting firms, has long defended the quality and independence of its work.

Yet the momentum for change stems from a fundamental concern about its business model: that it is fraught with conflicts of interest. While consultants are expected to take a critical look at banks, critics note, they are handpicked and paid by those same banks.

“It is worth considering the monitors’ lack of independence,” Mr. Lawsky said at a speech in Washington this year. “The monitors are hired by the banks, paid by the banks, and depend on the banks for future engagements.”

The move by Mr. Lawsky â€" who has a history of irking his federal counterparts by running ahead of them â€" could spur regulators in Washington to act against the consulting firms. After halting the foreclosure review amid the lingering problems, officials at the Federal Reserve and the Office of the Comptroller of the Currency, federal agencies that oversee many large banks, are already questioning the prudence of heavily relying on consultants, said people close to the agencies. In testimony before Congress in April, a senior official at the comptroller’s office said the agency was exploring new ways to curb the use of consultants and correct problems when they occur.

For now, according to the people, the agencies can instruct a bank to replace a consultant that has erred. And if the banks continue to run afoul of the law, the regulators have authority to punish them.

Still, the relationship with consultants is difficult to unwind. Regulators, grappling with scarce resources, rely on consultants to address weaknesses at banks that are hit with federal enforcement actions. Since the financial crisis, the comptroller’s office has forced banks to hire consultants after more than 130 enforcement actions, or roughly 15 percent of the cases, an analysis of government records shows.

Reinforcing their clout, consultants like Promontory Financial Group and Deloitte & Touche have established cozy ties to the regulators, routinely hiring from government agencies. Promontory was founded by Eugene A. Ludwig, a former comptroller of the currency, and nearly two-thirds of its roughly 170 senior executives once worked at agencies that regulate the financial industry.

In a previous statement about the review of foreclosed homes, Promontory said that “From Day 1, Promontory strove to conduct its review work as thoroughly and independently as possible.”

A spokesman for Deloitte said on Monday: “We share an important common goal with regulators â€" to safeguard the integrity of the capital markets. We welcome their insights into ways that we and others can improve our processes and procedures.”

Even if federal regulators were to take a tougher stance with consultants, they would likely face legal limitations. When the comptroller’s office fined a consulting firm in 2006, a federal appeals court later ruled that the regulator had “exceeded his statutory authority.”

At the Congressional hearing in April, the comptroller’s office petitioned Congress for greater authority. But lawmakers have yet to respond.

In the absence of federal action, Mr. Lawsky has been pursuing new avenues for regulating the consultants in New York, according to the people briefed on his plans. After searching local regulations, his office seized upon a little-known provision buried in New York state banking law dating back to the turn of the 20th century.

Under the law, the earliest version of which was created in 1892, Mr. Lawsky’s office controls access to certain regulatory documents that consultants need to review when advising a bank. The documents, including examination reports, are considered “confidential communications,” unless Mr. Lawsky’s office determines that their release will serve “the ends of justice.”

In the case of consultants, Mr. Lawsky is planning to choke off access to firms that fail to meet a set of standards, according to the people briefed on the plans. The standards Mr. Lawsky is likely to introduce would require, for example, that consultants disclose financial ties that could compromise their independence.

For consultants with a history of problems, he is weighing whether to revoke their access to the confidential information for as much as a year or more. Mr. Lawsky is considering such a move in the near future, the people said, though there are no indications of which firm he may target.

His use of the banking law mirrors how New York attorneys general have used a 1921 law, the Martin Act, as a cudgel against fraud. While Mr. Lawsky is not accusing the consultants of fraud, the banking law could enable him to take aim at their performance.

Mr. Lawsky has already criticized one prominent consultant. Last year, he accused Deloitte of helping the British bank Standard Chartered flout American sanctions on Iran. Although the bank hired Deloitte to spot suspicious money transfers from Iran routed through its New York branches, Mr. Lawsky said, the consultant instead instructed bankers on how to escape regulatory scrutiny.

Mr. Lawsky never took legal action against Deloitte, and federal officials have since placed full blame upon Standard Chartered.

Loeb’s Third Point Raises Stake in Sony and Presses Split-Off Plan

The activist hedge fund manager Daniel S. Loeb has raised his bet on Sony as he continues his campaign to persuade the embattled Japanese giant into spinning off part of its entertainment arm.

In a letter to Sony’s board sent on Tuesday morning Tokyo time, Mr. Loeb disclosed that his firm, Third Point, had raised its stake to about 7 percent, or about 70 million shares. That is up from 6.5 percent last month.

The letter is a sign that Mr. Loeb, who is embarking on a rare effort by an outsider to shake up one of Japan’s most respected companies, isn’t going away anytime soon.

Mr. Loeb praised Sony’s responses to his calls for change, noting the company’s hiring of banks to weigh the partial spinoff of the entertainment business, and he suggested that Kazuo Hirai, Sony’s chief executive, should serve as the chairman of both companies.

But giving the entertainment business its own board would, in Mr. Loeb’s estimation, provide better oversight over revival efforts and spending plans.

Since going public with his calls for change at Sony, Mr. Loeb has kept a polite, even deferential tone. But his latest letter is slightly more urgent.

“Shareholders should not have to wait any longer,” Mr. Loeb wrote. “We support efforts to create an integrated Sony ecosystem but must not forget that today the company’s most valuable untapped synergies lie within entertainment itself.”

A representative for Sony was not immediately available for comment.

Headhunter for the Rich Turns on Them

Wall Street’s masters of the universe have a new enemy: Adrian Barrie Smith.

Mr. Smith, a British recruiter who supplies butlers, maids and other domestic workers to some of the world’s wealthiest families, has turned on his former clients.

Over the last 18 months, Mr. Smith has filed lawsuits against the families of some of the most prominent names in finance, including Stephen A. Schwarzman, the chairman of the Blackstone Group; Carl C. Icahn, the activist investor; Leonard Blavatnik, the Russian investor who recently acquired Warner Music; Howard Lutnick, the chairman and chief executive of Cantor Fitzgerald; and George Soros’s former wife, Susan Soros Webber. To top it off, he filed a suit against Jerry Seinfeld and his wife, Jessica. Before that, he sued Ron Perelman, the billionaire investor, and the singer Mariah Carey.

This week, Mr. Smith is expected to be in court with a case against the wife of Kenneth A. Buckfire, co-founder of Miller Buckfire, the restructuring firm.

In virtually every instance, Mr. Smith has accused his clients of some form of breach of contract and has then trotted out a list of complaints about race and age discrimination. His targets see it as mudslinging, even extortion. Mr. Smith says he is simply trying to get the truth out about New York’s powerful.

“I could tell you stories that you simply would never believe,” Mr. Smith told me in a recent e-mail. “Who sits in the private planes and homes, dinner parties of the elite? The butlers, the nannies, the housekeepers.” He added, “And who do they e-mail, and tell all the gossip to? Me.”

When I first heard of Mr. Smith a little more than a year ago, I have to admit, I was intrigued. He promised the secrets of the city’s biggest names and stories worthy of a Park Avenue version of the TV show “Desperate Housewives.” He offered himself up as a Robin Hood crusading on behalf of the working class that serve the wealthiest.

But I came to believe that his intent could well be to tell fanciful stories in hopes of drawing media attention to extract settlement payments in his lawsuits.

In 2011, Mr. Smith was convicted of aggravated harassment of a potential client, Tania Higgins, the wife of a hedge fund manager. “I will have a really great laugh when I see your house crumble,” he said in a voice mail message to her that included profane language that can’t be printed here. “I will have my revenge.”

