In Case Against Hedge Fund, a Show of Force

When Steven A. Cohen’s lawyers arrived for a meeting this spring at the United States attorney’s offices in Lower Manhattan, in a Brutalist-style building tucked behind a pair of courthouses, the conference room was so packed with federal investigators that one official had to venture down the hall for additional chairs.

The meeting was just weeks after Mr. Cohen’s hedge fund, SAC Capital Advisors, paid $616 million to settle two civil insider trading cases, and his lawyers were there to present a broad defense of the fund.

But the marshaled might of law enforcement â€" which people briefed on the matter described as more than a dozen officials, including representatives from the Securities and Exchange Commission and the F.B.I., and postal inspectors as well as federal prosecutors â€" signaled that the government was no longer interested in just monetary settlements. Instead, after years of futile attempts to pin criminal charges on Mr. Cohen, the investigators were coalescing around a more unusual plan: indict SAC itself.

Now the government is poised to do just that. A grand jury voted this week to approve the indictment, a person briefed on the matter said, and authorities were expected to announce the case as soon as Thursday.

Criminal charges might devastate SAC because the banks that trade with the fund and finance its operations could abandon it.

Already, after several guilty pleas by former SAC employees and a series of civil actions brought by the S.E.C., the fund’s investors have removed about $5 billion of $6 billion in outside money from the firm. Those that have withdrawn money include major financial industry players like the Blackstone Group and Citigroup. The exodus could accelerate when the government levels the indictment.

SAC, based in Stamford, Conn., with 1,000 employees around the world, is putting on a brave face.

“The firm will operate normally and we have every expectation that will be the case going forward,” it said in a memo to employees on Wednesday.

In recent years, as the federal government waged an unrelenting crackdown against insider trading, a major focus of its efforts was Mr. Cohen, 57, a billionaire stock picker and collector of art and real estate. Mr. Cohen, however, was not expected to be charged criminally, though authorities were contemplating charges against other employees at SAC.

But while Mr. Cohen may not be charged, he is inextricably tied to the hedge fund that has come under the government’s line of fire. Not only are his initials on the door, but Mr. Cohen also owns 100 percent of the firm he founded in 1992.

The indictment, according to the people briefed on the matter, will charge the fund with carrying out a broad conspiracy to commit securities fraud, citing several instances of insider trading. Underpinning the charge, the people say, is the theory of corporate criminal liability, which allows the government to attribute certain criminal acts of employees to a company itself.

The case is the boldest yet from the top federal prosecutor in Manhattan, Preet Bharara, whose office has overseen the crackdown on insider trading. The government has brought charges against more than 80 people; of those, 73 have either been convicted or pleaded guilty, a success rate that stands in contrast to recent struggles with cases stemming from the financial crisis.

While lower-level prosecutors have led the SAC case, Mr. Bharara has taken a more active role in recent months. In May, a person briefed on the matter said, he was on a conference call to discuss strategy with his deputies and top S.E.C. officials.

Mr. Bharara’s involvement reflects the unusual nature of the case. Criminal charges against large companies are rare, given the collateral consequences for the economy and innocent employees. After the Justice Department indicted Enron’s accounting firm, Arthur Andersen, in 2002, the firm collapsed and 28,000 jobs were lost.

Just days ago, the S.E.C. filed a civil case that accused Mr. Cohen of failing to supervise employees suspected of insider trading. Federal prosecutors, the people say, are planning soon to ask a judge to suspend the commission’s case while the criminal charges are pending.

A spokesman for the F.B.I., Peter Donald, declined to comment. SAC also declined to comment.

Mr. Cohen reached the height of his powers in the boom years before the financial crisis. In both 2006 and 2007, Mr. Cohen earned about $900 million, according to Alpha magazine.

But during the financial crisis, Mr. Cohen’s fund, like much of Wall Street, came under pressure. Much of the activity at the center of the government’s case place took place during that year, when the fund posted its first-ever annual loss.

In 2009, Wall Street was stunned when government authorities announced a series of criminal insider trading charges against hedge fund managers and corporate executives. In the biggest case, federal prosecutors arrested Raj Rajaratnam, the founder of the Galleon Group hedge fund.

It was around that time that Mr. Cohen’s name began to surface as a target of the inquiry. Like Mr. Rajaratnam, Mr. Cohen ran a hedge fund whose traders were known for aggressively pumping corporate insiders for insights that might offer an edge.

Mr. Cohen was infuriated with the comparisons to Galleon, and went on something of a public relations offensive.

“I look at my firm, and I don’t see any of that,” Mr. Cohen told Vanity Fair magazine in 2010. “In some respects I feel like Don Quixote fighting windmills.”

Yet while Mr. Cohen was railing against the scrutiny, federal authorities were building their case against the firm.

The F.B.I. began to target low-level hedge fund traders whom they would persuade to cooperate. One cooperator, Noah Freeman, a former SAC portfolio manager, said he thought that obtaining corporate secrets was part of his job description. At one point, the F.B.I. also tapped Mr. Cohen’s phone line at his 35,000-square-foot home in Greenwich, Conn., the people briefed on the matter said.

Four onetime SAC employees have pleaded guilty to insider trading while at the fund; five others were implicated in conduct while at SAC.

The criminal indictment against SAC is likely to center on two employees: Mathew Martoma and Michael S. Steinberg, both of whom were charged criminally. Each pleaded not guilty to insider-trading-related charges.

Mr. Steinberg’s case stems from trading the computer maker Dell. In a 2008 e-mail, an SAC analyst, Jon Horvath, told Mr. Steinberg that he had a “2nd hand read from someone at” Dell who provided financial information about the company before its earnings announcement. The e-mail from Mr. Horvath, who has since pleaded guilty and is expected to testify against Mr. Steinberg and SAC, was then forwarded to Mr. Cohen.

Mr. Martoma’s case involves trading in the stocks of Elan and Wyeth, which at the time were developing an Alzheimer’s drug. Prosecutors accused Mr. Martoma of obtaining secret information from a doctor overseeing the drug’s clinical trials.

When the government arrested Mr. Martoma last November, the indictment cited a 20-minute phone call that Mr. Martoma had with Mr. Cohen the day before SAC began dumping its holdings.

But prosecutors did not claim that Mr. Martoma told Mr. Cohen about the confidential information. And Mr. Martoma rebuffed the government’s overtures to cooperate, one person said.

Without evidence directly linking Mr. Cohen to illicit trades, the government ramped up its focus on SAC. With companies, prosecutors often file a so-called deferred prosecution agreement that suspends charges, but prosecutors never considered such a deal with SAC, the people briefed on the matter said.

