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U.S. in Talks to Settle Suit Over Merger of 2 Airlines

U.S. in Talks to Settle Suit Over American-US Airways Merger

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US Airways and American Airlines planes at Arlington, Va. The Justice Department sued in August to block their merger, which would create the nation’s largest airline.

The Justice Department has started talks with American Airlines and US Airways, seeking concessions on airport takeoff and landing slots in exchange for dropping an antitrust lawsuit aimed at blocking their merger, Attorney General Eric H. Holder Jr. said on Monday

Mr. Holder’s comments on the negotiations, which began just three weeks before a trial on the suit was scheduled to start in federal court in the District of Columbia, raised expectations on Wall Street and in the aviation industry that the merger would stay in place with relatively modest concessions.

The department sued in August to block the merger, which would create the nation’s largest airline. Claiming that the combination would harm consumers, Justice Department officials said that they had to take a tough stance because other big airline mergers had increased airfares.

Several legal and airline specialists said that despite that talk, the Justice Department’s case was relatively weak and that it now appeared to be narrowing its main concerns about competition to a few airports.

Robert A. McTamaney, a mergers and acquisitions lawyer at Carter Ledyard & Millburn in New York, said Mr. Holder seemed to be “holding out something of an olive branch.”

Mr. Holder told reporters in Washington that the government would insist, in any settlement, on “divestitures of facilities at key constrained airports throughout the United States.”

For example, Mr. Holder said the department had determined how many slots it would want American and US Airways to sell at Reagan National Airport near Washington, where the two airlines together control about two-thirds of the landing and takeoff slots. He declined to specify the number and did not name any other airports.

But while department officials initially talked in August about 1,000 pairs of cities where the combination of American and US Airways would dominate a route and could increase fares, Mr. McTamaney said a settlement might require them to sell slots to competitors at only a few airports.

One problem for the Justice Department, he said, is that many smaller airports do not produce enough traffic to sustain competition among airlines for a more than a few months.

“Historically, in a lot of these markets, two airlines cannot make money,” Mr. McTamaney said. “It doesn’t matter whose name is on the side of the plane.”

Mr. Holder said the department hoped for a settlement, but remained “fully prepared to take this case to trial.” He added, “We will not agree to something that does not fundamentally resolve the concerns that were expressed in the complaint.”

The Justice Department has approved several mergers in recent years, including the combination of Delta Air Lines and Northwest, United and Continental, and Southwest and AirTran. Government lawyers have said that given the growing concentration in the industry â€" the proposed merger would result in four airlines carrying more than 80 percent of the nation’s commercial air travel â€" an additional merger would hurt passengers.

But some airline analysts had expected the sides to settle before the case reached court. That view gained traction last week when the Justice Department, American Airlines and US Airways picked a mediator, as requested by the court.

“Justice will be unable to convince a judge the merger is anticompetitive, especially given that AMR and US Airways offer far less competitive overlap versus all three previous mergers approved by Justice,” according to a report last week by Vicki Bryan, an analyst at GimmeCredit.

Negotiations are a far cry from the Justice Department’s initial statements, after filing its challenge, when its lawyers vowed to take the case to court.

The government’s case against the merger has also suffered several small setbacks in recent months, which threaten to weaken its position before the Nov. 25 trial.

Last month, the attorney general of Texas, who had joined the federal challenge with five other states and the District of Columbia, withdrew his support after negotiating a separate arrangement with American Airlines. Under that deal, the airline promised to keep its headquarters in the Dallas-Fort Worth area, which it had promised repeatedly in the past, and agreed to maintain daily service to more than 20 airports in Texas.

Another defection might be looming. Pam Bondi, the attorney general of Florida, another state that had joined the challenge, said she had met with Thomas W. Horton, the chairman and chief executive of American Airlines, and indicated they were working on a “timely resolution.”

The Justice Department is facing a tight schedule to prepare for the trial and present evidence. It had initially sought a court date in March 2014, but was rebuffed by Judge Colleen Kollar-Kotelly, of the United States District Court for the District of Columbia, who set an earlier date.

The airlines argue that their merger would benefit passengers by providing more flights to more airports, in the United States and abroad, and offer a stronger counterweight to Delta and United.

The federal challenge to the merger followed a tumultuous period of restructuring for American Airlines, which filed for bankruptcy in 2011. The reorganization was approved by a federal judge in September, subject to Justice Department approval of the merger. As part of the plan, American agreed to merge with US Airways, a move that received the backing of creditors and its three main labor groups.

Shares of American’s parent, the AMR Corporation, jumped nearly 25 percent Monday on the news about the settlement talks.

A version of this article appears in print on November 5, 2013, on page B1 of the New York edition with the headline: U.S. in Talks To Settle Suit Over Merger Of 2 Airlines.

After a Decade, SAC Capital Blinks

SAC Capital first sought to fend off a federal indictment. Then the hedge fund, run by the billionaire Steven A. Cohen, offered to pay about $700 million to settle. Finally, SAC suggested it plead guilty to only some of the criminal charges in the five-count indictment.

But at every turn, the government refused.

And so on Monday, SAC agreed to plead guilty to all five counts of insider trading violations and pay a record $1.2 billion penalty, becoming the first large Wall Street firm in a generation to confess to criminal conduct. The deal caps a decade-long investigation that has turned a mighty hedge fund into a symbol of financial wrongdoing.

An account of the negotiations, based on interviews with people briefed on the case, illuminates the private wrangling and underscores just how aggressive the government was in extracting the deal.

The guilty plea and fine paid by SAC are part of a broader plea deal that will impose a five-year probation on the fund. SAC must also terminate its business of managing money for outside investors, a largely symbolic blow, as it already faces an exodus of client money.

It will still most likely continue to manage Mr. Cohen’s vast fortune, a move that would help maintain its influence on Wall Street.

The case could inspire other aggressive actions against Wall Street, as the Justice Department’s uneven crackdown on financial fraud has gained momentum. Coming just days before JPMorgan Chase is expected to complete a $13 billion settlement with the government over the bank’s questionable mortgage practices, the SAC plea might stem long-seeded concerns that the Obama administration has been reluctant to bring charges against major financial firms.

“No institution should rest easy in the belief that it is too big to jail,” Preet Bharara, the United States attorney in Manhattan, said on Monday.

The $1.2 billion penalty adds to the $616 million in insider trading fines that SAC already agreed to pay to the Securities and Exchange Commission. Mr. Cohen, who owns 100 percent of the firm, will pay those penalties himself.

SAC’s total $1.8 billion punishment sets a record for insider trading cases and far surpasses those of other recent noteworthy financial prosecutions. Raj Rajaratnam, the fallen hedge fund titan serving an 11-year prison sentence for insider trading, was ordered to pay about $157 million.

In a letter to the court, Mr. Bharara called the SAC penalty, which was slightly above federal guidelines, “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct,” a reference to the eight former SAC traders charged with securities fraud. Six of those traders have pleaded guilty and are cooperating with prosecutors.

SAC, which is based in Stamford, Conn., said in a statement that it took “responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability. Even one person crossing the line into illegal behavior is too many and we greatly regret this conduct occurred.”

SAC’s guilty plea serves as a capstone moment in the government’s vast insider trading crackdown, which has produced more than 70 convictions, including that of Mr. Rajaratnam.

Led by federal authorities in Manhattan, the inquiry began in the middle of the last decade using techniques normally reserved for organized crime cases. F.B.I. agents used wiretaps to record Wall Street traders and pressured low-level employees to cooperate against their colleagues and bosses.

The SAC case began 11 years ago with a simple suspicion: Its investment returns were too good to be true. The fund has posted average annual returns of nearly 30 percent.

With questions mounting, a small team of investigators at the S.E.C. contacted the nation’s stock exchanges to ferret out whether insider trading was at play, officials briefed on the case said. The inquiry ebbed and flowed for years, producing leads but no smoking gun.

But in 2006, the F.B.I. had a breakthrough. It secured the cooperation of David Slaine, an employee of Mr. Rajaratnam’s hedge fund, the Galleon Group. Mr. Slaine soon offered the government a lens inside not only Galleon but the inner workings of competitors like SAC.

Starting in 2009, after the S.E.C. intensified its focus on SAC, the government gained further momentum when it secured a series of guilty pleas that appeared to legitimize the speculation swirling around the hedge fund. Noah Freeman, who joined SAC in 2008, told investigators that he thought insider trading was part of his job description.

“What started with a key cooperator, led to thousands of hours of relentless investigative work by a team of F.B.I. agents, uncovering an extensive network trafficking in inside information throughout the hedge fund industry,” April Brooks, the F.B.I. special agent in charge, said at a news conference on Monday.

The trading by two other former SAC portfolio managers, Mathew Martoma and Michael S. Steinberg, is also central to the indictment.

Prosecutors have accused Mr. Martoma, who has pleaded not guilty, of using confidential drug trial information to trade the stocks of pharmaceutical firms.