When it became clear that I intended to write about him, Mr. Smith sent a series of blistering e-mails threatening me with a lawsuit. “Bring your lawyer. You personally will be sued,” he said in one e-mail. “You are on notice! A jury made up of New Yorkers will judge you, plus all your colleagues, and the press worldwide,” he told me.

One of his early rambling e-mails said, “It would be nice if someone focused on the truth rather than merely just making me look foolish.” But he quickly moved to more threats: “Who are you taking money from? Who are you doing a favor for? Someone got to you today. Right?” His final e-mail on Monday said, among other things, “You throw dirt on me, and surely it’s my right to return the favor. Walk away. That’s my advice.”

In an interview last year with a colleague of mine, Mr. Smith admitted that he had a temper, and that “curse words were used” in some of his previous business dealings. But he defended himself against allegations that he was a bully who had harassed, or even blackmailed, his high-powered clientele.

“Do I look like a bully? Do you see any tattoos on me? I don’t even drink,” he said.

And yet his Twitter account is an unfiltered diatribe against his targets.

“Gail Golden Icahn is so lazy she cannot squeeze her own toothpaste, or switch on the TVs, cook, clean or drive a car. She hires someone!” he wrote.

Another, misspelling included, said: “Rupert Murdock apparently aided his friend Nelson Peltz to burn his house to the ground for insurance money. Tommy Mottola helped. Wow.”(Mr. Mottola’s former wife is Ms. Carey.)

In his case against the Seinfelds, he contended that the family’s butler rejected a qualified housekeeper because the butler said the Seinfelds would think “she is not cute enough and she’s a little fat.”

I mention these claims not to dignify them, but rather to illustrate the nature of his claims.

In my reporting, I discovered that Mr. Smith had outstanding lawsuits against media organizations including the News Corporation, the Daily Beast, and yes, even The New York Times. (Ms. Higgins’s case against him was mentioned in passing in an article about housekeepers in the New York section last year.) He also brought a case against The Daily Telegraph in Britain, contending that the paper used a photograph of Mr. Smith without his permission.

In a twist, after threatening to sue the musician Lou Reed in 2011 and getting into a heated argument with Mr. Reed’s manager, Mr. Smith had the manager arrested on charges of harassment. That case was dismissed, but a separate case was brought against Mr. Smith, who pleaded guilty to a charge of aggravated harrassment in the second degree.

In Ms. Icahn’s case, Mr. Smith was hired to find a housekeeper but was quickly fired after she discovered he was finding potential prospects on Craigslist, not from the pool of experienced housekeepers he said he had relationships with, according to people briefed on the case. The cases against the others seem equally thin.

When I called many of the subjects of his suits, virtually every one of them refused to speak about him or even provide a “no comment.” They all said that they feared his retribution, name calling and other backbiting.

Oddly enough, Mr. Smith’s litigious efforts appear to be working, at least outside of court. Mr. Schwarzman paid about $19,000 to settle his case, according to people briefed on it, hoping Mr. Smith would go away. Ms. Icahn offered him $1,500, which he rejected. Mr. Smith declined.

But the courts could be slowing Mr. Smith down. Last December, the city’s small-claims court barred Mr. Smith from bringing any new cases without receiving permission from the court in advance, citing 51 cases he has brought since 2006. The order said it was intended “to avoid the possibility of the use of the small-claims part for the purpose of harassment.” On Tuesday, Mr. Buckfire’s lawyers are planning to seek a permanent injunction stopping Mr. Smith’s lawsuit against their client.Mr. Smith now says he is writing a book. The title? “Filthy & Rich in New York City.”

Britain’s Top Fraud Prosecutor Aims to Add Bite to Its Bark

David Green, the director of Britain’s Serious Fraud Office, is in a combative mood.

On his desk at his office, a stone’s throw from Trafalgar Square in London, sits a souvenir plaque commemorating the signal that Admiral Horatio Nelson sent to his fleet on the eve of the Battle of Trafalgar in 1805. It says, “England expects that every man will do his duty.”

Mr. Green says his duty is to revive confidence in his office as a top-tier prosecutor of serious fraud and corruption. And he plans to do that with the help of one of the biggest cases the organization has ever taken on: the investigation into the rigging of the London interbank offered rate, or Libor.

His office plans to bring criminal fraud charges against Thomas Hayes, a former trader at UBS and Citigroup, as early as Tuesday, according to a person briefed on the case. Mr. Hayes, who was charged with fraud late last year by the United States Justice Department, is seen as a central character in the rate-rigging scheme. His role figured prominently in the case against UBS, which under a settlement pleaded guilty to one count of felony wire fraud and paid about $1.5 billion in fines. The criminal charges against Mr. Hayes would be the first brought by British prosecutors for suspected manipulation of Libor.

“What people look to is success in the very big headline cases, and inevitably Libor comes to mind,” Mr. Green, 59, said in an interview this month. “I am in the business of doing justice and restoring public confidence in the rule of law. The public need to have confidence that white-collar criminals are dealt with as criminals, that they are not given some special rosy path with a cop-out sentence at the end of the day.”

When Mr. Green took over as director of the fraud office in April last year after 25 years as a prosecutor and defense lawyer, he found an agency whose reputation was in shambles and whose staff morale had hit rock bottom. Two London businessmen, the Tchenguiz brothers, Robert and Vincent, had dragged the office to court over a botched investigation into their connections with failed banks in Iceland. The fraud office apologized and started an internal investigation but also ran up huge legal costs that might continue to grow.

Additional embarrassment came in 2011, when the office decided against investigating Libor and shifted responsibility instead to the Financial Services Authority. While the Justice Department started to delve into the Libor case from abroad, the fraud office said it would only be a further drag on its already stretched resources.

Despite an increase of publicity-friendly dawn raids on suspected wrongdoers and some saber-rattling speeches, the fraud office had built an image of a prosecutor that barked but would not bite. So bad was its reputation that when the government started to change the way it regulated the financial industry after the financial crisis, it seriously considered abolishing the office.

Mr. Green is well aware of these problems. One of the first things he did when he arrived was to clearly define the mission of the organization, he said. Unlike his predecessor, Richard Alderman, he is not in the business of giving guidance and striking deals with defendants. “The sentence is a matter for the judge,” he said. “I am here to prosecute.”

“There was a general perception in this country and abroad that the S.F.O. lacked somehow the stomach to prosecute and preferred the easier route of civil settlement,” he said. “There was a perception that the S.F.O. had dumbed down and has taken easier, less-complex cases.”

But those times are over, he said, and his message to criminals is clear: “If your conduct is criminal and comes within the purview of the S.F.O., we will go after you.”

When he took over, Mr. Green simplified the office’s structure by setting up two divisions for fraud and two divisions for bribery and hired new senior staff members, including Geoffrey Rivlin, a retired judge feared and respected for being a stickler for detail, to help prepare cases for court.

John Fingleton, chief executive of Fingleton Associates, which advises clients on regulatory issues, said Mr. Green “hired some good people and tries to tidy up the place.” But the job is not easy, Mr. Fingleton said.

“The S.F.O. has been heavily starved of resources, and crime enforcement in Britain is generally far more difficult than in the U.S.,” where there are fewer burdens on the prosecution and plea bargains are commonplace, he said.

Mr. Green takes particular issue with the suggestion that the fraud office would refuse to open an investigation because it was too expensive. “Absurd,” he said, before adding, “disgraceful.”

“I will not stay in this job and do that,” he emphasized.

The Libor inquiry is the largest of the fraud office’s 67 active cases and a vast undertaking that required Mr. Green to double the investigation team to 60 this year. Another handful of investigators are on loan from the tax authority, and there is some staff from large accounting firms and foreign regulators. A deal to swap staff with the Justice Department is in its final stages, he said.