In alleging a conspiracy at SAC, prosecutors must show that there was an agreement among SAC employees â€" like Mr. Horvath, Mr. Steinberg and Mr. Martoma â€" to commit insider trading. The government also must show that the acts were “overt” and done with “intent.”

In using the corporate liability theory to buttress the charge, the government has another powerful weapon. If prosecutors can show that the traders were acting “on behalf of and for the benefit of” SAC when breaking the law, then they might impute liability to the firm.

An indictment would present SAC with a crucial question: How will Goldman Sachs and other banks that trade with the fund react? Legal experts said that an indictment could activate default provisions in SAC’s trading agreements.

“Those provisions can effectively allow the banks to cut you off,” said Steven Nadel, a hedge fund lawyer at Seward & Kissel.

But the charges won’t necessarily spell disaster for SAC. Of the roughly $15 billion that SAC managed at the beginning of the year, about $8 billion is Mr. Cohen’s own money.

For now, SAC’s rank-and-file are staying put, people close to the fund said. When the heightened government scrutiny alarmed SAC’s traders this year, the fund offered financial incentives to retain employees.

“None of them have to worry about money or a future job,” said a senior Wall Street executive who has done business with SAC. “So they’re letting this play out and seeing what happens.”

Trader and S.E.C. Lawyer Spar Over E-Mail

The Securities and Exchange Commission waited more than three years to have a chance to shred the credibility of Fabrice Tourre, a former Goldman Sachs trader, in front of a jury. It finally got its chance on Wednesday.

Over the course of two hours, the government’s lawyer, Matthew T. Martens, and Mr. Tourre, who has been accused of participating in a scheme to defraud investors, verbally sparred over what Mr. Tourre knew about a 2007 trade he helped structure. Mr. Tourre seemed exasperated on the stand, and at one point during the questioning, tipped over the water container on the witness stand while reaching for a document.

“So the statement was false,” Mr. Martens asked just minutes after Mr. Tourre took the stand, challenging him over an e-mail he had written.

“It was not accurate,” Mr. Tourre responded, frustration rising in his voice.

“Is there a difference between something being inaccurate or false?” Mr. Martens shot back.

“There is,” Mr. Tourre said.

Mr. Tourre testified at the midpoint of the trial, one of the biggest cases to come out of the 2008 financial crisis. Mr. Tourre is also one of only a few Wall Street employees to land in court over their actions during the period, and the rarity of the trial underpins its importance.

For Mr. Tourre, who is now enrolled in a doctoral economics program at the University of Chicago, an unfavorable verdict from the civil trial could yield a fine, or worse, a ban from the securities industry. For the S.E.C., which has been dogged by its failure to thwart the crisis and hold executives who played a role in it accountable, its reputation is on the line and victory in the case is crucial.

On Wednesday, Mr. Tourre and Mr. Martens sparred over what could turn out to be a critical misstatement Mr. Tourre made in an e-mail to ACA Management, a company that both invested in the trade in question and helped construct it.

In 2007, at Goldman’s behest, ACA helped put together a trade for the hedge fund Paulson & Company. The firm and its leader, John A. Paulson, sensed that the housing market was heading for a collapse and made more than $1 billion by betting against the security ACA had assembled. Earlier this week, a former ACA executive, Laura Schwartz, testified that had she known Mr. Paulson was placing a negative or bearish bet she never would have gone ahead with the transaction.

A central question in the case is whether Mr. Tourre should have corrected ACA’s impression that Paulson & Company had a positive outlook on the security. In another correspondence, a January 2007 e-mail that was forwarded to Mr. Tourre, Ms. Schwartz described the Paulson & Company hedge fund as having an “equity perspective,” indicating that she believed the hedge fund wanted the security to rise in value.

Mr. Tourre acknowledged that he did not correct her error, and that a firm in ACA’s position should have had such a misunderstanding corrected. But Mr. Martens, the S.E.C. lawyer, was not able to get Mr. Tourre to say under oath that he had actually read that phrase in the e-mail from Ms. Schwartz.

Mr. Tourre had forwarded the e-mail to a lawyer at Goldman, saying, “Let’s sit down and discuss when you get a chance.” Mr. Tourre said all he could recall was that his note to the lawyer referred to the final sentence in the three-sentence e-mail, concerning credit analysis of the deal.

The courtroom was packed on Wednesday, as lawyers including Thomas Ajamie, a well-known plaintiffs’ attorney, watched Mr. Martens in action. Mr. Tourre, dressed in a black suit, crisp white shirt and purple tie, looked much younger than his 34 years. He smiled at repetitive questions from Mr. Martens, often raising his eyebrows.

He spoke quickly with a thick accent, and had trouble pronouncing some simple words, which may color the jury’s view of him. On more than one occasion, he referred to “bonds” but it sounded more like “bones.”

“Sorry, it is my French accent,” Mr. Tourre said to the court reporter, who had asked him to repeat a word.

While the highlight of the day was Mr. Tourre’s testimony, most of Wednesday was consumed with the cross-examination by Mr. Tourre’s lawyers of Ms. Schwartz, the ACA employee who worked with Goldman and Paulson & Company in 2007 to assemble the trade.

Though Ms. Schwartz proved to be an articulate witness for the S.E.C., Sean Coffey, Mr. Tourre’s lawyer, spent hours taking apart her testimony, painting her as a poorly informed executive who did not seem to read newspaper articles on the hedge funds she counted as her clients. At one point, she could not remember doing a simple Internet search on Paulson & Company before meeting with them on the trade in question.

Ms. Schwartz, Mr. Coffey contended, was confused about Paulson & Company’s role in the trade from the start.

In early January 2007, Ms. Schwartz received an e-mail from Gail Kreitman, a business acquaintance of hers who was then a Goldman saleswoman, about an unnamed client looking to meet with ACA. That same day Ms. Schwartz called Ms. Kreitman to discuss the e-mail. That call was followed up with an electronic meeting invitation to executives at Goldman and ACA, and referred to Paulson as an “equity” investor, meaning he would be a long investor, betting that the security would rise in value.

“Did she tell you the investment strategy?” Mr. Coffey asked Ms. Schwartz about her call with Ms. Kreitman.

“I have no recollection.” Ms. Schwartz said.

“You had never set eyes on Fabrice Tourre when you wrote this calendar invite,” he said. Ms. Schwartz testified that she did not believe she had met Mr. Tourre at that point.

Mr. Coffey contended that Ms. Schwartz simply assumed Paulson & Company was taking a long position, and never bothered to directly ask Goldman or the hedge fund. Ms. Schwartz has testified that her impression that Paulson & Company was long was based on numerous documents and e-mails stating that Mr. Paulson was the equity investor. She said Goldman never corrected e-mails stating that.