Mr. Steinberg stands accused of trading on inside information about the computer maker Dell. He has maintained his innocence and will stand trial on Nov. 18.

From this batch of cases, the government readied charges against SAC. But an indictment was not a forgone conclusion.

SAC and the government, the people briefed on the matter said, discussed a plea deal that included a guilty plea and a fine but would have spared it the embarrassment of an indictment.

Ultimately, talks broke down, paving the way for the government to bring the indictment in July, charging SAC with four counts of securities fraud and one count of wire fraud.

SAC pleaded not guilty. But in the weeks that followed, the fund had little to do but settle. The law of corporate criminal liability, which allows the government to attribute the criminal acts of employees to the company itself, buttresses the case. With former SAC employees having pleaded guilty â€" and the employees likely to have testified at a trial â€" SAC’s defenses were few.

And yet SAC, led by lawyers at Paul, Weiss, Rifkind, Wharton and Garrison and Willkie Farr & Gallagher, still pushed back when it came to money.

The United States attorney’s office, according to the people briefed on the case, demanded $1.8 billion in penalties from SAC â€" $900 million in fines and $900 million in forfeited profits. The office and its criminal division chief who handled negotiations, Lorin L. Reisner, was willing to deduct from that amount the $616 million the fund already paid to the S.E.C., reducing the additional penalty to about $1.2 billion.

After prosecutors rejected SAC’s initial offer of roughly $700 million, the fund raised the amount to about $1 billion. When that failed, SAC acceded to the $1.2 billion deal.

Even with the deal, criminal authorities continue to view Mr. Cohen and other SAC employees as targets of a continuing insider trading investigation. The plea agreement expressly states that it “provides no immunity from prosecution for any individual.”

What’s more, the plea deal does not incorporate a separate civil action the S.E.C. brought against Mr. Cohen. The S.E.C., which accused him of turning a blind eye to misconduct at his fund, is seeking to bar Mr. Cohen from managing outside money, at SAC or elsewhere.

Many have drawn comparisons between Mr. Cohen and Michael R. Milken, the junk bond pioneer at Drexel Burnham Lambert who became synonymous with financial greed during the go-go 1980s. After pleading guilty to securities fraud charges, Mr. Milken paid about $1 billion in penalties, adjusted for inflation. A quarter-century ago, Drexel pleaded guilty to securities fraud, the last big Wall Street firm to enter a guilty plea.

Guilty pleas by financial institutions are exceedingly rare, and legal specialists say the case against SAC could embolden prosecutors to bring criminal charges against other firms.

Brandon L. Garrett, a professor at the University of Virginia School of Law and author of the forthcoming book, “Too Big to Jail: How Prosecutors Target Corporations,” said that while environmental and antitrust inquiries frequently resulted in corporate indictments, financial fraud investigators were just now “starting to see the light.”

“Prosecutors have increasingly been saying that no company is too big to jail, and now they can point to the SAC case and say ‘We really mean it,’ ” Mr. Garrett said.



After a Decade, SAC Capital Blinks

SAC Capital first sought to fend off a federal indictment. Then the hedge fund, run by the billionaire Steven A. Cohen, offered to pay about $700 million to settle. Finally, SAC suggested it plead guilty to only some of the criminal charges in the five-count indictment.

But at every turn, the government refused.

And so on Monday, SAC agreed to plead guilty to all five counts of insider trading violations and pay a record $1.2 billion penalty, becoming the first large Wall Street firm in a generation to confess to criminal conduct. The deal caps a decade-long investigation that has turned a mighty hedge fund into a symbol of financial wrongdoing.

An account of the negotiations, based on interviews with people briefed on the case, illuminates the private wrangling and underscores just how aggressive the government was in extracting the deal.

The guilty plea and fine paid by SAC are part of a broader plea deal that will impose a five-year probation on the fund. SAC must also terminate its business of managing money for outside investors, a largely symbolic blow, as it already faces an exodus of client money.

It will still most likely continue to manage Mr. Cohen’s vast fortune, a move that would help maintain its influence on Wall Street.

The case could inspire other aggressive actions against Wall Street, as the Justice Department’s uneven crackdown on financial fraud has gained momentum. Coming just days before JPMorgan Chase is expected to complete a $13 billion settlement with the government over the bank’s questionable mortgage practices, the SAC plea might stem long-seeded concerns that the Obama administration has been reluctant to bring charges against major financial firms.

“No institution should rest easy in the belief that it is too big to jail,” Preet Bharara, the United States attorney in Manhattan, said on Monday.

The $1.2 billion penalty adds to the $616 million in insider trading fines that SAC already agreed to pay to the Securities and Exchange Commission. Mr. Cohen, who owns 100 percent of the firm, will pay those penalties himself.

SAC’s total $1.8 billion punishment sets a record for insider trading cases and far surpasses those of other recent noteworthy financial prosecutions. Raj Rajaratnam, the fallen hedge fund titan serving an 11-year prison sentence for insider trading, was ordered to pay about $157 million.

In a letter to the court, Mr. Bharara called the SAC penalty, which was slightly above federal guidelines, “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct,” a reference to the eight former SAC traders charged with securities fraud. Six of those traders have pleaded guilty and are cooperating with prosecutors.

SAC, which is based in Stamford, Conn., said in a statement that it took “responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability. Even one person crossing the line into illegal behavior is too many and we greatly regret this conduct occurred.”

SAC’s guilty plea serves as a capstone moment in the government’s vast insider trading crackdown, which has produced more than 70 convictions, including that of Mr. Rajaratnam.

Led by federal authorities in Manhattan, the inquiry began in the middle of the last decade using techniques normally reserved for organized crime cases. F.B.I. agents used wiretaps to record Wall Street traders and pressured low-level employees to cooperate against their colleagues and bosses.

The SAC case began 11 years ago with a simple suspicion: Its investment returns were too good to be true. The fund has posted average annual returns of nearly 30 percent.

With questions mounting, a small team of investigators at the S.E.C. contacted the nation’s stock exchanges to ferret out whether insider trading was at play, officials briefed on the case said. The inquiry ebbed and flowed for years, producing leads but no smoking gun.

But in 2006, the F.B.I. had a breakthrough. It secured the cooperation of David Slaine, an employee of Mr. Rajaratnam’s hedge fund, the Galleon Group. Mr. Slaine soon offered the government a lens inside not only Galleon but the inner workings of competitors like SAC.

Starting in 2009, after the S.E.C. intensified its focus on SAC, the government gained further momentum when it secured a series of guilty pleas that appeared to legitimize the speculation swirling around the hedge fund. Noah Freeman, who joined SAC in 2008, told investigators that he thought insider trading was part of his job description.

“What started with a key cooperator, led to thousands of hours of relentless investigative work by a team of F.B.I. agents, uncovering an extensive network trafficking in inside information throughout the hedge fund industry,” April Brooks, the F.B.I. special agent in charge, said at a news conference on Monday.

The trading by two other former SAC portfolio managers, Mathew Martoma and Michael S. Steinberg, is also central to the indictment.

Prosecutors have accused Mr. Martoma, who has pleaded not guilty, of using confidential drug trial information to trade the stocks of pharmaceutical firms.

Mr. Steinberg stands accused of trading on inside information about the computer maker Dell. He has maintained his innocence and will stand trial on Nov. 18.

From this batch of cases, the government readied charges against SAC. But an indictment was not a forgone conclusion.

SAC and the government, the people briefed on the matter said, discussed a plea deal that included a guilty plea and a fine but would have spared it the embarrassment of an indictment.

Ultimately, talks broke down, paving the way for the government to bring the indictment in July, charging SAC with four counts of securities fraud and one count of wire fraud.

SAC pleaded not guilty. But in the weeks that followed, the fund had little to do but settle. The law of corporate criminal liability, which allows the government to attribute the criminal acts of employees to the company itself, buttresses the case. With former SAC employees having pleaded guilty â€" and the employees likely to have testified at a trial â€" SAC’s defenses were few.

And yet SAC, led by lawyers at Paul, Weiss, Rifkind, Wharton and Garrison and Willkie Farr & Gallagher, still pushed back when it came to money.

The United States attorney’s office, according to the people briefed on the case, demanded $1.8 billion in penalties from SAC â€" $900 million in fines and $900 million in forfeited profits. The office and its criminal division chief who handled negotiations, Lorin L. Reisner, was willing to deduct from that amount the $616 million the fund already paid to the S.E.C., reducing the additional penalty to about $1.2 billion.

After prosecutors rejected SAC’s initial offer of roughly $700 million, the fund raised the amount to about $1 billion. When that failed, SAC acceded to the $1.2 billion deal.

Even with the deal, criminal authorities continue to view Mr. Cohen and other SAC employees as targets of a continuing insider trading investigation. The plea agreement expressly states that it “provides no immunity from prosecution for any individual.”

What’s more, the plea deal does not incorporate a separate civil action the S.E.C. brought against Mr. Cohen. The S.E.C., which accused him of turning a blind eye to misconduct at his fund, is seeking to bar Mr. Cohen from managing outside money, at SAC or elsewhere.