As determined to prosecute and passionate about his work as Mr. Green is, he is reluctant to talk about his private life or even his earlier legal cases. His father worked for a bank while his mother brought up the children. After studying history at Cambridge University, Mr. Green took an interest in criminal law and worked for a while for his brother-in-law, a lawyer.

He then worked as a prosecutor and defense lawyer on cases that included financial crime and murder. He said he defended financial organizations for regulatory and criminal offenses in the past but would not give any names.

His main prosecution work included cases involving the importation of heroin from places like Afghanistan, organized crime and fraud, but he declined to give any detail. In 2005, he was named director of revenue and customs prosecutions, successfully prosecuting money-laundering groups and cigarette smugglers. More than 90 percent of the cases secured a conviction.

Alison Graham-Wells, a lawyer who worked under Mr. Green in the 1990s, said he stood out in court for his ability to explain complex cases of financial fraud in simple terms to a jury. “He has a very good court presence,” she said.

Whether Mr. Green, now at the fraud office, is successful will depend on the outcome of the Libor investigation. Some analysts said he was taking a risk by focusing on Libor and pointed out that with a prominent international case like this, the likelihood of prosecution could be taken out of his hands.

But Mr. Green is defiant. “A risk-averse person should not be doing this job,” he said. “I’ve been a trial lawyer all my life. The whole process is about assessing and managing risk. Do I ask this question? Do I raise this point? What is the clearest way of presenting this to a jury?”

Next to the Nelson quote plaque on his desk, Mr. Green keeps another one, which he picked up during a trip to Washington and the Smithsonian National Air and Space Museum. It is closely associated with the Apollo 13 mission and reflects what Mr. Green really thinks about his mission at the fraud office: “Failure is not an option.”

Ex-Chairman of the F.T.C. Is Set to Join Davis Polk

Davis Polk & Wardwell has hired Jon Leibowitz, the former chairman of the Federal Trade Commission, a coup for the law firm as it bolsters its increasing presence in Washington.

Mr. Leibowitz served four years as head of the F.T.C., during which he pushed for consumer privacy protections, policed merger activity and reined in predatory lending practices. He left his post in February and was elected to the Davis Polk partnership on Monday, his 55th birthday.

The Supreme Court also handed Mr. Leibowitz a birthday present on Monday in a case that had become of a priority for the F.T.C. The justices ruled that federal regulators can sue brand-name pharmaceutical companies for antitrust violations when they pay generic drug makers to keep rival products off the market.

“Jon had committed his regime to this ‘pay-for-delay’ issue, trying to protect consumers from rising drug costs,” said Albert A. Foer, the president of the American Antitrust Institute. “He should get a lot of credit for this personally.”

Davis Polk, which is based in New York, plans to use Mr. Leibowitz’s expertise to advise its corporate clients on competition issues related to mergers and acquisition transactions, as well as to counsel companies in the burgeoning area of privacy law.

Mr. Leibowitz raises the firm’s already considerable profile in Washington at a time when government policy affecting corporate America is increasing. As outside counsel for several of the country’s largest banks, for instance, Davis Polk has played a significant role in helping shape the new rules emerging from the 2010 Dodd-Frank Wall Street overhaul law. In the enforcement area, Annette L. Nazareth, a former commissioner at the Securities and Exchange Commission, and Linda Chatman Thomsen, a former S.E.C. enforcement chief, are Davis Polk partners.

“In today’s markets, what our clients value highest is the most sophisticated and experienced risk advisers,” said Thomas J. Reid, the managing partner of Davis Polk. “Jon fits that bill perfectly.”

On the antitrust front, Mr. Leibowitz is the latest in a string of senior government antitrust lawyers who have departed for private practice after serving in major posts during President Obama’s first term. Christine A. Varney, the former head of the Justice Department’s antitrust division, joined Cravath, Swaine & Moore in 2011. And last year, Sharis A. Pozen, a former top Obama antitrust lawyer, joined Skadden, Arps, Slate, Meagher & Flom, and Joseph F. Wayland, another senior Justice Department antitrust official, returned to his former firm, Simpson Thacher & Bartlett.

These changes come as the White House has stepped up its antitrust enforcement efforts, strengthening its scrutiny of business behavior after what was widely considered a period of lax regulation during the Bush administration. The spate of moves could fuel criticism of Washington’s revolving door, where lawyers shuttle from the government to the private sector, defending the very clients whom they once sought to regulate.

Mr. Leibowitz, who grew up in Englewood, N.J., enters private practice after eight and a half years at the F.T.C. He was a commissioner for more than four years before being named chairman in 2009.

Under his leadership, the F.T.C. brought a number of high-profile cases, including an action against Facebook related to its customers’ privacy and an enforcement matter charging Intel with stifling competition in the microprocessor market. The commission came under some criticism for failing to accuse Google of abusing its dominance in Internet searches.

President Obama has appointed Edith Ramirez, who was a sitting F.T.C. commissioner, to succeed Mr. Leibowitz as chairman.

Mr. Leibowitz said that after more than two decades as a public servant, he looked forward to practicing law, something he found renewed passion for while at the commission. “At the F.T.C., I was reading cases, thinking through litigation strategy and found that I really enjoyed it,” Mr. Leibowitz said. (He will also get a substantial raise over his government salary; the average Davis Polk partner earned about $2.5 million last year, according to American Lawyer magazine.)

Before his term at the commission, Mr. Leibowitz worked as a lobbyist at the Motion Picture Association of America. He had previously been a longtime staffer on Capitol Hill, including a dozen years working for Hebert H. Kohl, the former senator from Wisconsin.

He will start at Davis Polk next month after taking a trip to the Galápagos Islands with his wife, the Washington Post columnist Ruth Marcus, and their two daughters.

“I’m getting as far away from civilization as I can before diving back in,” Mr. Leibowitz said.

Kabel Deutschland Discloses Takeover Approach by Liberty Global

Kabel Deutschland said on Monday that it had received a preliminary takeover bid by John C. Malone’s Liberty Global, setting up a potential bidding war for the German cable operator.

In a brief statement, Kabel Deutschland acknowledged speculation that Mr. Malone was interested in a deal, a move that potentially interrupts the German company’s talks with Vodafone of Britain.

Any takeover is likely to value the company at more than $10 billion.

Behind the growing interest in Kabel Deutschland are efforts by companies to break into the fast-growing German cable and television market.

Both Vodafone and Liberty are considered natural bidders for Kabel Deutschland, because both already operate in Germany. The biggest company in that market, Deutsche Telekom, is likely to be barred from bidding under antitrust regulations.

The German company is being advised by Morgan Stanley and Perella Weinberg Partners.

Kabel Deutschland Discloses Takeover Approach by Liberty Global

Kabel Deutschland said on Monday that it had received a preliminary takeover bid by John C. Malone’s Liberty Global, setting up a potential bidding war for the German cable operator.

In a brief statement, Kabel Deutschland acknowledged speculation that Mr. Malone was interested in a deal, a move that potentially interrupts the German company’s talks with Vodafone of Britain.

Any takeover is likely to value the company at more than $10 billion.

Behind the growing interest in Kabel Deutschland are efforts by companies to break into the fast-growing German cable and television market.

Both Vodafone and Liberty are considered natural bidders for Kabel Deutschland, because both already operate in Germany. The biggest company in that market, Deutsche Telekom, is likely to be barred from bidding under antitrust regulations.

The German company is being advised by Morgan Stanley and Perella Weinberg Partners.

AT&T Ready for a Deal, but Nowhere to Go

AT&T is all dressed up with nowhere to go.

The telecommunications company had a $93 billion bid for Telefónica blocked by Madrid, according to a Spanish newspaper. The target has denied that it received any expression of interest. But the report is a sign of the problem AT&T faces: it has a lofty stock multiple, which makes mergers tempting, but it seems shut out of both domestic and foreign deals.