While there were initial representations to ACA from Goldman that left the impression with ACA that Paulson & Company was going long on the trade, Mr. Coffey presented multiple other exhibits, including the offering document, which showed that no investor was taking that equity piece of the trade.

The jury also heard more about the another S.E.C. investigation Ms. Schwartz had been embroiled in. A week before the trial, the court was notified that the S.E.C. had decided not to bring a case against Ms. Schwartz, a reprieve that Mr. Tourre’s lawyers hope will shade the jury’s view of her.

Once the S.E.C. had decided not to move forward with the charges, it met with Ms. Schwartz to prepare her to testify at Mr. Tourre’s trial. Mr. Martens asked Ms. Schwartz what he told her at the end of that preparation session. “You told me to tell the truth and let the chips fall where they may. I have told my truth.”

Mr. Tourre is expected to continue his testimony on Thursday, when his lawyer is expected, and possibly into Friday.

Trader and S.E.C. Lawyer Spar Over E-Mail

The Securities and Exchange Commission waited more than three years to have a chance to shred the credibility of Fabrice Tourre, a former Goldman Sachs trader, in front of a jury. It finally got its chance on Wednesday.

Over the course of two hours, the government’s lawyer, Matthew T. Martens, and Mr. Tourre, who has been accused of participating in a scheme to defraud investors, verbally sparred over what Mr. Tourre knew about a 2007 trade he helped structure. Mr. Tourre seemed exasperated on the stand, and at one point during the questioning, tipped over the water container on the witness stand while reaching for a document.

“So the statement was false,” Mr. Martens asked just minutes after Mr. Tourre took the stand, challenging him over an e-mail he had written.

“It was not accurate,” Mr. Tourre responded, frustration rising in his voice.

“Is there a difference between something being inaccurate or false?” Mr. Martens shot back.

“There is,” Mr. Tourre said.

Mr. Tourre testified at the midpoint of the trial, one of the biggest cases to come out of the 2008 financial crisis. Mr. Tourre is also one of only a few Wall Street employees to land in court over their actions during the period, and the rarity of the trial underpins its importance.

For Mr. Tourre, who is now enrolled in a doctoral economics program at the University of Chicago, an unfavorable verdict from the civil trial could yield a fine, or worse, a ban from the securities industry. For the S.E.C., which has been dogged by its failure to thwart the crisis and hold executives who played a role in it accountable, its reputation is on the line and victory in the case is crucial.

On Wednesday, Mr. Tourre and Mr. Martens sparred over what could turn out to be a critical misstatement Mr. Tourre made in an e-mail to ACA Management, a company that both invested in the trade in question and helped construct it.

In 2007, at Goldman’s behest, ACA helped put together a trade for the hedge fund Paulson & Company. The firm and its leader, John A. Paulson, sensed that the housing market was heading for a collapse and made more than $1 billion by betting against the security ACA had assembled. Earlier this week, a former ACA executive, Laura Schwartz, testified that had she known Mr. Paulson was placing a negative or bearish bet she never would have gone ahead with the transaction.

A central question in the case is whether Mr. Tourre should have corrected ACA’s impression that Paulson & Company had a positive outlook on the security. In another correspondence, a January 2007 e-mail that was forwarded to Mr. Tourre, Ms. Schwartz described the Paulson & Company hedge fund as having an “equity perspective,” indicating that she believed the hedge fund wanted the security to rise in value.

Mr. Tourre acknowledged that he did not correct her error, and that a firm in ACA’s position should have had such a misunderstanding corrected. But Mr. Martens, the S.E.C. lawyer, was not able to get Mr. Tourre to say under oath that he had actually read that phrase in the e-mail from Ms. Schwartz.

Mr. Tourre had forwarded the e-mail to a lawyer at Goldman, saying, “Let’s sit down and discuss when you get a chance.” Mr. Tourre said all he could recall was that his note to the lawyer referred to the final sentence in the three-sentence e-mail, concerning credit analysis of the deal.

The courtroom was packed on Wednesday, as lawyers including Thomas Ajamie, a well-known plaintiffs’ attorney, watched Mr. Martens in action. Mr. Tourre, dressed in a black suit, crisp white shirt and purple tie, looked much younger than his 34 years. He smiled at repetitive questions from Mr. Martens, often raising his eyebrows.

He spoke quickly with a thick accent, and had trouble pronouncing some simple words, which may color the jury’s view of him. On more than one occasion, he referred to “bonds” but it sounded more like “bones.”

“Sorry, it is my French accent,” Mr. Tourre said to the court reporter, who had asked him to repeat a word.

While the highlight of the day was Mr. Tourre’s testimony, most of Wednesday was consumed with the cross-examination by Mr. Tourre’s lawyers of Ms. Schwartz, the ACA employee who worked with Goldman and Paulson & Company in 2007 to assemble the trade.

Though Ms. Schwartz proved to be an articulate witness for the S.E.C., Sean Coffey, Mr. Tourre’s lawyer, spent hours taking apart her testimony, painting her as a poorly informed executive who did not seem to read newspaper articles on the hedge funds she counted as her clients. At one point, she could not remember doing a simple Internet search on Paulson & Company before meeting with them on the trade in question.

Ms. Schwartz, Mr. Coffey contended, was confused about Paulson & Company’s role in the trade from the start.

In early January 2007, Ms. Schwartz received an e-mail from Gail Kreitman, a business acquaintance of hers who was then a Goldman saleswoman, about an unnamed client looking to meet with ACA. That same day Ms. Schwartz called Ms. Kreitman to discuss the e-mail. That call was followed up with an electronic meeting invitation to executives at Goldman and ACA, and referred to Paulson as an “equity” investor, meaning he would be a long investor, betting that the security would rise in value.

“Did she tell you the investment strategy?” Mr. Coffey asked Ms. Schwartz about her call with Ms. Kreitman.

“I have no recollection.” Ms. Schwartz said.

“You had never set eyes on Fabrice Tourre when you wrote this calendar invite,” he said. Ms. Schwartz testified that she did not believe she had met Mr. Tourre at that point.

Mr. Coffey contended that Ms. Schwartz simply assumed Paulson & Company was taking a long position, and never bothered to directly ask Goldman or the hedge fund. Ms. Schwartz has testified that her impression that Paulson & Company was long was based on numerous documents and e-mails stating that Mr. Paulson was the equity investor. She said Goldman never corrected e-mails stating that.

While there were initial representations to ACA from Goldman that left the impression with ACA that Paulson & Company was going long on the trade, Mr. Coffey presented multiple other exhibits, including the offering document, which showed that no investor was taking that equity piece of the trade.

The jury also heard more about the another S.E.C. investigation Ms. Schwartz had been embroiled in. A week before the trial, the court was notified that the S.E.C. had decided not to bring a case against Ms. Schwartz, a reprieve that Mr. Tourre’s lawyers hope will shade the jury’s view of her.