Many have drawn comparisons between Mr. Cohen and Michael R. Milken, the junk bond pioneer at Drexel Burnham Lambert who became synonymous with financial greed during the go-go 1980s. After pleading guilty to securities fraud charges, Mr. Milken paid about $1 billion in penalties, adjusted for inflation. A quarter-century ago, Drexel pleaded guilty to securities fraud, the last big Wall Street firm to enter a guilty plea.

Guilty pleas by financial institutions are exceedingly rare, and legal specialists say the case against SAC could embolden prosecutors to bring criminal charges against other firms.

Brandon L. Garrett, a professor at the University of Virginia School of Law and author of the forthcoming book, “Too Big to Jail: How Prosecutors Target Corporations,” said that while environmental and antitrust inquiries frequently resulted in corporate indictments, financial fraud investigators were just now “starting to see the light.”

“Prosecutors have increasingly been saying that no company is too big to jail, and now they can point to the SAC case and say ‘We really mean it,’ ” Mr. Garrett said.



SAC: A Textbook Case of Corporate Prosecution

SAC Capital’s guilty plea to insider trading and $1.2 billion fine may represent a sweeping victory for Preet Bharara, the United States attorney, and his team of prosecutors, and vindication for their multiyear investigation of one of the country’s most successful hedge funds. But the decision to indict a company, and to spare, at least for now, its founder and billionaire manager, Steven A. Cohen, has already ignited criticism.

“A company can’t commit a crime,” said Edwin T. Burton, a professor of economics at the University of Virginia, who wrote a widely circulated blog post this summer that criticized the government’s indictment. “They should only go after the people doing things wrong. There are innocent bystanders, a lot of them, who get hurt. Why is the villain the one who sweeps out the floor every night?”

The Justice Department itself recognizes in its “Principles of Federal Prosecution of Business Organizations” that “corporate prosecutions can potentially harm blameless investors, employees, and others.” The collapse of Arthur Andersen after it was indicted in 2002, reducing the number of large international accounting firms to just four, is widely cited as an example of the collateral damage that corporate prosecutions can have.

But SAC Capital is no Arthur Andersen.

“Based on all that we know and the evidence that’s come to light, I’d say justice was done,” said Lawrence M. Friedman, a professor at the New England School of Law and author of “In Defense of Corporate Criminal Liability” in the Harvard Journal of Law and Public Policy. “It’s hard to imagine a better case for advancing the goals of criminal liability.”

Mr. Bharara said in an interview on Monday that he didn’t want to comment on the SAC plea, which still must be approved by a federal judge. But, he said: “There are lots of different ways to punish wrongdoing and effect deterrence. Sometimes you charge individuals, sometimes you seek a large penalty, sometimes you send people to jail and sometimes you try to make the world understand that an entire institution deserves to be held blameworthy. Just because you do one doesn’t mean you don’t do the others.”

Given the broader goals of the criminal code, SAC Capital may emerge as a textbook case for prosecuting companies â€" and a harbinger of far more aggressive prosecution of corporate crime.

While Professor Burton is correct that only human beings can commit crimes, the notion that corporations are the same as individuals in the eyes of the law dates at least to an early 19th century Supreme Court case, which held that corporations, like people, can enter into contracts. That view was reaffirmed in the recent Citizens United case, which held that corporations are entitled to the free speech guarantees of the First Amendment.

The federal government has long prosecuted corporations whose managers engaged collectively in criminal behavior. “Corporations should not be treated leniently because of their artificial nature nor should they be subject to harsher treatment,” the Justice Department principles state. “Vigorous enforcement of the criminal laws against corporate wrongdoers, where appropriate, results in great benefits for law enforcement and the public.”

These benefits, according to Professor Friedman, include protecting the public, deterring similar unlawful conduct and what he called “expressive value,” which is the public statement that certain behavior should be subject to criminal sanction.

“There are many critics who will say, ‘You can’t incarcerate a corporation, so what’s the point?’ My view is, what they did, it was just as wrong, and by treating it as a criminal rather than civil matter, it makes an important statement about the seriousness of the wrongness.”

There’s surely no dispute that SAC Capital was the site of some of the most brazen and widespread insider trading in Wall Street history. In its plea agreement, the firm admitted committing five felonies. Six of the firms’ traders have pleaded guilty to securities fraud charges, and two more are awaiting trial in what the prosecutors have called a systemic insider trading scheme that spanned more than 10 years.

And while Mr. Cohen hasn’t been charged with any crime, he can’t claim to be simply an innocent bystander. The Securities and Exchange Commission has filed civil charges against Mr. Cohen claiming failure to supervise, and said he didn’t follow up on numerous “red flags” indicating potential insider trading at the firm. (Mr. Cohen has denied the charges and vowed to fight the suit, which wasn’t affected by the guilty pleas on Monday.)

It’s true that many of SAC’s employees may lose their jobs as the firm winds down; it has already shrunk considerably. And many investors have already moved their money elsewhere, and may have trouble replicating SAC’s astounding track record. But presumably, traders at one of the country’s most successful hedge funds will have no trouble landing new, multimillion-dollar positions at rival firms in the fiercely competitive hedge fund world. And investors can hardly complain that they can no longer earn market-beating returns aided by illegal insider trading.

As for deterrence, “This is a very visible case with a very large dollar sign attached to it,” Professor Friedman said. “You could argue that the audience for this is very sensitive to dollar signs. They’re other hedge funds and money managers. It’s a big enough number to get attention, because if it’s too low, it’s just perceived as another cost of doing business.”

And given Mr. Cohen’s ownership of the firm, the $1.2 billion fine, as well as a previous $600 million settlement with the S.E.C., will come out of his pocket, rather than public shareholders’. With a fortune estimated at $9 billion, Mr. Cohen will still be a billionaire many times over, but the fine is nonetheless more than a dent in his personal fortune.

This aspect even mollified a critic like Professor Burton. “At least the target is the same as the alleged villain,” he said, referring to Mr. Cohen. “This is almost never the case when you sue and indict a public company.”

SAC Capital didn’t even pay lip service to the idea that it would unconditionally cooperate with the government’s investigation, let alone make a “timely and voluntary disclosure of wrongdoing,” which is another factor in the Justice Department’s guidelines that SAC flouted. “It’s extraordinary that they said publicly they would not cooperate,” Professor Friedman said. “They evidently thought they would get away with it with impunity.”

Mr. Cohen’s lavish spending during the course of the investigation â€" he bought “Le Rêve” by Pablo Picasso for $155 million and paid $60 million on a Hamptons estate earlier this year â€" was widely perceived as thumbing his nose at prosecutors.

Even after his company’s guilty plea, Mr. Cohen is hardly out of the woods, and he won’t find any comfort in the Justice Department’s principles. They state, “Prosecution of a corporation is not a substitute for the prosecution of criminally culpable individuals within or without the corporation.” And, “Only rarely should provable individual culpability not be pursued, particularly if it relates to high-level corporate officers, even in the face of an offer of a corporate guilty plea or some other disposition of the charges against the corporation.”



Wall Street’s Marathoners Go the Extra Mile

For many runners on Sunday, the evening after the New York City Marathon was a time to relax. But Hugh Parker wasn’t sure he would be able to.

“I was worried about being called into work after the marathon,” said Mr. Parker, a first-year investment banking analyst at Credit Suisse. He added: “It was really special to be able to get enough sleep the two days beforehand.”

Such are the concerns of a competitive runner employed on Wall Street. Despite a demanding work schedule, Mr. Parker, 23, was able to finish in 2 hours 35 minutes 35 seconds, coming in 56th in the men’s division, in an overall field of about 50,000 runners.

Like Mr. Parker, a number of the top runners in Sunday’s race spend their days toiling on Wall Street, at hedge funds and at big banks like Goldman Sachs. Greg Cass, the 64th finisher in the men’s race, who was profiled in The New York Times on Monday, is an investment banker at Barclays.

In a sense, this is not surprising: Finance appeals to workers with a competitive drive. But these amateur runners have to balance a training regimen against the demands of a job that can dominate their waking hours.

Some finance workers who ran on Sunday took Monday off from work. But Alexandra Cadicamo, 25, was at her desk in the investor relations department of Goldman Sachs the next morning.

With a time of 2 hours 51 minutes 33 seconds, Ms. Cadicamo came in 26th place in the women’s race. Among the female runners who work on Wall Street, she was the fastest. At Goldman, that accomplishment earned her lots of kudos.

“Everyone gathered around, listening to my stories,” said Ms. Cadicamo, who ran competitively in college but had never before completed a marathon.

As Phillip Falk ran on Sunday, his coworkers at Gapstow Capital Partners, a small hedge fund, tracked his progress online and saw him on television. When he arrived at work on Monday, after finishing in 2 hours 34 minutes 44 seconds, the chief operating officer of the firm joked that Gapstow should sponsor him, complete with its logo, Mr. Falk recalled.

“I think you already do,” Mr. Falk, 29, replied with a laugh.