The U.S. mobile market looks pretty mature. The number of active wireless devices already exceeds the population, according to industry group CTIA. Sure, as consumers adopt additional devices, such as tablets, this figure will drift higher. But that’s a slow crawl compared with past growth in what was then a burgeoning new market.

Increasing revenue by pushing higher-priced data plans will be difficult. About three-quarters of its billed subscribers already have smartphones, and American bills are higher than in most developed countries. AT&T’s wireless growth slipped below 4 percent in its most recent quarter.

Acquiring smaller U.S. rivals to boost the top line is a no-go. U.S. wireless regulators are keen to promote competition. That’s why they nixed AT&T’s $39 billion bid for T-Mobile USA in 2011. That bid may have been the catalyst for a wave of consolidation among smaller U.S. carriers like Sprint Nextel, Leap Wireless and Clearwire. AT&T, though, is unlikely to play a part.

Overseas is a different story. Company executives think mobile data usage in Europe is about to take off, based on recent comments to investors and analysts alike. Infrastructure and software rolled out domestically can increasingly be used overseas. And there’s a striking valuation mismatch. AT&T stock currently trades at more than a 50 percent premium to Telefónica’s, based on estimated 2013 earnings.

The snag is European regulators don’t appear any friendlier. If AT&T wants growth, then Telefónica, Portugal Telecom and France Telecom would fit the bill. All boast an attractive collection of wireless assets in developing countries. Yet each of these companies is regarded as a national champion, and probably off limits. The revelation that the U.S. government is widely spying on foreign data traffic won’t help, either. AT&T may be interested in Europe, but that right now looks like a one-way conversation.

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

Lawsuit Tries Creative Approach Against Fannie and Freddie Bailout

Shareholders of Fannie Mae and Freddie Mac, the two government-sponsored enterprises bailed out by the government, have some hubris.

Like some shareholders of the American International Group, the Fannie and Freddie shareholders have stooped to lawsuits as a way of trying to garner millions from the same government that rescued the entities. As was the case with the A.I.G. shareholders who have sued, they ought to know better.

In the case involving Fannie and Freddie, the shareholders acknowledge that the government takeover of the two entities likely saved Western civilization, but they still blame the government for bailing the two entities out.

That maybe that’s a bit of an oversimplification, but it has a kernel of truth.

The thrust of the argument in the lawsuit is that during the financial crisis, the government first enacted a new conservatorship process for the government-sponsored enterprises, put those enterprises into that process and finally provided lots of new money to the two at a senior level in the capital structure (relative to the old shareholders) to keep the companies afloat.

The result of those actions has been that the previous preferred and common shareholders have been in a kind of limbo ever since. It’s not clear that there is much value left for their junior interests, especially since many politicians would rather shut down and liquidate the two.

There is a kind of high-risk, high-reward play at work with regard to the preferred shares, but the common shares are largely thought to be entirely out of the money as a result of the bailout.

In such a situation, it makes some sense to see whether there might not be some other source of value that might at least put a good face on a lousy outcome. Hence the litigation.

The complaint tries to suggest that there were many other options available to the government, including the notion that Fannie and Freddie didn’t really need to be rescued. That is an argument that seems to ignore the twin threat that they presented to both the global financial system, because of the ubiquity of their securities, and the entire American home lending system.

But ultimately, the complaint boils down to a single claim that the conservatorship process amounts to an unconstitutional taking under the Fifth Amendment, although sometimes the claim seems to slide into a due process claim, too.

The conservator process was enacted as part of the Housing and Economic Recovery Act of 2008. That law does not indicate which power Congress was using when it enacted the act. Arguably, the conservatorship provisions might be deemed an exercise of power under the Bankruptcy Clause, which gives Congress the power to enact bankruptcy laws.

While the Supreme Court has held that laws enacted under the Bankruptcy Clause are subject to the limits of the Fifth Amendment, it has done so only in cases involving

creditors. Our plaintiffs here are not even unsecured creditors; they are shareholders, meaning that they are at the bottom of the capital structure in the event of a bankruptcy.

Therefore, it’s not even clear that the plaintiffs have an interest in “property” that is protected by the takings clause of the Fifth Amendment. That would seem to be kind of important if one is bringing a takings claim.

GSE Complaint

Stephen J. Lubben is the Harvey Washington Wiley Chair in corporate governance and business ethics at Seton Hall Law School and an expert on bankruptcy.

A Warning Shot on Management Buyouts

The adage “what you don’t know can’t hurt you” does not apply to federal securities laws, as Revlon learned from the Securities and Exchange Commission when the company settled an accusation that it deceived its minority shareholders. The larger question is whether the S.E.C. might actually start to police buyout offers from management and controlling shareholders that are rife with conflicts of interest and usually end up favoring the buyer over the minority shareholders.

The case centers on efforts by MacAndrews & Forbes, the controlling shareholder of Revlon owned by the billionaire Ronald O. Perelman, to arrange a transaction in 2009 in which shareholders would exchange their stock for preferred shares. S.E.C. rules require certain disclosures about the deal before it can go through, and whenever a company speaks, it has to be truthful â€" or at least not dishonest.

The problem in any transaction designed to squeeze out minority shareholders is that the incentive for the buyer is to pay the lowest price possible, but corporate leaders also have an obligation to protect all shareholders from an unfair transaction. Thus, the controlling shareholder has to try to maintain at least the facade that the deal provides adequate compensation. As the Deal Professor wrote recently, “Time and again, management buyouts have gone awry as executives allegedly used their position to buy companies on the cheap.”

The S.E.C. accused Revlon of failing to disclose to independent directors and shareholders that the exchange offer had been found wanting by an outside financial adviser to its employee 401(k) plan â€" something anyone would want to know about a deal. To keep shareholders in the dark, however, the company went to great lengths to avoid receiving information that would activate its disclosure obligation. It engaged in something one of its employees called “ring-fencing” to keep information from being delivered so that Revlon did not, in turn, have to disclose it.

S.E.C. rules require a company involved in a buyout like this to disclose any report or opinion it receives about the value of the deal and its fairness. When Revlon learned about the negative evaluation of the offer, it rewrote the rules for the 401(k) plan to keep the trustee from disclosing the financial adviser’s determination so that it could claim ignorance. This all sounds a little bit like the child who says “my eyes are closed, so you can’t see me.”

The S.E.C. usually pursues this type of disclosure case as a violation of Rule 10b-5, the broad antifraud provision reaching any “scheme or artifice to defraud” related to a securities transaction. But the accusation against Revlon is under the rarely used Rule 13e-3(b)(1), which prohibits engaging “in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person” in a going-private transaction.

While the wording of the two rules are similar, there is a crucial difference between them. Rule 13e-3(b)(1) reaches conduct that might not meet all the requirements to prove a fraud, as long as it comes reasonably close to appearing to be deceptive. That lets the S.E.C. pursue cases even if it cannot meet all the technicalities for a fraud case, as would be required under Rule 10b-5.

The S.E.C. also opted to bring the case as an administrative proceeding rather than a complaint in federal court, where it pursues most fraud actions. The Dodd-Frank Act authorized the agency to obtain penalties in this type of proceeding, which means it does not have to run the risk of having a federal judge â€" perhaps even Judge Jed S. Rakoff in Manhattan â€" scrutinizing its settlement.

Revlon agreed to pay $850,000 as a penalty to settle the case, along with an order not to violate the law again. In its administrative filing, the S.E.C. noted that the company had paid substantial amounts to settle shareholder class actions, totaling about $37 million.