Once the S.E.C. had decided not to move forward with the charges, it met with Ms. Schwartz to prepare her to testify at Mr. Tourre’s trial. Mr. Martens asked Ms. Schwartz what he told her at the end of that preparation session. “You told me to tell the truth and let the chips fall where they may. I have told my truth.”

Mr. Tourre is expected to continue his testimony on Thursday, when his lawyer is expected, and possibly into Friday.

For SAC, Indictment May Imperil Its Survival

Is SAC Capital Advisors going to be the next Arthur Andersen, a company destroyed by an indictment?

If so, there will be one primary distinction: Government officials came to regret forcing Andersen, the auditor of Enron and one of the Big Five accounting firms at the time, out of business. At SAC, the hedge fund manager run by Steven A. Cohen, that appears to be a primary goal of the government.

Corporations, as Mitt Romney famously said, are people, too, at least under the law. They can be â€" and are â€" indicted and convicted of felonies. They often face large fines, but, unlike people, they cannot be thrown into prison.

But as with people, the extent to which an indictment or even a conviction can be damaging depends very much on the details of the nature of the business and of the nature of a company’s customers. In general, a company that has a primarily wholesale business, dealing with a relatively small group of customers, may be better placed to survive the bad publicity than would be one that dealt extensively with the public.

By those criteria, SAC would appear to be relatively immune to reputational threats. Unlike, say, a large bank, it does not deal with many individual customers. There are institutional investors â€" notably some public pension funds â€" that might be barred by their own rules from dealing with a firm convicted of a felony. But at SAC, most such customers have probably closed out their accounts anyway during the years the firm has been under investigation.

And then there is the nature of the crime that prosecutors say took place at SAC â€" insider trading. That is a crime that, to some extent at least, can attract customers who hope to share in the profits. In fact, there have been many cases where individual investors were defrauded by promoters who falsely claimed to be sharing inside information.

Mr. Cohen has become a billionaire many times over as a wildly successful hedge fund manager. The government believes that a significant amount of his firm’s success came from insider trading, but it has so far been unable to build a case tying Mr. Cohen directly to acts he knew were illegal.

Instead, the firm itself is to be indicted, according to people briefed on the investigation. And the Securities and Exchange Commission, which has no criminal enforcement authority, has brought an administrative case that could lead to Mr. Cohen’s being barred from managing outside investors’ money. If so, that would force Mr. Cohen out of the firm that bears his initials and almost certainly lead to its closing, at least as a hedge fund open to other investors. Many hedge funds have closed to outside investors and continued as so-called family offices, managing their owners’ money. About $9 billion of what is left of SAC’s assets belongs to Mr. Cohen.

The prospect of a world without an active SAC does not seem to scare the government, and there is no reason to think it would. The disappearance of SAC would not lead to diminished competition in the hedge fund world; plenty of such firms would continue to seek to manage money.

But an indictment of a large bank could be a different story. Banks like Citigroup, Bank of America, JPMorgan Chase and Wells Fargo have millions of customers, and officials would hate to see one of them go away, even if the departure could be managed in a way that prevented the contagion that followed the collapse of Lehman Brothers in 2008.

Moreover, the Investment Company Act of 1940 bars felons from managing mutual funds. The S.E.C. could waive that penalty for a convicted bank, and it might do so if the crime were sufficiently removed from banking â€" say, illegally storing chemicals or something like that. But if the conviction was for defrauding investors, or money laundering or mortgage fraud, the chances of gaining such a waiver would probably be slim.

Eric H. Holder Jr., the attorney general, seemed to say during Senate testimony in March that some banks were “too big to jail,” as critics immediately paraphrased.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large,” he said at the time.

He later tried to backtrack. “Let me be very, very, very clear,” he said at a House hearing in May. “Banks are not too big to jail. If we find a bank or a financial institution that has done something wrong, if we can prove it beyond a reasonable doubt, those cases will be brought.”

Nonetheless, it has long been Justice Department policy to bear in mind corporate issues not present in individual cases. In 1999, Mr. Holder, the deputy attorney general at the time, said in a memo to prosecutors that before indicting a company they should consider “collateral consequences, including the disproportionate harm to shareholders and employees not proven personally culpable.”

Andersen, the accounting firm, went under because of its failed audits of Enron, and it probably would have done so even without the indictment, so severe was the hit to its reputation. In that case, prosecutor anger against the firm stemmed in part from the fact it had been spared indictment in a previous accounting scandal, involving Waste Management, after it promised to mend its ways. The Enron case made it clear those promises had not been kept.

In recent years, some corporations do appear to have escaped indictment because of concerns about creating a new Andersen. In retrospect, many officials who concluded that four big accounting firms were too few wished that a way could have been found to keep a reformed Andersen alive.

At KPMG, one of the remaining Big Four accounting firms, former partners were convicted and imprisoned for their role in illegal tax shelters, but the firm itself escaped prosecution. It signed a “deferred prosecution agreement” in which it admitted culpability and paid a large fine but avoided a criminal record.

Such agreements, and related “nonprosecution agreements,” have been signed with many large companies in recent years, among them Merck, JPMorgan, Google, UBS and Johnson & Johnson. None of those suffered obvious consequences in terms of the ability to conduct their business in the future.

And many companies have gone on to success after being convicted of felonies. One of the most famous antitrust cases ever, concerning a price-fixing conspiracy among large manufacturers of electrical equipment in the 1950s and early 1960s, led to a conviction for General Electric. And a subsidiary of Merck was forced to plead guilty to state criminal charges in connection with the marketing of the drug Vioxx, although the parent escaped with a nonprosecution agreement. In January, BP pleaded guilty to a sries of felonies, including manslaughter, in connection with the 2010 Gulf of Mexico oil spill. On the day that was announced, its stock price went up.

Dell Considered Novel Tax Strategy in Buyout

In the proposed buyout of Dell Inc. by its founder, the company considered but ultimately rejected as too risky a novel strategy that tweaks the now-curbed practice of corporations moving overseas to take advantage of lower taxes.

The strategy, drafted by JPMorgan Chase and disclosed in Dell’s regulatory filings in recent months, proposed a fresh twist on that practice, which has largely been banned by the Internal Revenue Service. In slides of a presentation dated last October, JPMorgan cited a “lack of precedent” for the strategy, calling it a “new structure â€" has not been executed publicly.”

Dell and its advisers decided not to use the strategy in part because of potential image problems with United States and European regulators and investors, people briefed on the matter said. But the new strategy could serve as a template for future buyout participants because it circumvents anti-abuse regulations, said Robert Willens, a tax and accounting expert.