Runners like Mr. Falk - who finished 48th in the men’s race, making him Wall Street’s fastest man - aren’t making any prize money.

But to many, running can be a helpful complement to a grueling work schedule. Mr. Parker, the Credit Suisse analyst, said he runs in Central Park during the week with a friend at Barclays, often logging 10 miles before work.

In October, Mr. Parker said, he would cram workouts into his weekends, going 10 miles Friday nights, 20 miles on Saturdays and then hill workouts on Sundays. (For a young worker on Wall Street, weekends don’t mean a break from work - just less of it.)

Mr. Falk, the hedge fund analyst, said he began to commit to running after losing his job. It was 2009, in the depths of the financial crisis, when he was laid off from Morgan Stanley in a round of cuts.

“I suddenly had quite a bit more time on my hands,” said Mr. Falk, who ran cross-country in high school but did not run competitively in college. “One of the ways I filled it was by becoming a more dedicated runner.”

In the process, he has developed camaraderie with other Wall Street runners.

On Monday, Mr. Falk shot off an e-mail to Brent Frissora, an analyst at the hedge fund LibreMax Capital, who ran the marathon in 2 hours 36 minutes 8 seconds, putting him in 60th in the men’s race - behind Mr. Falk.

“Think we traded leads a couple times,” Mr. Falk said in the e-mail.

For Mr. Frissora, running and finance are intertwined with romance. He met his wife, Eva, when they were investment banking interns at Bank of America in 2005, according to their wedding website. When they returned to the bank for full-time jobs, they began running together before work in Central Park.

“Brent was so kind, and patiently accompanied Eva on her long and slow jogs,” the website says.

But for all their competitiveness, Wall Street’s men were outdone by a commercial strategist at Statoil, who was working in Connecticut for the week.

The strategist, Paolo Natali, who is based in London, finished in 2 hours 26 minutes, 27th place among the men. He said he uses his lunch breaks to run in Hyde Park and exercises again after work at the gym.

“I can arrange my own timing around what I need to do,” he said. “It’s quite easy.”

As for Mr. Parker, at Credit Suisse? He didn’t have to report to work on Sunday after all.



Wall Street’s Marathoners Go the Extra Mile

For many runners on Sunday, the evening after the New York City Marathon was a time to relax. But Hugh Parker wasn’t sure he would be able to.

“I was worried about being called into work after the marathon,” said Mr. Parker, a first-year investment banking analyst at Credit Suisse. He added: “It was really special to be able to get enough sleep the two days beforehand.”

Such are the concerns of a competitive runner employed on Wall Street. Despite a demanding work schedule, Mr. Parker, 23, was able to finish in 2 hours 35 minutes 35 seconds, coming in 56th in the men’s division, in an overall field of about 50,000 runners.

Like Mr. Parker, a number of the top runners in Sunday’s race spend their days toiling on Wall Street, at hedge funds and at big banks like Goldman Sachs. Greg Cass, the 64th finisher in the men’s race, who was profiled in The New York Times on Monday, is an investment banker at Barclays.

In a sense, this is not surprising: Finance appeals to workers with a competitive drive. But these amateur runners have to balance a training regimen against the demands of a job that can dominate their waking hours.

Some finance workers who ran on Sunday took Monday off from work. But Alexandra Cadicamo, 25, was at her desk in the investor relations department of Goldman Sachs the next morning.

With a time of 2 hours 51 minutes 33 seconds, Ms. Cadicamo came in 26th place in the women’s race. Among the female runners who work on Wall Street, she was the fastest. At Goldman, that accomplishment earned her lots of kudos.

“Everyone gathered around, listening to my stories,” said Ms. Cadicamo, who ran competitively in college but had never before completed a marathon.

As Phillip Falk ran on Sunday, his coworkers at Gapstow Capital Partners, a small hedge fund, tracked his progress online and saw him on television. When he arrived at work on Monday, after finishing in 2 hours 34 minutes 44 seconds, the chief operating officer of the firm joked that Gapstow should sponsor him, complete with its logo, Mr. Falk recalled.

“I think you already do,” Mr. Falk, 29, replied with a laugh.

Runners like Mr. Falk - who finished 48th in the men’s race, making him Wall Street’s fastest man - aren’t making any prize money.

But to many, running can be a helpful complement to a grueling work schedule. Mr. Parker, the Credit Suisse analyst, said he runs in Central Park during the week with a friend at Barclays, often logging 10 miles before work.

In October, Mr. Parker said, he would cram workouts into his weekends, going 10 miles Friday nights, 20 miles on Saturdays and then hill workouts on Sundays. (For a young worker on Wall Street, weekends don’t mean a break from work - just less of it.)

Mr. Falk, the hedge fund analyst, said he began to commit to running after losing his job. It was 2009, in the depths of the financial crisis, when he was laid off from Morgan Stanley in a round of cuts.

“I suddenly had quite a bit more time on my hands,” said Mr. Falk, who ran cross-country in high school but did not run competitively in college. “One of the ways I filled it was by becoming a more dedicated runner.”

In the process, he has developed camaraderie with other Wall Street runners.

On Monday, Mr. Falk shot off an e-mail to Brent Frissora, an analyst at the hedge fund LibreMax Capital, who ran the marathon in 2 hours 36 minutes 8 seconds, putting him in 60th in the men’s race - behind Mr. Falk.

“Think we traded leads a couple times,” Mr. Falk said in the e-mail.

For Mr. Frissora, running and finance are intertwined with romance. He met his wife, Eva, when they were investment banking interns at Bank of America in 2005, according to their wedding website. When they returned to the bank for full-time jobs, they began running together before work in Central Park.

“Brent was so kind, and patiently accompanied Eva on her long and slow jogs,” the website says.

But for all their competitiveness, Wall Street’s men were outdone by a commercial strategist at Statoil, who was working in Connecticut for the week.

The strategist, Paolo Natali, who is based in London, finished in 2 hours 26 minutes, 27th place among the men. He said he uses his lunch breaks to run in Hyde Park and exercises again after work at the gym.

“I can arrange my own timing around what I need to do,” he said. “It’s quite easy.”

As for Mr. Parker, at Credit Suisse? He didn’t have to report to work on Sunday after all.



Why a Pension Case Will Not Change Private Equity Tax Law

Steve Judge is president and chief executive of the Private Equity Growth Capital Council.

In a recent Deal Professor column, Steven M. Davidoff writes that a recent pension case decision involving Sun Capital Partners “upends the current tax treatment of carried interest.” The notion that a case involving the Employee Retirement Income Security Act, or Erisas, could be interpreted as a tax case to change settled carried-interest tax law requires the reader to take many leaps of faith (and logic) that run counter to several important facts.

The first is that the United States Court of Appeals for the First Circuit expressly admits that the case is not a tax law case and that its decision applies strictly to potential withdrawal liability in the Erisa multi-employer pension plan context.

The second is that both the Treasury Department and the Internal Revenue Service lack the authority to change the tax treatment of carried interest absent an explicit act by Congress. As former Treasury Secretary Timothy F. Geithner stated in a March 2010 letter exchange with Senator Sheldon Whitehouse, Democrat of Rhode Island: “These changes to current tax law require statutory changes, and unfortunately cannot be done by changes to administrative guidance.”

It is true that the ruling could potentially have important implications for the private equity and growth capital industry within the Erisa context, even though it applies only in the First Circuit. But it is pure speculation to assume this will have any bearing on established tax law that has been in place for a century.

Carried interest represents a profits interest in a business, and the profits earned by private equity firms and their partners when they sell a business are appropriately taxed as capital gains. When a private equity firm sells a business - a capital asset - the tax treatment of the gain flows through to the partners. As the income tax code has appropriately recognized since its inception, the sale of a capital asset creates capital gain or loss, and that treatment flows through to the partners in the firm.

Taxing carried interest as anything other than a capital gain would deny private equity, venture capital and real estate partnerships the same long-term capital gains treatment available to other kinds of businesses that sell a long-term capital asset for a profit.

Private equity partnerships invested more than $347 billion of long-term capital into the United States economy last year, and increasing taxes on carried interest would hurt partnerships that strengthen thousands of companies across the country. Even critics of carried interest say there are no shortcuts for changing this longstanding tax law outside the legislative process.



Why a Pension Case Will Not Change Private Equity Tax Law

Steve Judge is president and chief executive of the Private Equity Growth Capital Council.

In a recent Deal Professor column, Steven M. Davidoff writes that a recent pension case decision involving Sun Capital Partners “upends the current tax treatment of carried interest.” The notion that a case involving the Employee Retirement Income Security Act, or Erisas, could be interpreted as a tax case to change settled carried-interest tax law requires the reader to take many leaps of faith (and logic) that run counter to several important facts.

The first is that the United States Court of Appeals for the First Circuit expressly admits that the case is not a tax law case and that its decision applies strictly to potential withdrawal liability in the Erisa multi-employer pension plan context.