The fine is more of a nuisance than any type of deterrent, but the case may be intended to serve more as a warning to other companies about the S.E.C.’s interest in disclosures in a going-private transaction. The interesting question is whether the S.E.C. will start to use Rule 13e-3(b)(1) to police the conduct of management and controlling shareholders when they try to force out minority shareholders.

Issues related to the inherent conflicts of interest in these transactions have been left for the most part to the state courts because it is usually a question of internal corporate governance regarding the process of evaluating an offer. Delaware is the leading jurisdiction for these transactions, and its courts have struggled to deal with these issues. For the most part, legal rulings push companies to put in place mechanisms to simulate the type of arm’s-length bargaining that would take place in a typical buyout by having independent directors try to negotiate a better price.

Revlon’s efforts to keep important information from its independent directors responsible for evaluating the deal undermined the core of the protection afforded by state law to minority shareholders. If a company is going to deceive its own directors, what hope do shareholders have of receiving a fair deal.

The S.E.C.’s case portrays the company’s conduct as an extreme example of the type of manipulative acts a controlling shareholder can undertake to obtain the deal it wants while giving the appearance of complying with its disclosure obligations under federal securities laws. So if the S.E.C. is only going to pursue cases that involve this type of egregious misconduct, then other companies involved in management buyouts can breath a sigh of relief as long as they do not engage in the type of “ring-fencing” Revlon tried.

But the administrative proceeding could also be seen as a shot across the bow for companies considering this type of transaction. Although shareholder litigation is inevitable in almost any deal, the federal government has largely stayed away from getting involved in going-private transactions â€" at least until now.

The potential for unfair treatment when a controlling shareholder tries to force out the minority is the type of situation in which the S.E.C.’s mission of protecting investors calls for greater involvement in policing the disclosures. If nothing else, the settlement with Revlon tells companies that their dealings with minority shareholders may be subject to heightened government scrutiny, which can have its own deterrent effect.

‘Wolf of Wall Street’: Boiler Room Antics on the Big Screen

Before he went to prison, Jordan Belfort amassed a net worth of more than $100 million while still in his mid-20s, with a mansion in Southampton, N.Y., and a 167-foot yacht.

This fall, Mr. Belfort’s financial shenanigans are set to be represented in a movie adaptation of his 2007 memoir, “The Wolf of Wall Street.” A trailer for the movie, directed by Martin Scorsese and starring Leonardo DiCaprio, with a screenplay by Terence Winter, was released over the weekend.

From the looks of it, the film, which also stars Matthew McConaughey and Jonah Hill, features some familiar financial tropes, including fast cars, debauched partying and large bills thrown in the air. The trailer also includes a scene of dwarf-tossing, an activity with a notorious reputation on Wall Street.

“Was all this legal? Absolutely not. We were making more money than we knew what to do with,” Mr. DiCaprio, who plays Mr. Belfort, says in the trailer.

As head of Stratton Oakmont, a now-defunct Long Island brokerage firm, Mr. Belfort oversaw a seven-year scheme to manipulate stocks, he admitted in 1999. One prosecutor called the firm “the most infamous boiler-room brokerage firm in recent memory.”

“Jordan Belfort in the 1990s was like Ivan Boesky in the 1980s,” Ira Lee Sorkin, the lawyer who represented Mr. Belfort, told The New York Times in 2007. “He was a brilliant salesman carried away with hubris.”

The movie will be the latest finance-themed romp to appear in theaters since the financial crisis. The 2011 film “Margin Call” depicted an embattled brokerage firm, while the 2010 release from Oliver Stone, “Wall Street: Money Never Sleeps,” was a follow-up to his 1987 classic, “Wall Street.”

“The Wolf of Wall Street” isn’t the first time Hollywood has found inspiration in the scandal-ridden boiler room culture of the 1990s. The 2000 film “Boiler Room,” directed by Ben Younger, centered on the rise and fall of a young man working for a fictional firm called J.T. Marlin. It was both an homage to, and a critique of, Mr. Stone’s 1987 film, A.O. Scott wrote in his review in The New York Times.

Mr. Belfort â€" the real-life one â€" was inspired to tell his tale after reading Tom Wolfe’s “Bonfire of the Vanities” so many times that he was able to quote long passages, according to The Times’s Landon Thomas Jr.

Though Mr. Belfort’s book was released amid a spate of industry tell-alls, it stood out for its unvarnished revelations, The Times said. Mr. Belfort, for example, wrote that he once crashed his helicopter on the front lawn of his estate, too stoned to find the airport.

In China, a Push for Cleaner Air

China’s State Council announced an ambitious package on Friday of 10 measures to combat air pollution. On Monday, Jun Ma, chief economist for greater China at Deutsche Bank and the author of the June 9 report “Big Bang Measures to Fight Air Pollution,” wrote in a note:

It is the most aggressive policy effort to address air quality issues in China’s history. Within these 10 broad measures, there are nearly 20 more specific actions. We believe these measures represent the beginning, rather than the full package, of China’s anti-air pollution campaign. Its sectoral implications will include a reduction in coal consumption growth; faster growth of clean energies such as gas, solar, wind and nuclear; faster growth in the adoption of environment-related technologies; faster growth of public transportation; and a faster reduction in polluting and technologically outdated capacities in the steel, cement, aluminum and glass sectors.

Air pollution is a major problem in China (remember the January “airpocalypse”?) and steps to alleviate the problem are vital to the government’s stated goals of building a “beautiful China” and improving people’s welfare. Implementation in China, however, tends to lag behind lofty policy pronouncements, and a recent academic study found that investment in environmental projects lowers mayors’ career prospects.

Still, Vance Wagner, an American clean transportation engineer with long experience in China, found reason to be optimistic about these new measures. He argues that the language in the official Chinese announcement of the new measures “indicates for the first time that local leaders in China will be on the hook not just for vague, gameable targets like total emissions reductions, but actual improvements in measured ambient air quality.”

Any efforts to address one of China’s environmental crises is welcome but progress will come over decades, even with aggressive implementation.

The same State Council meeting also promised support for China’s solar industry through easier financing and policies to increase demand for electricity generated from solar. The industry is one of many struggling with significant overcapacity and it now faces a possible trade war with Europe.

Perhaps the most concrete announcement from the Sunnylands summit meeting between President Obama and President Xi Jinping was an agreement to cut greenhouse gas emissions by committing to phase out the production and consumption of hydrofluorocarbons.

But whatever good will generated at the summit meeting might have been quickly overshadowed by Edward J. Snowden.

Mr. Snowden’s disclosures of the National Security Agency’s cyberactivities and his flight to the Hong Kong Special Administrative Region of the People’s Republic of China have been a boon for Beijing. Official media is starting to have a bit of a field day with his revelations.

A Xinhua columnist wrote that as a whistle-blower he was “welcome in China” in an online article accompanied by a cartoon of a rat dressed as the Statue of Liberty peeking into a computer covered by a Chinese flag. Another cartoon, this one in The China Daily, showed the Statue of Liberty with the shadow of a spy with eavesdropping equipment.

What is more serious, the official People’s Daily on Monday published a commentary on Mr. Snowden’s leaks under a pseudonym frequently used to express the paper’s foreign policy views. The author wrote that Mr. Snowden had helped to expose American hypocrisy and that America’s “exceptionalism is an impediment to the transformation of international relations.”

The effect on American business in China from Mr. Snowden’s actions are unclear. Over the years, there have been occasional discussions in Chinese media about the risks to national security from a reliance on United States software, networking and telecommunications hardware.

Just as Huawei is now effectively blocked from selling its networking equipment in the United States, we should not be surprised to see more aggressive moves from Beijing to shut out American firms like Cisco Systems, which one Chinese news report on Monday noted had significant market share in core parts of Chinese networks.