While maneuvering continues over the price that Michael S. Dell and the investment firm Silver Lake will offer to buy out the company he founded, the scrapped tax strategy sheds light on Dell’s quest for tax benefits to the buyout.

The slides appeared in a Dell filing as recently as May 20. No other tax structure regarding the buyout has emerged in filings, and it is unclear how large shareholders, including Carl C. Icahn and his ally, Southeastern Asset Management, viewed it. Mr. Icahn was not available for comment on Tuesday. Calls to a Southeastern spokeswoman were not returned.

David Frink, a Dell spokesman, declined to comment on Tuesday on the rejected strategy or its successor. So did Brian Marchiony, a JPMorgan spokesman.

What is clear is that Dell was presented with a maneuver some tax lawyers said appeared legal but aggressive.

Under a section labeled “political,” the slides ask whether use of the strategy could “raise issues” or “impact” government contracts, indication of concern that it could have faced a backlash.

The apparent reason is the strategy resembles a corporate inversion, a stamp in recent decades for tax-dodging corporations like Tyco International and Nabors Industries. Those companies prompted Congressional investigations and tougher I.R.S. rules after they moved their headquarters to the offshore haven of Bermuda, with a post-office box holding company as the parent to the main United States subsidiary that housed operations and management.

Mr. Willens said the strategy would most likely have passed technical muster under I.R.S. rules but would also have brought “political and popular heat to Dell, and reputational risk.”

The proposed strategy involved conducting the buyout through a newly created foreign entity that would have effectively owned Dell. Under United States tax laws, that foreign entity would have legally escaped United States corporate taxes because it would have been a partnership for United States tax purposes.

At the same time, the foreign entity, whose jurisdiction was not specified, would have been treated under tax laws in that unspecified jurisdiction as a corporation and would have been subject to foreign taxes. Those two contrasting tax outcomes, embodied in one structure, would have created a “foreign hybrid,” able to navigate different national tax regimes and access offshore cash while paying little or no United States taxes.

The “unprecedented” piece in the JPMorgan strategy was the proposal that Dell designate the foreign hybrid as a partnership, securities filings show. The foreign hybrid would have held a new entity called Denali, which would have held Dell share, and Denali would have owned Dell’s foreign subsidiaries. (Mr. Dell was known in secret negotiations on the buyout as “Mr. Denali.”)

Dell’s physical headquarters would have remained in Round Rock, Tex., while the company would have been able to tap into the cash and tax benefits of being legally based in a lower-tax country. And it would have been able to borrow money from cash-rich offshore subsidiaries to finance Dell’s operations, all without having to pay United States corporate income taxes. “Can likely access existing offshore cash without U.S. tax,” one slide of the novel structure said.

Global tax officials have increasingly criticized foreign hybrids as leaching corporate profits out of higher tax jurisdictions. The Organization for Economic Cooperation and Development has railed against what it calls “hybrid mismatches” for several years.

Edward Kleinbard, a tax law professor at the University of Southern California and a former chief of staff of the Congressional Joint Committee on Taxation, called the strategy “a twist on the old corporation inversion that relies on the fact that U.S. companies can dress up their foreign entities in different costumes for different tax purposes.”

Whatever maneuverings are used, tax analysts are wondering precisely how the deal might take advantage of Dell’s considerable overseas cash hoard without generating large tax bills. (The United States corporate rate for bringing overseas cash home is 35 percent.) Dell has said it wants to tap nearly half of its estimated $10.4 billion in overseas cash and cash equivalents to help finance the buyout. The rejected strategy would have done just that. Reuven Avi-Yonah, a professor of taxation at the University of Michigan, said that other ways of structuring tax to access cash tax-free could present problems.

“There are a couple of other options, but those have come under I.R.S. attack,” he said, so the rejected option “would have been safer.”

Mr. Willens wonders whether shareholders might be interested in the value of that offshore cash.

“You’d think a shareholder would say, ‘Wow, they can afford to pay me more â€" they’re accessing cash tax free,’” he said.

Choices Ahead for the Dell Board, but Not Much Time

The endgame for Dell is here.

Mr. Dell and his partner, Silver Lake Partners, have made their final move raising their bid by 10 cents a share and calling it their “best and final” proposal. While these “best and final” qualifiers are often ignored, this time the Dell bidders probably mean it.

The bump in price is small but important, and it will cost Mr. Dell another $150 million. But the second request made by Mr. Dell is really what this maneuver is all about. Mr. Dell has demanded that, in connection with this increased bid, the Dell board modify the voting rules on the deal. The latest reports say that Dell’s board is pressing for Mr. Dell to raise his offer to $14 a share, or another 25 cents a share, in order to accept his terms.

As of right now, the Dell board requires that the deal be approved by a majority of all shares of Dell held by shareholders unaffiliated with the buyout group. This knocked out the 14 percent of Dell held by Mr. Dell himself, meaning that shareholders holding a majority of about 86 percent of Dell’s shares must vote yes on the deal for it to occur. For those doing the math here, this requires shareholders holding 43 percent of Dell’s shares to vote yes.

The provision was put in the deal to protect shareholders. And it also complied with Delaware law, which was necessary to ensure that the courts signed off on a buyout in which management was involved.

Carl C. Icahn and Southeastern Asset Management, who oppose the buyout offer, have leveraged this requirement to the hilt. Together they own about 13 percent of the shares and have been lobbying other shareholders to join them in voting no.

The way the provision is currently worded, any shareholder who doesn’t cast a vote is counted as a no vote.

But in connection with their raised offer, Mr. Dell and Silver Lake are seeking the approval of a majority of only unaffiliated shareholders voting at the meeting. This would exclude shareholders who simply don’t show up to the meeting or don’t care to about the vote. The number of shareholders who don’t vote is likely to be lower in a controversial deal like this, but this is still likely to be a small but significant percentage of Dell’s shares.

This would be a small change with big consequences. First, it means that the approval for Mr. Dell’s bid will be easier. And it is also a signal that the vote is very close, close enough that this small change will make a difference.

Second, it affects how this buyout will be reviewed under Delaware law. Previously inclusion of this condition meant that the Delaware courts would review it deferentially.
But this modification, if accepted by the Dell board, would may mean that it is reviewed under entire fairness. The Delaware court will scrutinize the buyout for fair price and fair process.

Still, this may not amount to much. Chancellor Leo E. Strine Jr., the judge considering this litigation, has already praised the Dell sale process. At a June hearing, he said: “I do not see any plausible, conceivable basis in which to conclude that it is a colorable possibility that you could deem the choices made by this board to be unreasonable with all the different safeguards.” The fact that Mr. Dell is giving so little time here right now means he is perhaps not that worried about litigation risk.

The question now is whether the Dell board bites. Given their support of the deal before, they are likely to accept this proposal. But they may ask for some tweaks on how the condition is worded.