The second is that both the Treasury Department and the Internal Revenue Service lack the authority to change the tax treatment of carried interest absent an explicit act by Congress. As former Treasury Secretary Timothy F. Geithner stated in a March 2010 letter exchange with Senator Sheldon Whitehouse, Democrat of Rhode Island: “These changes to current tax law require statutory changes, and unfortunately cannot be done by changes to administrative guidance.”

It is true that the ruling could potentially have important implications for the private equity and growth capital industry within the Erisa context, even though it applies only in the First Circuit. But it is pure speculation to assume this will have any bearing on established tax law that has been in place for a century.

Carried interest represents a profits interest in a business, and the profits earned by private equity firms and their partners when they sell a business are appropriately taxed as capital gains. When a private equity firm sells a business - a capital asset - the tax treatment of the gain flows through to the partners. As the income tax code has appropriately recognized since its inception, the sale of a capital asset creates capital gain or loss, and that treatment flows through to the partners in the firm.

Taxing carried interest as anything other than a capital gain would deny private equity, venture capital and real estate partnerships the same long-term capital gains treatment available to other kinds of businesses that sell a long-term capital asset for a profit.

Private equity partnerships invested more than $347 billion of long-term capital into the United States economy last year, and increasing taxes on carried interest would hurt partnerships that strengthen thousands of companies across the country. Even critics of carried interest say there are no shortcuts for changing this longstanding tax law outside the legislative process.



Extra Cash and New Chief Buy BlackBerry Just a Bit More Time

BlackBerry’s liquid infusion won’t douse its cash burn. The troubled company is selling $1 billion of convertible debt after attempts to find a buyer flopped. Even big supporter Fairfax Financial has backed away from taking full control. The extra money and a new boss buy BlackBerry a bit more time. But its prospects are bleak.

Calling off an auction without a buyer in hand can leave a company in a precarious position. Investors ponder if troubling details emerged during due diligence, frightening prospective buyers, lenders and vendors. Customers will shy away from buying equipment, because they may fear being stranded without support - whether because of big cost cuts, lack of investment, closure of a business unit or, at worst, a bankruptcy. No chief technology officer wants this risk.

BlackBerry certainly needs the additional cash. The new chief executive, John Chen, said a turnaround would require six quarters. The company had $2.6 billion of cash and investments at the end of last quarter, after burning $500 million in three months. Laying off 40 percent of its staff will reduce the flames eventually, but severance costs will be high. And BlackBerry needs to keep enough capital on hand to pay its vendors. If its sales decline as rapidly as they have - they are shrinking at about a 40 percent annual clip - the company’s current pile of cash might have run out within a year.

But the extra cash doesn’t resolve BlackBerry’s turnaround challenge. The company’s keeping its handset unit, Mr. Chen says, even though it’s in the red and falling further and further behind Apple or Android-based phones. Its services businesses are also shrinking. And its patent portfolio may be worth less than the $1.5 billion or so many analysts had it pegged at.

Fairfax and other buyers of the bonds aren’t exactly giving the company a ringing endorsement either. Sure, they ought to garner a huge return on their implied 16 percent equity stake if Mr. Chen succeeds in turning BlackBerry around. But the bonds place them above stockholders if the company tanks. What’s more, Fairfax boss Prem Watsa is now executive chairman, giving them a great say in how the company should be run. Given BlackBerry’s trajectory, they could soon be in the driving seat.

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



The Impact of the Settlement on SAC Capital and Cohen

The plea agreement between the Justice Department and SAC Capital Advisors that calls for the firm to pay almost $1.2 billion to resolve insider trading charges is carefully crafted to permit the government to continue its pursuit of Steven A. Cohen, the hedge fund firm’s founder and owner. So while SAC has finally put the government’s criminal case behind it, Mr. Cohen remains the focus of a continuing criminal investigation and an administrative complaint filed by the Securities and Exchange Commission.

Resolving the case was just a matter of time because SAC could put up only token resistance to fight the charges. Corporate criminal liability can be imposed based on a violation by any employee, even if the person violated the firm’s internal policies. Six former analysts had already pleaded guilty to insider trading charges. So the issue was how much SAC would have to pay and whether its guilty plea would be enough to insulate Mr. Cohen, something the Justice Department did not grant.

SAC settled both the criminal charges and a parallel asset forfeiture case in which the Justice Department sought all of the firm’s assets. The payment involves a criminal fine of $900 million and the forfeiture of $900 million of assets. The forfeiture amount was reduced by a previous settlement with the S.E.C. that resulted in a payment of $616 million. The firm also agreed to withdraw from the investment advisory business and not accept funds from outside investors.

In looking at the plea agreement, here are some thoughts about what it means for both SAC and Mr. Cohen:

SAC and its subsidiaries pleaded guilty to each of the five charges in the indictment, unlike most cases in which a defendant admits to only one or two charges. SAC’s guilty plea to each count allowed the government to obtain a larger fine, and the $900 million penalty is higher than the applicable federal sentencing guidelines called for.

The largest trades in the case involved SAC’s sale of Elan and Wyeth shares after a portfolio manager, Matthew Martoma, received information that a drug trial the companies were pursuing had unfavorable results. After Mr. Martoma spoke with Mr. Cohen, SAC sold its position and then shorted the shares, netting gains and avoiding losses totaling about $276 million.

Although SAC pleaded guilty to all the charges, it did not specifically admit that the Elan and Wyeth trading was based on inside information. The plea agreement states that the firm only has to admit that “at least one employee of each of the SAC Entity Defendants engaged in insider trading,” but there was no admission that every trade listed in the indictment resulted in a violation.

The charge against CR Intrinsic, a SAC subsidiary where Mr. Martoma worked that was also named as a defendant, identified two different instances of insider trading â€" one based on the drug trial results and much smaller transactions involving information about Dell and Foundry Networks. Thus, while SAC admitted that there was insider trading at CR Intrinsic, it did not specifically acknowledge its sales of Elan and Wyeth stocks as based on inside information.

That means the firm can continue to support Mr. Martoma as he fights charges filed against him in an upcoming criminal trial, and does not affect civil claims against it filed by investors in Wyeth and Elan.

The plea agreement also protects SAC from being charged with criminal insider trading for any transactions between 1999 and December 31, 2012, including any asset forfeiture action. That gives the firm the comfort of knowing that the Justice Department is pretty much done with it.

The same cannot be said of Mr. Cohen, however. The agreement states that it “provides no immunity from prosecution to any individual.” So the Justice Department can pursue charges for any violation and seek “the maximum term of imprisonment applicable to any such violation of criminal law.”

The plea agreement does not mean the government is committed to pursuing a case against Mr. Cohen, but it remains open to doing so if it can obtain evidence of violations that implicate him. That effort has failed so far, but not for lack of effort, and we can expect the Justice Department will not rest until it has exhausted every avenue of investigation.

The agreement is made under Federal Rule of Criminal Procedure 11(c)(1)(C), which does not give the court any discretion to vary the terms if the agreement is accepted. Thus, Judge Laura Taylor Swain of the Federal District Court in Manhattan, who is presiding over the criminal case, will have to decide whether to accept the terms imposing the $900 million criminal fine, or reject them and give SAC the opportunity to withdraw.

Federal judges are usually wary of these types of agreements because of the limits on their ability to fashion a sentence to fit the type of violation that occurred and the characteristics of the defendant. But when an organization is the defendant, it is much more likely the agreement will be found acceptable. That is especially true in a case where there is little chance the government unfairly exercised its power over a vulnerable defendant who may have been forced into pleading guilty.

One potential bump in the road to accepting the plea agreement is a letter submitted to Judge Swain on behalf of investors in Elan and Wyeth suing SAC who want to address the terms as victims of the crime. A court is required to give victims the opportunity to raise issues about a guilty plea, and the investors are likely to object to the absence of a specific admission of wrongdoing in SAC’s trading in those companies.

It is not clear whether investors in a company qualify as victims of insider trading. Even if Judge Swain allows them to speak, it is unlikely to derail the plea agreement but may slow down the process of resolving the case.

SAC’s guilty plea does not directly affect the criminal cases of Mr. Martoma and Michael S. Steinberg, another former SAC portfolio manager accused of insider trading. A guilty plea by one defendant cannot be used as evidence against others to show that they committed a crime.

But the publicity surrounding SAC has already been raised by Mr. Steinberg’s counsel as a potential issue in selecting an unbiased jury. With his trial scheduled to begin on Nov. 18, there is a good chance that a motion for a change of venue to move the case outside of New York City will be filed. Although such motions are rarely granted, the widespread attention to SAC’s guilty plea is likely to make the process of selecting jurors to hear the case more difficult if the trial remains in Manhattan.



Weigh In on Twitter’s I.P.O. Value

Twitter is increasing the price for its upcoming initial public offering by as much as a third. The social network is now looking to raise $23 to $25 a share, according to a filing on Monday with the Securities and Exchange Commission.

That sets Twitter’s worth at as much as $14 billion, above its most recent internal value. Breakingviews’ latest calculator offers a way for prospective investors to decide whether that’s too much, or the right enticement.