Mr. Snowden’s disclosures may also explain why certain parts of the United States government have been so concerned about Huawei; they fear the Chinese government could use Huawei to do what the N.S.A. already does. Protests from Washington will be much harder to take seriously now if American technology firms start getting “Huawei’d” in Beijing on national security grounds.

Accusations that Mr. Snowden may be a Chinese spy are beginning in Washington. The former Vice President Dick Cheney told Fox News that Mr. Snowden was a traitor and possibly a spy. Representative Peter T. King, Republican of New York, told MSNBC that he suspected Mr. Snowden could be “in cahoots with the Chinese government” because, among other reasons, he studied Chinese. This is clearly a serious case, but we should hope it does not lead to “Red Scare 2.0” on Capitol Hill.

To Washington, Mr. Snowden may be an enemy of the state, and to civil libertarians, he may be a hero. To Beijing, he is at least a significant propaganda prize, if not much more.

A.I.G. Gives Chinese Buyers of Its Plane-Leasing Unit More Time

The American International Group disclosed on Monday that it had given a group of Chinese investors more time to complete a deal to buy its big airplane-leasing unit, nearly three weeks after the consortium missed a down payment.

In a regulatory filing, A.I.G. said it had agreed to extend the time at which either party could terminate the deal to July 31. In the meantime, A.I.G. and its unit, the International Lease Finance Corporation, can continue to look at taking the business public as an alternative option.

A.I.G. also has the right to call off the deal if it believes that certain conditions tied to regulatory matters are unlikely to be resolved by July 31.

The insurer agreed in December to sell up to 90 percent of the business to a group of Chinese investors that includes the New China Trust Company, the China Aviation Industrial Fund and P3 Investments.

The deal valued the unit at about $5.28 billion. The sale is part of A.I.G.’s effort to streamline itself as it continues to recover from the financial crisis.

Battle for Elan in Doubt After Shareholders Approve Buyback Plan

LONDON - Elan, the embattled Irish drug company, said on Monday that an unsolicited takeover bid by Royalty Pharma had lapsed because Elan’s shareholders had voted in favor of a share buyback plan.

Elan, which has been defending itself against the Royalty Pharma approach, said shareholders at an extraordinary general meeting voted against three recent purchases, but because they also voted in favor of the share plan, Royalty Pharma’s $6.7 billion offer would end. Royalty Pharma’s offer depended on all four transactions being rejected, Elan said.

The vote poses a challenge to Royalty Pharma’s plan, but it is unclear whether it does mean the end of the takeover effort. The company, which twice increased its offer price for Elan and took it straight to Elan shareholders, is challenging a decision by the Irish Takeover Panel that would require the company to abandon its offer after Monday’s shareholder vote.

In another twist, Elan put itself up for sale last week, saying it had received other expression of interests for its business.

In an open letter to Elan’s directors, Royalty Pharma’s chairman, Rory Riggs, wrote on Monday that he was “disappointed” that Elan’s board and its advisers “rejected our advisers’ efforts to engage with you this past weekend.”

He welcomed that Elan was now contemplating a sale, but he urged the company to work with Royalty Pharma “rather than undertaking a lengthy, and we think likely fruitless, effort to find a buyer willing to offer more than we are.” Mr. Riggs called Elan’s recent transactions “hastily arranged” and “value-destructive.”

Elan agreed to a $1 billion royalty deal in May with Theravance and also bought AOP Orphan Pharmaceuticals, which specializes in rare diseases. Elan also said it would spin off its treatment for bipolar disorder into an independent company called Speranza Therapeutics.

Relationship Science Raises $30 Million

The Rolodex for Wall Street’s elite has gained several new big backers.

Relationship Science, a start-up that aims to connect the 1 percent, has raised $30 million from a group that includes David Komansky, the former chairman of Merrill Lynch; Stephen Luczo, the chief executive of Seagate; Reuben Jeffery III, a former Bush administration official; the real estate developer William Rudin; and Salesforce.com.

In a sign of how much the business of networking is worth, the new investors join an already burnished list of Wall Street heavyweights like Henry R. Kravis, Ronald O. Perelman, Stanley Druckenmiller and Joseph Perella.

Since formally kicking off in January with $60 million in financing, Relationship Science (RelSci to its aficionados) has sought to become a sort of high-end social network of sorts for the elite. It compiles information on more than 2 million executives across corporate America and Wall Street â€" but unlike LinkedIn or Facebook, the service requires no manual input from those it profiles.

Relationship Science instead puts together its dossiers by scraping the Web, allowing customers to figure out how they’re connected to these individuals, as well as how strong those ties are.

Its founder is Neal Goldman, who created the financial database Capital IQ before selling that company to McGraw Hill in 2004.

Many deal makers and wealth managers already use the Relationship Science service to bolster their pitches. The company currently has more than 150 clients, including investment banks, private equity firms, law firms and hedge funds.

The latest round of financing is meant to help finance Relationship Science’s expansion, including a broadening of its core database and developing new applications.

“Our product clearly resonates with people,” Mr. Goldman said in a statement. “Deal makers, sales professionals, fund-raisers, investors â€" they are all looking to leverage their individual and organization-wide relationships in more powerful and productive ways.”

Activist Investor Calls for Breakup of Smithfield Foods

An activist hedge fund took aim at Smithfield Foods on Monday, arguing that the pork producer should consider splitting itself up despite its proposed $4.7 billion sale to a major Chinese meat processor.

The fund, Starboard Value, wrote in a letter to Smithfield’s board that it believes the company is worth much more separately. The investment firm said that it owns a 5.7 percent stake, making it one of the largest shareholders in the company.

Shares of Smithfield were up more than 2 percent in premarket trading on Monday, although they remain below the Shuanghui offer price.

The letter marks a potential fight over Smithfield, one of the country’s biggest producers of hogs. Last month, it agreed to sell itself to Shuanghui International for $34 a share, in a bid to increase sales of American pork in China.

But Starboard has picked up an argument advanced against Smithfield over the years: that its vertically integrated operations, from raising hogs to slaughtering and processing them into bacon and ham and then selling the products, are worth more separate than combined.

“We believe there are numerous interested parties for each of the company’s operating divisions, and that a piece-by-piece sale of the company’s businesses could result in greater value to the company’s shareholders than the proposed merger,” the hedge fund wrote.

Starboard may be in for a tough fight. Smithfield’s management team, led by C. Larry Pope, has defended the logic of keeping the company whole, as have Shuanghui executives. Before announcing the deal with Shuanghui, Smithfield had been in talks with two other buyers as well.

One of Smithfield’s former biggest investors, the Continental Grain Company, had also called for a breakup of the company. But the agricultural concern instead sold off virtually its entire stake earlier this month, taking advantage of the rise in share price since the Shuanghui deal was announced.

Starboard acknowledged that Smithfield’s deal with Shuanghui prevents the company from seeking rival takeover bids. Instead, the hedge fund offered to look for and bring in potential suitors for Smithfield’s divisions.

In taking aim at Smithfield, Starboard is choosing one of its biggest targets yet. The activist hedge fund has made its name agitating against the likes of AOL.

Activist Investor Calls for Breakup of Smithfield Foods

An activist hedge fund took aim at Smithfield Foods on Monday, arguing that the pork producer should consider splitting itself up despite its proposed $4.7 billion sale to a major Chinese meat processor.

The fund, Starboard Value, wrote in a letter to Smithfield’s board that it believes the company is worth much more separately. The investment firm said that it owns a 5.7 percent stake, making it one of the largest shareholders in the company.

Shares of Smithfield were up more than 2 percent in premarket trading on Monday, although they remain below the Shuanghui offer price.