Any tweaks will likely focus on the second big issue this proposal raises. The shareholder vote has already been rescheduled to Aug. 2. But will the board reset the record date from its current date of June 3, 2013?

Mr. Dell in his letter specifically addresses this saying that a reset of the record date was acceptable, provided that “the resulting delay in the special meeting is the minimum required by law.” Delaware law requires that it be not more than 60 days nor less than 10 days from the meeting date. That means Dell’s board still has a week and a half to hold the meeting.

The record date could be reset, but it is not strictly required since Dell has one day of room to maneuver before is must mandatorily reset the record date. In other words, Mr. Dell specifically timed this raise and worded his letter to allow for a very short time period in which to reset the record date and to keep that window as small as possible. This is Mr. Dell’s check move - attempting to box in and lock in the shareholder vote in an optimal manner.

Stirring into this mix is how any record date change will affect the vote. The conventional wisdom is that reseting actually helps a buyout pass (and that is Mr. Dell’s assumption presumably). There are anecdotal reports of more arbitrageurs buying in the past few days, and if this is true they will likely vote to approve the buy-out since the stock price is currently only trading at about $13 per share. Any change in the record date is likely to lead to litigation as shareholders accuse Mr. Dell of tying to rejigger the shareholder mix to influence the buyout.

Any such litigation would likely focus on whether the record date reset is appropriate and whether shareholders have enough time to consider this change. The federal law doesn’t have a strict requirement but it is generally considered appropriate under federal law to give a 5 to 10 business day period for shareholders to consider material changes deal terms.

Delaware law also has spoken to this matter. In 1986, In re Anderson Clayton Shareholders’ Litigation, a Delaware court stated that directors have “no duty to delay an otherwise appropriate transaction“ but that a three-day period to consider an offer might not be a long enough period while 7-11 days could. It ultimately looks as though the Aug. 2 date is in that range where there is arguably enough time to consider the revised deal.
This puts Dell in the harbor where it really has to think hard about the record date and how it affects the vote and what is best for shareholders. Either way Dell may be embroiled in litigation, but then again, given that Icahn has threatened “years of litigation” over this buyout, everyone might be inured to it right now.

The big issue is thus how the Dell board treats the record date. It all means that deliberate consideration and a thorough review of the choices here, is probably prudent.

Unfortunately, there isn’t much time.

A Dance Music I.P.O. That’s a Little Off Key

Robert F.X. Sillerman wants to throw Wall Street’s biggest dance party. The entrepreneur who rolled up the rock concert business is trying to do the same for electronic dance music with a planned $175 million public offering of SFX Entertainment. Though Mr. Sillerman’s track record is good and he is focusing on a hot slice of the music industry, this bash promises to be more fun for partygoers than investors.

Electronic dance music used to be confined to discos like Studio 54 or abandoned warehouses in European cities. It has taken off recently through the expansion of large outdoor festivals, like SFX’s Tomorrowland this coming weekend in appropriately named Boom, Belgium. Ticket, merchandise and other sales should reach $4.5 billion this year, according to the International Music Summit Business Report.

But it is still a fragmented corner of the market, with many players - including Live Nation, AEG and Massive Enterprises - jostling for dominance. For Mr. Sillerman, that’s a familiar opportunity. In 2000, he sold another company that had snapped up concert promoters for $3.3 billion. SFX has already committed about $140 million of the cash it hopes to raise for a series of acquisitions.

The company’s filing with the Securities and Exchange Commission calculates a pro forma (accounting lingo for “make believe”) financial picture of what this would look like. Had all of these deals been previously consummated, SFX would have lost about $50 million on $242 million of revenue in 2012. Even under SFX’s permissive accounting - allowed under the Jumpstart Our Business Startups Act - that’s not terribly attractive.

Yet it may not be the best reason to steer clear of SFX. New shareholders will be diluted from the start as the company’s net tangible book value, which was negative $10.4 million in March, will be recalculated to reflect the new share price. This offers a boost to Mr. Sillerman and other current stockholders, including the promoters SFX has promised to buy. But it means I.P.O. investors may effectively hand over dollar bills that are immediately turned into something worth less.

At 65, Sillerman may not be able to keep up with his new venture’s customers on the dance floor. But he’s employing novel financial gymnastics in bringing them all under one big disco ball.

Rob Cox is editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

A Dance Music I.P.O. That’s a Little Off Key

Robert F.X. Sillerman wants to throw Wall Street’s biggest dance party. The entrepreneur who rolled up the rock concert business is trying to do the same for electronic dance music with a planned $175 million public offering of SFX Entertainment. Though Mr. Sillerman’s track record is good and he is focusing on a hot slice of the music industry, this bash promises to be more fun for partygoers than investors.

Electronic dance music used to be confined to discos like Studio 54 or abandoned warehouses in European cities. It has taken off recently through the expansion of large outdoor festivals, like SFX’s Tomorrowland this coming weekend in appropriately named Boom, Belgium. Ticket, merchandise and other sales should reach $4.5 billion this year, according to the International Music Summit Business Report.

But it is still a fragmented corner of the market, with many players - including Live Nation, AEG and Massive Enterprises - jostling for dominance. For Mr. Sillerman, that’s a familiar opportunity. In 2000, he sold another company that had snapped up concert promoters for $3.3 billion. SFX has already committed about $140 million of the cash it hopes to raise for a series of acquisitions.

The company’s filing with the Securities and Exchange Commission calculates a pro forma (accounting lingo for “make believe”) financial picture of what this would look like. Had all of these deals been previously consummated, SFX would have lost about $50 million on $242 million of revenue in 2012. Even under SFX’s permissive accounting - allowed under the Jumpstart Our Business Startups Act - that’s not terribly attractive.

Yet it may not be the best reason to steer clear of SFX. New shareholders will be diluted from the start as the company’s net tangible book value, which was negative $10.4 million in March, will be recalculated to reflect the new share price. This offers a boost to Mr. Sillerman and other current stockholders, including the promoters SFX has promised to buy. But it means I.P.O. investors may effectively hand over dollar bills that are immediately turned into something worth less.

At 65, Sillerman may not be able to keep up with his new venture’s customers on the dance floor. But he’s employing novel financial gymnastics in bringing them all under one big disco ball.

Rob Cox is editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Hanes to Buy Maidenform for $575 Million

With a deal for Maidenform, Hanes is hoping for a good fit.

Hanesbrands said on Wednesday that it had agreed to acquire Maidenform Brands for $23.50 a share, or about $575 million, adding an intimate apparel maker to its portfolio of clothing brands. The price represents a 30 percent premium to Maidenform’s average closing price over the last 30 days.