Run the numbers.

Richard Beales is an assistant editor for Reuters Breakingviews in New York. For more independent commentary and analysis, visit breakingviews.com.



High-Level Executive Switches to Carlyle From Warburg Pincus

The Carlyle Group has hired Kewsong Lee away from his post as managing director at Warburg Pincus, an unusually high-level transition within private equity’s executive ranks.

Mr. Lee, who had been at Warburg for more than two decades and recently served as member of the executive management group, will hold the new position of deputy chief investment officer for corporate private equity. He will assist the firm’s co-founder and co-chief executive, William E. Conway Jr., in a “range of activities related to investing and managing” the firm’s largest sector, according to a statement from Carlyle announcing the appointment on Monday.

“It’s kind of like a classic deputy position,” a Carlyle spokesman, Christopher Ullman, said in a phone interview. Mr. Lee came to Carlyle’s attention after the firm hired an executive recruiting firm to identify candidates for the new position.

Mr. Lee declined to comment, Mr. Ullman said.

Carlyle, one of the world’s largest global alternative asset managers, has $180 billion under management. That includes $58 billion from 11 funds in its corporate private equity platform, which advises buyout and growth capital funds. Mr. Lee will become a member of each fund’s investment committee and will join the company’s management and operating committees, as well as help with corporate development.

“Carlyle’s greatest strength is the depth, continuity and collegiality of our global investment professionals,” Mr. Conway said in the statement. “Kew will be a great addition to this team and will play a critical role in helping us ensure the platform we have created continues to make superb investments and create value for our investors.”

Carlyle’s holdings include positions in Beats Electronics, Getty Images and Booz Allen Hamilton.

Senior executives at Mr. Lee’s level rarely switch firms, and hee had been with Warburg since 1992. He most recently led the company’s consumer, industrial and services group and was instrumental in a number of prominent transactions, including the 2006 buyout of Aramark and last month’s sale of Neiman Marcus for $6 billion.

“We appreciate Kew’s 20-plus years of dedication and contribution to the firm,” a Warburg spokesman said in an email. “We wish him well in his new role.”



What a Big Investment Says About BlackBerry’s Endgame

BlackBerry’s announcement that the company was ending its sale process and receiving a $1 billion investment is all about the company’s endgame.

The obvious conclusion from the announcement was that Fairfax Financial Holdings was unable to pull off its attempt to bring together financing and other investors to buy BlackBerry. This is no surprise, and many pundits had pointed out the highly conditional nature of Fairfax’s bid at the time it was announced.

What may be surprising is why BlackBerry would make a deal when speculation of Cerberus and other interested bidders was swirling. The simple answer may be that these were merely rumors, and no real bidders had appeared. Another possible explanation is that Fairfax had hit the date for the deadline to make a real bid and was unable to extend it in good faith. Faced with the collapse of the Fairfax bid, the BlackBerry board looked for yet another face-saving transaction.

But all this is mere speculation, and I suspect the circumstances of the demise of BlackBerry’s attempted sale will come out in the coming hours and days.

If you examine the terms of the second BlackBerry announcement - the convertible debt investment - you get an idea of the company’s path forward. It isn’t pretty.

The deal, as outlined by BlackBerry, is that Fairfax and others will invest $1 billion in BlackBerry, purchasing BlackBerry convertible debt that pays 6 percent interest. This rate is not a bad return, particularly considering BlackBerry has assets worth quite a bit more than that. The debt will be convertible into BlackBerry shares for a period of seven years at a conversion price of $10 a share, meaning the conversion feature is worthless if BlackBerry’s shares are below that price. Fairfax will take up to $250 million of the $1 billion investment amount.

One way to look at this investment is that it positions Fairfax and the other investors for a BlackBerry bankruptcy. BlackBerry has no long-term debt on its balance sheet, so this investment would now jump Fairfax ahead of the equity line for controlling BlackBerry in any bankruptcy proceeding. And remember that BlackBerry is a Canadian company, so the bankruptcy would be there. Canadian rules are different than those of the United States, but they do allow the creditors to have a substantial say in any restructuring plan, including approving it.

But by structuring the investment as a convertible debt interest, one that is convertible into shares, Fairfax has it both ways. It protects its downside in a bankruptcy, but it also has an upside.

BlackBerry right now can be viewed as a binary play. It will either fail miserably or be a remarkable turnaround. Fairfax’s exercise price for these BlackBerry shares is a high premium over the current market price of about $6.90. But if any turnaround plan succeeds, the company will be worth far more. In some ways, the equity here is protection from the low chance of a BlackBerry turnaround.

The investment also gives BlackBerry some time to take itself out of the deal rumor mill and try to repair itself. BlackBerry’s current chief executive, Thorsten Heins, also announced his resignation on Monday. BlackBerry will have to find a new C.E.O. who is willing to take on this task, a tall order to say the least.

And so, the best spin on this investment is that it buys BlackBerry more time for an overhaul (or perhaps to get a bidder to change its mind), while also positioning some of its major investors to protect themselves if the turnaround effort fails.



SAC Capital Agrees to Plead Guilty to Insider Trading

SAC Capital Advisors has agreed to plead guilty to insider trading violations and pay a record $1.2 billion penalty, becoming the first large Wall Street firm in a generation to confess to criminal conduct. The move caps a decade-long investigation that turned a once mighty hedge fund into a symbol of financial wrongdoing.

The guilty plea and fine paid by SAC, which is owned by the billionaire investor Steven A. Cohen, are part of a broader plea deal that federal prosecutors in Manhattan announced on Monday. It will also require SAC to wind down its business of managing money for outside investors, though the firm will probably continue to manage Mr. Cohen’s fortune.

SAC’s case could inspire other aggressive actions against Wall Street, as the Justice Department’s uneven crackdown on financial fraud has gained momentum in recent months. Coming just days before JPMorgan Chase is expected to finalize a $13 billion settlement with the government over the bank’s questionable mortgage practices, the SAC case could stem concerns that financial firms are too big to charge.

In a letter to the court, Preet Bharara, the United States attorney in Manhattan, called the penalty “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct.” The letter explained that SAC agreed to plead guilty to every count in the indictment.

The government scheduled a press conference for Monday afternoon to discuss the deal. A spokesman for SAC, which is based in Stamford, Conn., did not have an immediate comment on the guilty plea.

Mr. Cohen, whose enormous compensation and conspicuous consumption have made him an emblem of the new Gilded Age, has not been charged criminally. Still, the plea deal is a devastating blow to Mr. Cohen, as the firm that bears his initials will acknowledge that it was a corrupt organization.

SAC’s admission that several of its employees traded stocks based on secret information also colors Mr. Cohen’s astounding investment track record. Since 1992, the fund posted average annual returns of nearly 30 percent; during that same stretch, the Standard & Poor’s 500-stock index returned about 6.6 percent, on average.

The $1.2 billion penalty adds to the $616 million in insider trading fines that SAC agreed to pay to federal regulators earlier this year. Mr. Cohen, who owns 100 percent of the firm, will pay those penalties.

SAC’s total $1.8 billion punishment sets a record for insider trading cases and surpasses those of other noteworthy financial prosecutions. Raj Rajaratnam, the fallen hedge fund titan serving an 11-year prison sentence for insider trading, was ordered to pay about $157 million.

Many have drawn comparisons between Mr. Cohen and Michael R. Milken, the junk bond pioneer at Drexel Burnham Lambert who became synonymous with financial greed during the go-go 1980s. After pleading guilty to securities fraud charges, Mr. Milken paid about $1 billion in penalties, adjusted for inflation. To avoid an indictment a quarter century ago, Drexel pleaded guilty to securities fraud, the last big Wall Street firm to enter a guilty plea before SAC.

A resolution of the criminal case against SAC comes more than three months after a grand jury indicted the fund for permitting a “systematic” insider trading scheme to unfold from 1999 through 2010. The government had built the charges around eight former SAC traders charged with securities fraud. Six of those traders have pleaded guilty and are cooperating with the government. Two others are fighting their indictments and are awaiting trial.

“The scope and the pervasiveness of the insider trading that went on at this particular place is unprecedented in the history of hedge funds,” Mr. Bharara, the United States attorney in Manhattan, said this summer, referring to SAC.

Mr. Cohen, 57, has told his friends that he at all times acted appropriately and complained that the government was obsessed with destroying him and his firm. He has also said he thinks it is unfair that he is paying nearly $2 billion in penalties out of his pocket for the crimes of what he believes are rogue employees.

In recent weeks, friends say, Mr. Cohen’s spirits have been high in the hopes that the SAC settlement will put his legal problems behind him. On Wednesday, he appeared relaxed sitting courtside at Madison Square Garden, where he watched the New York Knicks defeat the Milwaukee Bucks in the season opener.

But Mr. Cohen is not out of the woods.