The letter marks a potential fight over Smithfield, one of the country’s biggest producers of hogs. Last month, it agreed to sell itself to Shuanghui International for $34 a share, in a bid to increase sales of American pork in China.

But Starboard has picked up an argument advanced against Smithfield over the years: that its vertically integrated operations, from raising hogs to slaughtering and processing them into bacon and ham and then selling the products, are worth more separate than combined.

“We believe there are numerous interested parties for each of the company’s operating divisions, and that a piece-by-piece sale of the company’s businesses could result in greater value to the company’s shareholders than the proposed merger,” the hedge fund wrote.

Starboard may be in for a tough fight. Smithfield’s management team, led by C. Larry Pope, has defended the logic of keeping the company whole, as have Shuanghui executives. Before announcing the deal with Shuanghui, Smithfield had been in talks with two other buyers as well.

One of Smithfield’s former biggest investors, the Continental Grain Company, had also called for a breakup of the company. But the agricultural concern instead sold off virtually its entire stake earlier this month, taking advantage of the rise in share price since the Shuanghui deal was announced.

Starboard acknowledged that Smithfield’s deal with Shuanghui prevents the company from seeking rival takeover bids. Instead, the hedge fund offered to look for and bring in potential suitors for Smithfield’s divisions.

In taking aim at Smithfield, Starboard is choosing one of its biggest targets yet. The activist hedge fund has made its name agitating against the likes of AOL.

Telefonica Shares Climb

Shares of the Spanish telecommunications giant Telefónica climbed on Monday after a report in the Spanish newspaper El Mundo that AT&T had made a $93 billion offer for the company that was rejected by the government. But Telefónica was forced to deny the report. “In relation to press rumors published today, Telefónica states that it has not received any approach, nor any indication of interest, neither verbal nor in written form, from any party,” the Spanish company said in a statement. In Madrid, shares of Telefónica rose as much as 3.9 percent on Monday before paring back gains. They were up 2.6 percent in late morning trading, DealBook’s Mark Scott writes.

The Spanish industry minister, José Manuel Soria, said on Monday that he had no knowledge of an offer by AT&T for Telefónica, but acknowledged that he had met with the chairman of AT&T, Randall L. Stephenson, at the Mobile World Congress in Barcelona, The Financial Times reports.

THE BIG FORESTRY DEAL  |  Weyerhaeuser said on Sunday that it planned to acquire Longview Timber from Brookfield Asset Management, gaining 645,000 acres of timberland, for about $2.65 billion. The company added that it was weighing a sale or spinoff of its home-building unit, DealBook’s Michael J. de la Merced reports.

The deal expands Weyerhaeuser’s holdings in the Pacific Northwest by 33 percent, to 2.6 million acres, and increases its overall holdings in the United States to 6.6 million acres. Weyerhaeuser is paying for the deal by raising about $2.45 billion in debt and equity, including through loans from Morgan Stanley. The company also plans to raise its quarterly dividend to 22 cents a share from 20 cents. According to Bloomberg News, it is the third-largest forestry acquisition in North America.

Weyerhaeuser is also considering a potential sale or spinoff of its home-building division, the Weyerhaeuser Real Estate Company, which includes Pardee Homes. But the company may also decide to hold onto the unit, which reported nearly $1.1 billion in revenue last year, a 28 percent increase from 2011.

JPMORGAN TO SPIN OUT PRIVATE EQUITY UNIT  |  The last remaining private equity unit of JPMorgan Chase, One Equity Partners, is being spun out into a separate company and is raising its next fund as an independent firm. “The move comes as banks are facing regulatory pressure to reduce their exposure to risky businesses, but the divestment of One Equity, which manages $4.5 billion of the bank’s money, was not in response to that, according to a person briefed on the matter,” DealBook’s Peter Lattman reports. “Instead, this person said, the decision is a reflection of JPMorgan’s emphasis on its client businesses rather than making investments off the firm’s balance sheet.”

“One of the bank’s reasons for de-emphasizing its private equity investments â€" especially the ones that were made by its largest unit, JPMorgan Partners â€" is that it didn’t want to be in businesses that directly competed with some of its prized private equity clients, like the Blackstone Group and Kohlberg Kravis Roberts,” Mr. Lattman continues.

ON THE AGENDA  |  Gary D. Cohn, the president and chief operating officer of Goldman Sachs, is being honored at the annual gala of Harlem RBI and Dream Charter School, starting at 5 p.m. in Manhattan. The lawyer H. Rodgin Cohen of Sullivan & Cromwell is on Bloomberg TV at 7:45 a.m. Aaron Levie, chief executive of Box, is on Bloomberg TV at 6 p.m.

A DERIVATIVES DEAL FALLS APART  |  JPMorgan Chase and Morgan Stanley were planning a sale of “synthetic collateralized-debt obligations,” derivative investments that were at the heart of the financial crisis. But the attempt failed after investors balked at buying some of the products being offered, The Financial Times reports. The bankers had been looking to revive the synthetic C.D.O.’s “after receiving inquiries from some investors hungry for higher-yielding investments,” the newspaper writes.

Mergers & Acquisitions »

Cinven to Buy CeramTec for $2 Billion  |  The European private equity firm Cinven agreed on Sunday to buy the ceramics business CeramTec from Rockwood Holdings for 1.49 billion euros. DealBook »

Asia’s Richest Man Buys Dutch Waste Firm  |  A consortium of companies owned by the Asian billionaire Li Ka-shing has agreed to pay more than $1 billion to acquire the Dutch waste management firm AVR from its private equity owners. DealBook »

Talk of Takeover Grows at Health Management Hospital Group  |  The chief executive of Health Management Associates is planning to depart, and speculation about a possible sale has sent the company’s stock higher. DealBook »

Elan Puts Itself Up for Sale  |  Four months after Royalty Pharma approached the Irish drug maker Elan, a takeover battle takes a new turn. DealBook »

INVESTMENT BANKING »

Co-operative Bank Turns to Bondholders to Fill Capital Shortfall  |  Co-operative Bank has announced plans to raise an additional $2.4 billion to replenish a capital shortfall by asking junior bondholders to swap their debt securities for shares. DealBook »

JPMorgan Plans Service for Tracking Assets  |  The Financial Times reports: “JPMorgan Chase will on Monday unveil its attempt to capture a slice of the growing business of managing the billions of dollars worth of cash and securities that funds and companies will need to stump up to back their derivatives trades.” FINANCIAL TIMES

Among Pessimists, a New Economic Optimism  |  “But could the New Normal, as this long economic slog has been called, be growing old? That is the surprising new view of a number of economists in academia and on Wall Street, who are now predicting something the United States has not experienced in years: healthier, more lasting growth,” Nelson D. Schwartz writes in The New York Times. NEW YORK TIMES

Big Banks Resist New Rules for Small Loans  | 
WALL STREET JOURNAL

Overcoming Your Negativity Bias  |  Learning to put your attention where it serves you best requires the same sort of deliberate practice necessary to build any new skill, Tony Schwartz writes in the Life@Work column. DealBook »

Pitching the Value of Marijuana to Investors  |  On Friday, 18 start-up companies attended a conference organized by the ArcView Investor Network, a group of entrepreneurs looking to invest in legal cannabis companies, E.C. Gogolak writes in The New York Times. NEW YORK TIMES

PRIVATE EQUITY »

Singapore Telecommunications Unit Attracts Private Equity Bidders  |  K.K.R., the Blackstone Group and the Carlyle Group, in addition to strategic buyers like Eutelsat Communications of France, are among the parties to place first-round bids for the Australian satellite unit of Singapore Telecommunications, Reuters reports, citing an unidentified person with direct knowledge of the matter. REUTERS