Shares of Maidenform rose modestly in premarket trading on Wednesday, while Hanes shares were up about 2 percent.

The all-cash deal has been approved by the boards of both companies, and is subject to approval by Maidenform shareholders and regulators, Hanes said. The deal is expected to close in the fourth quarter of this year.

“This business is a natural fit into our core business and meets all of our acquisition criteria,” Richard A. Noll, the chairman and chief executive of Hanes, said in a statement.

Hanes expects the deal to augment earnings per share in the first 12 months after closing, and the company projects the deal would add more than $500 million in incremental annual sales within three years.

Maidenform would join a stable of prominent brands at Hanes, including Playtex and Just My Size. Among the expected synergies, Maidenform’s average-figure bra line would complement Hanes’s full-figure bra business, Hanes said. Maidenform’s brands include Lilyette and Sweet Nothings.

“Maidenform and Hanes are two companies that share rich histories, world-class and complementary brands, and promising futures,” said Maurice S. Reznik, the chief executive of Maidenform. “This transaction is an important affirmation of the Maidenform brands, our prospects and the hard work and dedication of our team.”

Guggenheim Securities and Davis Polk & Wardwell are advising Maidenform. Goldman Sachs and King & Spalding are advising Hanes.

Dell Founder Raises Takeover Bid

The founder of Dell Inc. has raised his takeover bid for the computer company by 7 percent, to $13.75 a share, in what he said would be his best and final offer.

The new bid by Michael S. Dell and the investment firm Silver Lake came on the eve of a rescheduled vote on the takeover proposal, one that has been hotly contested by a number of shareholders, including the billionaire Carl C. Icahn.

But the new bid comes with several strings attached. First, a special committee of Dell directors must agree to change the rules for a vote on the deal by agreeing to discard a provision in which shares not cast in the election count as “no” votes. That requirement made winning acceptance of Mr. Dell’s original offer, worth $13.65 a share, extremely difficult given the opposition of Mr. Icahn and others.

Second, the committee must decide quickly whether to accept the new bid by 6 p.m. Eastern time on Wednesday, or the offer will expire.

“We believe these amendments are fair and in the best interests of the company’s unaffiliated stockholders and provide the best alternative available to the special committee to maximize stockholder value,” Mr. Dell and Egon Durban, a top executive at Silver Lake, wrote in a letter to the special committee on Tuesday.

In a statement, the special committee said it was evaluating the proposal. The rescheduled shareholder vote, which had been set for Wednesday, is being moved for a second time, to Aug. 2 at 10 a.m. Eastern time.

Morning Agenda: A Possible Crippling Blow for SAC

Federal authorities are poised to level criminal charges against SAC Capital Advisors, the hedge fund run by Steven A. Cohen, capping an insider trading investigation into one of Wall Street’s most prominent firms, DealBook’s Ben Protess and Peter Lattman report. Prosecutors and the F.B.I. in Manhattan are expected to announce the charges in the coming days, people briefed on the matter told DealBook. The aggressive action could cripple SAC.

Any last-minute settlement is an unlikely option at this point. While Mr. Cohen is not expected to be charged criminally, authorities are still contemplating bringing charges against other employees of the firm. Authorities plan to navigate around a legal deadline for filing some insider trading charges by filing a broad criminal conspiracy case against SAC, these people said.

YAHOO AFTER LOEB  |  Yahoo seems like damaged goods now that it has been abandoned by one of its biggest investors, Daniel S. Loeb, and his hedge fund, Third Point, Steven M. Davidoff writes in the Deal Professor column. Investors reacted negatively to the news that Yahoo had agreed to buy back 40 million shares from Third Point at $1.16 billion â€" a transaction that has the whiff of greenmail, or repurchasing stock to make an investor go away, Mr. Davidoff says.

A year after Marissa Mayer was appointed chief executive â€" a leadership change Mr. Loeb took credit for â€" Yahoo still has a lot of work to do. And yet, Mr. Loeb is ready to get out. “It appears that Mr. Loeb and his cohorts are departing Yahoo midvoyage. Not only that, but the sale is arguably suspect in terms of its timing,” Mr. Davidoff writes.

Yahoo’s stake in the Chinese Internet giant Alibaba Group has driven up its share price of the last two years. “In this light, Mr. Loeb’s departure is being viewed as riding the wave of hype over Yahoo. He is gaining from the unexpected Alibaba rise but not the restructuring he advocated, leaving just before things get hard and the wave crashes.”

On Tuesday, Mr. Loeb apparently could not help leveling a playground taunt over Herbalife, a company he was invested in earlier this year. The barb, displayed on Mr. Loeb’s Bloomberg terminal profile, appeared to be directed at a rival, William A. Ackman, who is betting against Herbalife, and it apparently referred to the investor Carl C. Icahn, who is betting Herbalife’s shares will rise: “New HLF product: The Herbalife Enema administered by Uncle Carl.”

ON THE AGENDA  |  Shareholders of Dell are scheduled to vote on the $24.4 billion buyout offer from Michael S. Dell and the investment firm Silver Lake. Caterpillar, a target of the prominent short-seller James S. Chanos, reports earnings before the market opens. Facebook reports earnings this evening. Data on sales of new homes in June is out at 10 a.m. Hugh Johnston, the chief financial officer of PepsiCo, is on Bloomberg TV at 7:15 a.m.

DIFFICULTY IN KNOWING A DEAL’S FRIENDS FROM FOES  |  A transaction named Abacus 2007-AC1 became one of the most infamous trades of the financial crisis, netting more than $1 billion for the hedge fund Paulson & Company, which bet the housing market would crash. According to a crucial witness who took the stand on Tuesday at the trial of a former Goldman Sachs trader, the trade would never have happened had ACA Management, a firm that helped assemble the security, been told that Paulson & Company was betting the trade would fail. The witness, Laura Schwartz, was testifying at the trial of Fabrice P. Tourre, who has been accused of participating in a scheme to defraud investors in connection to the trade. Ms. Schwartz, who was a senior executive at ACA, is one of most important â€" and controversial â€" witnesss to take the stand in this trial, which on Wednesday will enter its eighth day.

Paulson & Company was referred to in ACA documents as an “equity investor,” contributing to Ms. Schwartz’s understanding that the firm was betting the deal would succeed. In fact, Paulson had taken a short position. “I believed Paulson was the equity investor in the transaction,” Ms. Schwartz said, repeating this refrain multiple times to the jury.