The plea deal does not incorporate a separate civil action the Securities and Exchange Commission brought against Mr. Cohen. Filed a week before the SAC criminal indictment was announced, the lawsuit accused him of turning a blind eye to misconduct at his fund. The S.E.C. is seeking to bar Mr. Cohen from ever managing outside money, at SAC or elsewhere, people briefed on the matter said.

Criminal authorities also continue to view Mr. Cohen and other SAC employees as targets of a continuing insider trading investigation. F.B.I. agents, the people said, are examining SAC’s trading records and seeking the cooperation of potential informants. The plea agreement expressly states that it “provides no immunity from prosecution for any individual.”

Still, SAC’s guilty plea serves as a capstone moment in the government’s vast insider trading investigation. Led by federal authorities in Manhattan, the inquiry began in earnest during the middle of the last decade using techniques normally reserved for organized crime and drug trafficking cases. F.B.I. agents used wiretaps to secretly record the telephone conversations of Wall Street traders. They also pressured low-level traders to cooperate and help build cases against their colleagues and bosses.

The crackdown has resulted in more than 70 convictions, including those of Mr. Rajaratnam and his former friend Rajat K. Gupta, the onetime head of the consulting firm McKinsey & Company. But SAC is the first corporate entity charged with insider trading since the investigation began.

Guilty pleas by financial institutions are exceedingly rare, and legal specialists say the case against SAC could embolden prosecutors to bring criminal charges against other Wall Street firms. The Justice Department has been reluctant to go after big companies in the wake of the 2002 indictment of Enron’s accounting firm, Arthur Andersen, which led to the firm’s swift collapse and the loss of 28,000 jobs.

But a policy shift appears to be afoot. Mr. Bharara, who according to people briefed on the matter is also weighing a criminal charge against JPMorgan Chase related to its role as Bernard L. Madoff’s banker, has argued that corporations should face the consequences of financial misdeeds. The S.E.C. has also begun to demand admissions of wrongdoing from corporate defendants, a change from its historical practice of not requiring an acknowledgment of misconduct.

“The pendulum had swung too far back the other way,” Mr. Bharara said in September. “I think we should be entering a serious era of institutional accountability, not just personal responsibility.”

Brandon L. Garrett, a professor at the University of Virginia School of Law and author of the forthcoming book, “Too Big to Jail: How Prosecutors Target Corporations,” said that while environmental and antitrust inquiries frequently resulted in corporate indictments, financial fraud investigators were just now “starting to see the light.”

“Prosecutors have increasingly been saying that no company is too big to jail, and now they can point to the SAC case and say ‘we really mean it,’” Mr. Garrett said.

These cases can exact a significant toll. In the case of Drexel, the guilty plea caused the firm to unravel and ultimately collapse.

By contrast, SAC appears fit for survival. Although the indictment threatened to cripple the fund, the government tried to limit the collateral damage that might have been inflicted on the fund’s investors and trading counterparties. Prosecutors did not freeze SAC’s assets and encouraged brokerage firms to continue to trade with the fund.

And the government’s demand that SAC stop managing client assets is largely symbolic. Nearly all of the fund’s investors have already pulled their money. But SAC was always more insulated than other hedge funds from the damaging effects of withdrawals because of the $15 billion it managed at its peak, only $6 billion was from outside investors.

The balance, about $9 billion, belongs largely to Mr. Cohen, with a fraction consisting of employees’ money. In the wake of the guilty plea, SAC will likely morph into a so-called family office, with Mr. Cohen managing his personal wealth.

It is unclear how many traders and staff members Mr. Cohen will employ, but SAC has begun to substantially pare back its operations. The fund, which recently employed more than 1,000 people in 10 offices around the world, has said it will shut its 50-person London unit by year-end. It also has cut six portfolio management teams based in the United States.

Though SAC management has told its staff that there will be no more cuts, it expects some traders to leave after receiving their year-end bonuses. The fund’s performance year to date has been solid - it is up more than 13 percent.

SAC had an unusual structure, with Mr. Cohen sitting atop a decentralized firm in which about 140 small teams each had control over hundreds of millions of dollars to invest. The teams were all required to share their best investment ideas with Mr. Cohen, who managed the largest trading account with several billion dollars in capital. SAC attracted ambitious, talented traders and promised them outsize compensation as long as they performed. In good years, the fund’s top talent earned tens of millions of dollars in annual pay.

Mr. Cohen was able to pay such compensation because, on the strength of superior performance, he charged among the highest annual fees in the hedge fund industry - 3 percent of assets and as much as 50 percent of profits. The average hedge fund charges a 1.5 percent management fee and 20 percent of the gains.

Though it branched into other investment strategies, SAC’s stock in trade was its so-called mosaic style of investing, using disparate sources of information to buy and sell stocks around market-moving events like quarterly earnings, big mergers and new products. His traders became known for aggressively pumping their sources for insights that would give them an edge, and speculation persisted that the fund routinely crossed the line into trading on confidential information.

Since early 2011, the government secured a series of guilty pleas that gave legitimacy to the speculation and ultimately underpinned the government’s indictment of SAC. Noah Freeman, a Harvard graduate, told investigators that he thought insider trading was part of his job description. Richard Choo-Beng Lee, a Malaysian immigrant with an engineering degree, said he freely trafficked in secret corporate information about technology companies. Richard S. Lee, who worked at the Clinton Foundation and McKinsey before pursuing riches on Wall Street, admitted to trading on leaks about corporate restructurings and acquisitions.

The trading of two other former SAC portfolio managers, Mathew Martoma and Michael S. Steinberg, is also central to the indictment. Prosecutors have accused Mr. Martoma of using confidential drug trial information to trade the stocks of the pharmaceutical companies Elan and Wyeth.

In bringing charges against Mr. Martoma, prosecutors appeared to be closing in on a case against Mr. Cohen. Prosecutors said Mr. Martoma spent 20 minutes on the telephone with Mr. Cohen the day before SAC made questionable trades in the drug stocks. But the government stopped short of saying Mr. Martoma told Mr. Cohen about the secret trial data. Mr. Martoma has refused to cooperate with investigators, and his trial is set for January.

Mr. Steinberg stands accused of trading on inside information about the computer maker Dell. Jon Horvath, a former SAC analyst who worked under Mr. Steinberg, has pleaded guilty and is expected to testify against Mr. Steinberg at his trial, which is scheduled to begin on Nov. 18.

From this batch of cases against SAC employees, the government in July brought a 41-page indictment against the fund in that included four counts of securities fraud and one count of wire fraud. Prosecutors argued that SAC allowed its traders to generate hundreds of millions of dollars in profit from insider trading. The fund, the government said, “enabled and promoted” the illicit behavior.

SAC pleaded not guilty. But in the weeks that followed, SAC had little to do but strike a deal.

The law of corporate criminal liability, which allows the government to attribute the criminal acts of employees to the company itself, buttresses the case. With six former SAC employees having pleaded guilty to insider trading while at the fund - and the employees very likely to have testified at a trial - SAC’s defenses were few.

Mr. Cohen’s troubles have hardly slowed down his prodigious buying and selling of real estate and art. This year, he purchased a $60 million oceanfront property in the Hamptons while at the same time putting his Manhattan penthouse on the market for $115 million. Last fall, he paid $150 million for Picasso’s “Le Rêve,” one of the highest prices ever for a painting. But next week, at the contemporary sales at Sotheby’s, he will put up for auction about $80 million worth of art, including two Warhols and a Richter.



Men’s Wearhouse Rejects Jos. A. Bank Again

Men’s Wearhouse again rebuffed a $2.3 billion takeover bid by Jos. A. Bank on Monday, refusing to allow it confidential access to its books. The move may be the last salvo in the battle to combine two of the country’s biggest retailers of men’s suits.

The refusal comes only four days after Jos. A. Bank sent a letter to Men’s Wearhouse, dangling the prospects of raising its offer above $48 a share if it was allowed to conduct due diligence.

But the quick response by Men’s Wearhouse â€" well before the Nov. 14 deadline that’s. A. Bank had set â€" reflected the company’s strong opposition to the takeover campaign. In a statement on Monday, Men’s Wearhouse again criticized the unsolicited bid as highly conditional and reiterated its belief that its own turnaround plan would be better for shareholders.

“We are enthusiastic about Men’s Wearhouse’s prospects and are confident that our strategic plan will deliver more value to our shareholders than Jos. A. Bank’s inadequate, highly conditional proposal,” Douglas S. Ewert, the company’s chief executive, said in the statement.

Jos. A. Bank’s chairman, Robert Wildrick, has said that if Men’s Wearhouse continued to prove unwilling to even begin talks, his company would have no choice but to walk away and focus on its own strategic initiatives.

Shares in Men’s Wearhouse dropped nearly 4 percent in early morning trading on Monday, to $41.68.

Jos. A. Bank first announced its takeover approach in September, hoping to combined with its larger rival to create the country’s biggest specialist in selling men’s suits.

The bid came several weeks after Men’s Wearhouse ousted its founder and chairman, George Zimmer, for pressing the idea of taking the retailer private in an effort to revive its fortunes.