Cermaq Receives $1.1 Billion Offer for Unit  |  Altor Equity Partners and Bain Capital made an offer for the Ewos unit of the Norwegian fish food maker Cermaq, Bloomberg News reports. BLOOMBERG NEWS

HEDGE FUNDS »

Hedge Funds Reduce Bets on Gold  |  Bloomberg News writes: “Hedge funds cut wagers on a gold rally for the first time in three weeks on mounting speculation central banks will curb record stimulus and as this year’s slump in bullion spurred losses for billionaire John Paulson.” BLOOMBERG NEWS

I.P.O./OFFERINGS »

Brazil Cement Producer Aims to Raise $4.9 Billion in I.P.O.  |  If successful, the initial public offering of Votorantim Cimentos of Brazil would bring the level of capital raised in I.P.O.’s in that country this year above $10.6 billion, setting a record, The Financial Times reports. FINANCIAL TIMES

In I.P.O., CDW to Fall Short of Boom-Era Valuation  |  The CDW Corporation disclosed plans to price its initial public offering at $20 to $23 a share, valuing the entire company at about $3.6 billion at the midpoint of that range, or half of what its owners paid for it in 2007. DealBook »

VENTURE CAPITAL »

Path Is Said to Approach $1 Billion Valuation  |  TechCrunch writes: “We’re hearing from multiple sources that private social network Path is raising a new round of funding that could value the company as high as $1 billion.” TECHCRUNCH

LEGAL/REGULATORY »

Watchdogs Without Bark in Countrywide Case  |  A court battle over legal liability for Countywide Financial loans is “laying bare an industry practice that has put investors in mortgage securities at a disadvantage and reduced their financial recoveries in the aftermath of the home loan mania,” Gretchen Morgenson writes in The New York Times. NEW YORK TIMES

Bank Gave Bonuses Tied to Foreclosures, Lawsuit Claims  |  Bank of America “rewarded staff with cash bonuses and gift cards for meeting quotas tied to sending distressed homeowners into foreclosure, former employees said in court documents,” Bloomberg News reports. BLOOMBERG NEWS

Defining Real Estate Broadly to Avoid Corporate Taxes  |  Iron Mountain, an information storage company, is a great example of how companies are trying to qualify as real estate businesses to take advantage of tax benefits, Victor Fleischer writes in the Standard Deduction column. DealBook »

Singapore Censures 20 Banks Over Rates  |  Financial institutions, including Bank of America and JPMorgan Chase, were found to have insufficient risk management and internal controls, which allowed some traders to try to alter rates. DealBook »

In Utah, a Local Hero Is Accused of Fraud  |  An Internet marketing millionaire named Jeremy Johnson, who is known in his local community as “Christlike,” has been accused by the Federal Trade Commission of being “the mastermind” behind a large and intricate online marketing fraud, The New York Times reports. NEW YORK TIMES

U.S. Directs Agencies to Free Up Spectrum  |  The White House announced efforts intended in part to spur government agencies to participate in a plan to double the country’s supply of airwaves for use in high-speed wireless Internet service, The New York Times reports. NEW YORK TIMES

Telefonica Denies Talk of a AT&T Takeover Bid

LONDON - The Spanish telecommunications giant Telefónica denied a report on Monday that it was the target of a $93 billion takeover approach by AT&T.

The statement follows a report by the Spanish newspaper El Mundo that the American company had been thwarted in a potential bid for Telefónica after Spanish politicians blocked the deal last week for national strategic reasons.

AT&T’s prospective 70 billion euro deal also would have included the assumption of Telefónica’s more than 50 billion euro debt burden, according to El Mundo. The takeover would have represented the largest European deal so far this year, as local companies continue to shy away from large acquisitions.

In Madrid, shares of Telefónica rose as much as 3.9 percent before paring back gains. They were up 2.6 percent in late morning trading on Monday.

Since the financial crisis began, the Spanish telecommunications company has fallen victim to the increasingly difficult economic environment, and has been looking to offload and spin-off assets in a bid to reduce its debt levels.

Despite Europe’s gloomy outlook, the phone, wireless and cable sectors has been one of the few bright spots in the Continent’s moribund acquisitions markets, as several American players, including John Malone’s Liberty Global, continue to hunt for assets.

In a brief statement, Telefónica said that it had not been approached by AT&T.

“In relation to press rumors published today, Telefónica states that it has not received any approach, nor any indication of interest, neither verbal nor in written form, from any party,” the Spanish company said in a statement.

A representative for AT&T could not be immediately reached for comment.

As part of efforts to reduce its debt, Telefónica spun off its German subsidiary, Telefónica Deutschland, raising $1.9 billion last year in Europe’s largest initial public offering last year.

The Spanish company also sold its $1.4 billion stake in China Unicom back to the Chinese firm, while it continues to mull potential I.P.O.’s for its Latin American divisions.

Europe’s telecommunications sector has been influx for the last 18 months, as a number of international companies circle local assets.

The Mexican billionaire Carlos Slim has acquired companies like the Dutch cellphone operator KPN and its Austrian counterpart Telekom Austria. Mr. Malone’s Liberty Global also recently completed its $16 billion takeover of the British cable company Virgin Media. Rumors also abounded that Verizon is planning a $100 billion approach to buy the 45 percent stake it does not already own in Verizon Wireless from its British partner, Vodafone.

Co-Operaritive Bank Turns to Bondholders to Fill Capital Shortfall

LONDON - The Co-operative Bank announced plans on Monday to raise an additional £1.5 billion, or $2.4 billion, to replenish a capital shortfall.

Under the terms of the deal, the British bank will ask junior bondholders to swap their existing debt for shares in the Co-operative Bank. The agreement represents the first time that a so-called ‘‘bail in’’ of bondholders has been used to recapitalize a British bank since the financial crisis began.

The move contrasts with previous efforts by local banks to raise new capital, which has included multibillion-dollar state bailouts of rival lenders like the Royal Bank of Scotland and Lloyds Banking Group.

By forcing bondholders to exchange their current debt securities for shares, Co-operative Bank is trying to avoid turning to the British government for financial help.

The lender, whose credit rating was downgraded to junk status by Moody’s Investor Services last month because of questions over its capital reserves, said the agreement would increase its so-called common Tier 1 equity ratio, a measure of a firm’s ability to weather financial shocks, to 9 percent by the end of the year.

The Prudential Regulatory Authority, a British regulator, has called for all of the country’s banks to have a common Tier 1 equity ratio of at least 7 percent by the end of the year under the accountancy rules known as Basel III.

British lenders must raise a combined £25 billion by the end of the year to meet the capital shortfall. Regulators will announce details on Thursday of how much each bank must raise by the end of the year.

The Co-operative Bank said on Monday that it planned to raise £1 billion through the bondholder bail-in this year, and increase its reserves by a further £500 million next year.

‘‘This announcement is good news for the Co-operative Group, the Co-operative Bank, its customers,’’ Euan Sutherland, chief executive of the Co-operative Group, the British conglomerate that owns the lender, said in a statement. ‘‘This solution, under which they investors own a significant minority stake in the Bank, will then allow them to share in the upside of the transformation of the bank.’’

As part of the capital raising, the Co-operative Bank also plans to sell its general insurance unit. Earlier this year, the lender sold its life insurance and asset management businesses to the British pension company Royal London for around £220 million.

The British lender’s financial difficulties stem from its mistimed acquisition of a local rival, Britannia Building Society, in 2009 that left the Co-operative Bank with a large pool of delinquent commercial real estate loans.

The Co-operative Bank also ran into trouble earlier this year when its plan to buy part of Lloyds Banking Group’s branch network collapsed. The move was an effort to increase its capital base, while also expanding across Britain to compete with larger lenders like Barclays and HSBC.