Mergers & Acquisitions »

Ryanair Says It’s Open to Selling Stake in Aer Lingus  |  The airline’s conditional offer was seen by some analysts as more maneuvering in its pursuit of Aer Lingus. DealBook »

Sale of Dexia Unit to GCS Capital Collapses  |  Dexia said it had pulled out of talks to sell its asset management arm to GCS Capital of Hong Kong. FINANCIAL TIMES

Cisco to Buy Sourcefire, a Cybersecurity Company, for $2.7 Billion  |  Cisco Systems has agreed to buy Sourcefire, a provider of cybersecurity services, for about $2.7 billion in cash, amid a growing fervor for companies that can help guard against computer-based attacks. DealBook »

Big Shareholder of KPN Withholds Support for Telefonica Deal  |  Two directors of KPN who were appointed by América Móvil did not vote in favor of the deal to sell KPN’s German operations to Telefónica, The Financial Times reports. Still, there was enough support for the board to approve the deal. FINANCIAL TIMES

KPN’s $10.7 Billion Retreat From Germany  |  KPN’s deal to sell its E-Plus mobile unit is heartening for investors in Europe’s fragmented, cutthroat and heavily regulated telecommunications industry, Quentin Webb of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

INVESTMENT BANKING »

BlackRock Executive Says No to Top Job at R.B.S.  |  After being approached by the Royal Bank of Scotland in its search for a new chief executive, BlackRock’s chairman for the Asia-Pacific region told his staff members on Wednesday that he had no plans to leave. DealBook »

Deutsche Bank to Combine Debt-Trading Units  |  The move by Deutsche Bank, intended to cut costs and reduce risk, has led a senior trader in Europe to depart the firm, Bloomberg News reports. BLOOMBERG NEWS

Regulators May Ease a Mortgage Requirement  |  Federal regulators “want to loosen a proposed requirement that banks retain a portion of the mortgage securities they sell to investors, according to people familiar with the situation,” The Wall Street Journal reports. WALL STREET JOURNAL

Amid Market Volatility, Concerns Over E.T.F.’s  |  The Financial Times reports: “The global sell-off last month sparked the highest amount of settlement failures in parts of the $2 trillion exchange-traded fund market in nearly two years, reviving a debate over whether the popular investment vehicles suffer from structural issues that flare up in times of market stress.” FINANCIAL TIMES

Intersection: Keeping Cool on Wall St.  |  Jose De Haro skips the suit on most days, but pays special attention to fit and tailoring when dressing for his broadcast job on Wall Street. DealBook »

PRIVATE EQUITY »

K.K.R.’s Credit Investments Chief Is Stepping Down  |  “Orson Welles once said: ‘If you want a happy ending, you need to know when to end your story,’” William Sonneborn, the head of corporate credit and equity investments for K.K.R., said in a conference call on his departure. REUTERS

K.K.R. Said to Secure Low Rates for Gardner Denver Deal  |  For its $3.9 billion takeover of Gardner Denver, the private equity firm K.K.R. “secured the cheapest borrowing rates it ever got to fund a leveraged buyout,” Reuters reports, citing unidentified “banking sources.” REUTERS

HEDGE FUNDS »

On Reading the Fed, Humans Triumph Over Machines  |  Bloomberg News reports: “Currency funds that use computer models for trading decisions made 0.9 percent this year through May, compared with 2.5 percent for those that don’t, the biggest margin since 2008, according to the latest data from Parker Global Strategies L.L.C.” BLOOMBERG NEWS

I.P.O./OFFERINGS »

Aramark Said to Choose Banks for I.P.O.  |  Goldman Sachs, JPMorgan Chase, Credit Suisse and Morgan Stanley have been chosen to handle an initial public offering for Aramark, the Philadelphia-based food services company, The Wall Street Journal reports. (Trivia: Aramark runs Goldman’s cafeteria at its 200 West Street headquarters.) WALL STREET JOURNAL

VENTURE CAPITAL »

Twitter Expands Advertising Feature Aimed at TV Viewers  |  The service lets advertisers direct their promotions at viewers who post messages about particular TV shows. BLOOMBERG NEWS

LEGAL/REGULATORY »

Senate Panel Examines Banks’ Involvement in Commodities  |  Several witnesses warned of significant risks to the nation’s financial system and to taxpayers if big banks continued to own commodities units that store and ship vast quantities of metals and oil, Edward Wyatt reports in The New York Times. NEW YORK TIMES

Cities Need to Weigh Costs of Private Partnerships  |  Cities and states should make certain that the public interest is being served before they enter into deals with profit-making companies, Donald Cohen, the executive director of In the Public Interest, writes. DealBook »

S.E.C. Says Texas Man Operated Bitcoin Ponzi Scheme  |  The regulator has also warned investors that “the rising use of virtual currencies in the global marketplace may entice fraudsters.” DealBook »

Summers Seen as Front-Runner for Fed Chairman  |  Lawrence H. Summers is “increasingly viewed as the leading candidate” to lead the Federal Reserve once Ben S. Bernanke steps down, Ezra Klein reports in The Washington Post’s Wonkblog. WASHINGTON POST

Japan’s Leader Urges Speedy Action to Support Economy  |  After a landslide election victory, Prime Minister Shinzo Abe warned his ministers against triumphalism, The New York Times reports. NEW YORK TIMES

BlackRock Exec Says No to Top R.B.S. Job

HONG KONG â€" BlackRock’s top Asia executive, Mark McCombe, has turned down an approach by the Royal Bank of Scotland as it hunts for a new chief executive.

‘‘We can confirm that Mark has been approached by R.B.S. as part of its C.E.O. search process, but he has no intention of leaving his role as BlackRock’s Asia-Pacific chairman at this time,’’ a spokeswoman in Hong Kong at the asset manager said Wednesday.

Mr. McCombe joined BlackRock, the world’s biggest asset manager, in 2011 after a two-decade career at HSBC, where he last served as head of the British bank’s lucrative Hong Kong unit. A report on the Web site of the Financial Times on Tuesday identified Mr. McCombe as the leading candidate to succeed Stephen Hester, who after five years on the job resigned last month as the chief of R.B.S., which is 81 percent owned by the British government.

But in an internal note to senior staff in Asia on Wednesday morning, Mr. McCombe wrote that he plans to stay put and feels ‘‘fortunate to be part of the BlackRock team,’’ adding, ‘‘We’ve accomplished a great deal.’’ The contents of the memo were confirmed by the spokeswoman.

Media representatives for R.B.S. declined to comment immediately on the chief executive search or approaches made to Mr. McCombe.

Mr. Hester’s sudden departure last month came just as UK Financial Investments, the organization that manages the government’s stakes in banks that were rescued with taxpayer funds after the financial crisis, had started to move forward with plans to offload its shares in bailed-out institutions, most likely beginning with Lloyd’s Banking Group.

Finding a new chief executive is crucial for R.B.S. as it faces what is expected to be a long and complicated process once the government begins to unload its stake.

The bank may give more details of the progress of its recruitment effort when it reports results for the second quarter on August 2.