Men’s Wearhouse is being advised by Bank of America Merrill Lynch, JPMorgan Chase and the law firm Willkie Farr & Gallagher.



Twitter Raises Price Range for I.P.O.

Twitter has raised the price range for its initial public offering to $23 to $25, signaling the company’s bullish outlook ahead of its trading debut on Thursday.

At the midpoint of that range, the offering would raise about $1.7 billion for the company. Twitter still intends to sell 70 million shares in its debut. At the high end of the new range, Twitter would be valued at $13.6 billion.

On Oct. 24, the company said that it planned to sell 70 million shares at $17 to $20 each. That was below what some analysts had expected.

The new price range also increases Twitter’s potential market value.

Coming ahead of pricing for the company, which is to take place on Wednesday, the boosting of the price range suggests Twitter is emboldened after its road show. Orders for Twitter stock from institutional investors were strong, and the offering was oversubscribed, according to people with knowledge of the matter.

The new price range also signals that Twitter is unconcerned it will make one of the same mistakes that hampered Facebook‘s I.P.O. last year, when the rival social media company priced its shares too aggressively, contributing to an initial fall in its share price.



BlackBerry Abandons Effort to Sell Itself; C.E.O. to Step Down

Thorsten Heins, the chief executive of BlackBerry, will leave the company  following the collapse of a tentative takeover offer from the ailing smartphone maker’s largest shareholder, the company said on Monday.

Instead of purchasing BlackBerry and taking it private, the largest shareholder, Fairfax Financial Holdings, and an unnamed group of institutional investors will invest $1 billion through debentures which can be converted into common shares at a price of $10 a share.

There has long seen skepticism about the ability of Fairfax  to turn its tentative offer, which values BlackBerry at $4.7 billion, into a firm bid. Since Fairfax first made the offer in September, BlackBerry’s shares never rose to its $9 a share price.

John S. Chen, the former chief executive of Sybase, will become BlackBerry’s executive chairman and the acting chief executive.

The cash infusion into BlackBerry will also see the return of V. Prem Watsa, the chairman and chief executive of Fairfax, to the phone maker’s board. Mr. Watsa had resigned after the company announced that it was reviewing strategic options, including a sale, in the fall.

Mr. Heins, a former Siemens executive in Germany, became chief executive in January 2012 after Jim Balsillie and Mike Lazaridis, the longtime co-chairmen and co-chief executives, resigned in the face of a rapid decline in BlackBerry’s business and the failure of its PlayBook tablet computer.

Formerly the head of the company’s handset business, Mr. Heins heavily promoted the new line of BlackBerry 10 handsets as the company’s salvation. They proved, however, to be a commercial failure setting off the company’s collapse.

Mr. Chen led Sybase from 1998 until the company was acquired by SAP of Germany in 2010. More recently, he has been a senior adviser to the private equity firm Silver Lake Partners, which, with Michael S. Dell, recently took Dell private.

It is unclear if the investment by Fairfax will affect an attempt by group that includes Mr. Lazaridis and Doug Fregin, the other co-founder of BlackBerry, as well as Qualcomm, which makes the chips inside BlackBerry phones and the private equity firm Cerberus Capital Management to make a bid for the company. Other companies have also looked into BlackBerry as a potential acquisition although it is not clear if they have any interest in a bid.



BlackBerry Abandons Effort to Sell Itself; C.E.O. to Step Down

Thorsten Heins, the chief executive of BlackBerry, will leave the company  following the collapse of a tentative takeover offer from the ailing smartphone maker’s largest shareholder, the company said on Monday.

Instead of purchasing BlackBerry and taking it private, the largest shareholder, Fairfax Financial Holdings, and an unnamed group of institutional investors will invest $1 billion through debentures which can be converted into common shares at a price of $10 a share.

There has long seen skepticism about the ability of Fairfax  to turn its tentative offer, which values BlackBerry at $4.7 billion, into a firm bid. Since Fairfax first made the offer in September, BlackBerry’s shares never rose to its $9 a share price.

John S. Chen, the former chief executive of Sybase, will become BlackBerry’s executive chairman and the acting chief executive.

The cash infusion into BlackBerry will also see the return of V. Prem Watsa, the chairman and chief executive of Fairfax, to the phone maker’s board. Mr. Watsa had resigned after the company announced that it was reviewing strategic options, including a sale, in the fall.

Mr. Heins, a former Siemens executive in Germany, became chief executive in January 2012 after Jim Balsillie and Mike Lazaridis, the longtime co-chairmen and co-chief executives, resigned in the face of a rapid decline in BlackBerry’s business and the failure of its PlayBook tablet computer.

Formerly the head of the company’s handset business, Mr. Heins heavily promoted the new line of BlackBerry 10 handsets as the company’s salvation. They proved, however, to be a commercial failure setting off the company’s collapse.

Mr. Chen led Sybase from 1998 until the company was acquired by SAP of Germany in 2010. More recently, he has been a senior adviser to the private equity firm Silver Lake Partners, which, with Michael S. Dell, recently took Dell private.

It is unclear if the investment by Fairfax will affect an attempt by group that includes Mr. Lazaridis and Doug Fregin, the other co-founder of BlackBerry, as well as Qualcomm, which makes the chips inside BlackBerry phones and the private equity firm Cerberus Capital Management to make a bid for the company. Other companies have also looked into BlackBerry as a potential acquisition although it is not clear if they have any interest in a bid.



Home Builders to Merge in $2.7 Billion Deal

TRI Pointe Homes, the West Coast builder controlled by Barry S. Sternlicht’s Starwood Capital, is merging with the home-building subsidiary of Weyerhaeuser, a large owner of timberlands, in a deal valued at $2.7 billion.

The merger will create one of the 10 biggest home builders in the country, a combined company that will own or control some 27,000 lots in fast-growing markets, the companies said on Monday.

The deal will employ a transaction structure known as a “reverse Morris trust” that enables the merger to be tax free. Weyerhaeuser will spin off or split off its real estate subsidiary, with the shares going to Weyerhaeuser shareholders. That new company will merge with a subsidiary of Tri Pointe, with Weyerhaeuser shareholders owning 80.5 percent of the combined company on a fully diluted basis.

Those shareholders will receive 130 million shares of Tri Pointe, or $2 billion based on Tri Pointe’s closing stock price of $15.38 on Friday. The Weyerhaeuser real estate subsidiary will also make a $700 million cash payment to Weyerhaeuser.

Mr. Sternlicht will continue as chairman of the board of Tri Pointe, and Doug Bauer will continue to serve as chief executive of the company. Tri Pointe, based in Irvine, Calif., was the first home builder to go public since the housing crisis, making its market debut in January 2013 at $17 a share.

Weyerhaeuser will select four directors for the Board, while Tri Pointe will select five.

Deutsche Bank and the law firm Gibson, Dunn & Crutcher advised Tri Pointe. Citigroup and Morgan Stanley are serving as financial advisers to Weyerhaeuser, and Cravath, Swaine & Moore is its legal adviser.



Hedge Funds Plan Proxy Battle for Shopping Network ValueVision Media

Two activist hedge funds, Clinton Group and Cannell Capital, have joined forces to mount a proxy battle for control of the internet and television shopping network ValueVision Media.

Clinton Group, which manages $1.5 billion in assets, began publicly agitating for change last week, calling for the company’s chief executive and some of its board members to step down.

It plans to announce later on Monday that it has filed a request demanding a special meeting for shareholders, according to a person briefed on the firm’s plans.

The hedge fund is expected to propose a list of board candidates that includes Thomas D. Mottola, the former chairman and chief executive of Sony Music Entertainment, and Thomas D. Beers, the chief executive of FremantleMedia, the producer of “American Idol” and “The X Factor.”

ValueVision, which sells jewelry, watches and appliances, has lagged behind its peers the Home Shopping Network and QVC, despite similar distribution numbers. ValueVision’s network reaches more than 86 million satellite and cable homes, while HSN reaches 95 million.

Clinton Group wants Keith Stewart, the chief executive officer, to relinquish his position, contending that under his leadership the company has consistently missed its targets and has fallen further behind its rivals in terms of revenue and market capitalization.

In a letter addressed to ValueVision’s chairman Randy S. Ronning last week, Clinton Group’s president, Gregory P. Taxin, said the company “has great assets, a big opportunity for growth and a chance to create significant shareholder growth.”

The hedge fund met with ValueVision’s chairman, Randy S. Ronning, and Sean Orr, an independent director, in September, and exchanged phone calls, according to the letter.

In response, the company said last week that it would “take the time necessary to thoroughly evaluate the Clinton letter,” but added that it supported the current management.

Clinton Group is expected to call for Mr. Ronning to step down along with five of the seven current board members. It will also propose expanding the board to nine members and has a list of candidates including a former chief executive at rival HSN.

Collectively, Clinton Group and Cannell Capital have a 10 percent stake, which entitles them to call for a vote with shareholders.

ValueVision’s share price closed at $5.21 on Friday and has fallen 3.9 percent since Clinton Group publicly disclosed its interest in the company.



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