JPMorgan Reaches $4.5 Billion Settlement With Investors

The checks from JPMorgan Chase just keep on coming as the nation’s largest bank works to move beyond its mortgage-related troubles.

On Friday, JPMorgan reached a $4.5 billion settlement with a group of investors over claims that the bank sold them shaky mortgage-backed securities that imploded later, leading to large losses.

The multibillion-dollar payout is separate from the tentative $13 billion settlement that JPMorgan reached with the Justice Department over the bank’s questionable mortgage practices in the run-up to the financial crisis. That deal could be announced as early as next week, according to people briefed on the settlement.

The move on Friday to settle with the group, comprising 21 institutional investors, comes as JPMorgan and its chief executive, Jamie Dimon, work to mend frayed relationships in Washington and wrap up a number of investigations dogging the bank.

The $4.5 billion will go to trustees that oversee 330 residential mortgage-backed securities trusts. The deal covers investments sold between 2005 and 2008 by JPMorgan, along with those sold by Bear Stearns â€" the beleaguered firm that JPMorgan scooped up in the depths of the financial crisis. But the settlement does not include claims related to mortgage-backed securities sold by Washington Mutual, another bank that JPMorgan acquired during the crisis. The deal still has to be approved by the court and by the trustees.

That group, which includes large trustees like BNY Mellon, already reached an $8.5 billion settlement with Bank of America.

The terms of the deal with JPMorgan were hashed out earlier this week, according to people briefed on the matter. Wrapping up this looming lawsuit was a priority within the bank, the people said.

Still, JPMorgan faces lawsuits related to its mortgage practices, according to a review of JPMorgan’s corporate filings. Still pending, for example, is private litigation related to more than $100 billion worth of residential mortgage-backed securities. Bracing for such additional legal costs, JPMorgan has set aside a $23 billion cushion for litigation reserves â€" a figure that the bank disclosed for the first time last month.

Weekend Reading: JPMorgan’s Strategy in China

The daughter of China’s former prime minister used the alias “Lily Chang” while working for JPMorgan Chase. In fairness, we should reveal that DealBook sometimes comments anonymously under the pseudonym of Bargain Literary Work.

A look back on our reporting of the past week’s highs and lows in finance.

FRIDAY, NOV. 15

Jury Finds Pipe Maker Defrauded Governments | The jury’s decision entitles the states and municipalities to be compensated for their losses by the manufacturer, JM Eagle, a private company based in Los Angeles. DealBook »

THURSDAY, NOV. 14

U.S. Investigates Currency Trades By Major Banks | Investigators say groups of traders from several major banks may have influenced currency benchmarks to benefit their employers â€" actions that may not have been illegal but do highlight lax regulation. DealBook »

Chief’s Vision for Big Bank Is Showing Some Success | Morgan Stanley’s stock is up 59 percent this year, reflecting its growing skill at avoiding the sort of squalls that battered it in recent years. DealBook »

Carnegie Mellon to Get a $67 Million Donation | David Tepper’s donation brings his total giving to Carnegie Mellon in the last decade to more than $125 million. DealBook »

Speculation Over the Sale of Artworks From Cohen’s Collection | The answer to the whispered question at art auctions this week â€" “How’s Steve’s stuff selling?” â€" in the wake of the guilty plea by Steven A. Cohen’s hedge fund, SAC Capital Advisors. DealBook »

Virtual Money Draws Notice Of Regulators | New York’s financial services superintendent, Benjamin M. Lawsky, will conduct a hearing on the feasibility of methods making the virtual currency market more like that for more traditional money. DealBook »

High & Low Finance: When a Deal Goes Bad, Blame The Ratings | A suit by the trustee for two Bear Stearns funds contends that managers relied on ratings by the major credit agencies in purchasing risky securities just before the financial crisis, writes Floyd Norris. DealBook »

WEDNESDAY, NOV. 13

Bank’s Fruitful Ties to a Member of China’s Elite | A contract shows that JPMorgan Chase’s relationship with the daughter of China’s former prime minister points to its strategy for building influence in China. DealBook »

After a Prominent Case, a Return to Law | Kramer Levin Naftalis & Frankel is expected to name John P. Coffey, who defended the former Goldman Sachs trader Fabrice Tourre this summer, as chairman of its complex-litigation group. DealBook »

News Analysis: Tax Wizardry Accomplished With an Offbeat Merger | Tax avoidance mechanisms are mostly legal and take advantage of rules written in the days when assets were tangible and difficult to move. DealBook »

TUESDAY, NOV. 12

DealBook Conference: Opportunities for Tomorrow Video and reports from Q. and A. sessions with Valeria Jarrett, Elon Musk, Daniel S. Loeb, David Karp and other executives in finance, innovators in technology and regulators in New York and Washington. DealBook »

Justice Dept. Clears Airlines’ Merger | US Airways and American Airlines reached a settlement with the Justice Department that will allow the two companies to go forward with their merger. DealBook »

Treasury Official Picked for Futures Trading Panel | If approved by the Senate, the senior Treasury official would go from overseeing the end of TARP to policing risky activity on Wall Street. DealBook »

Federal Regulators Unveil Rules on Their Sometime Proxies, Bank Consultants | The Office of the Comptroller of the Currency has adopted rules for how banks employ the groups sometimes called Wall Street’s “shadow regulators.” DealBook »

Back Injury Puts Football Player on I.P.O. Delayed List | Investors will have to wait for Arian Foster, a running back for the Houston Texans, to recover from back surgery to buy shares related to his earnings. DealBook »

Deal Professor: In a Child’s Lemonade Stand, the Transformation of a Corporation | Make a Stand sells fair trade, organic lemonade as a new type of corporate entity, a for-profit company that raises money for social causes, writes Steven M. Davidoff. DealBook »

MONDAY, NOV. 11

3 Ratings Agencies Sued in Bear Stearns Case | Liquidators seeking to recover money for investors in two hedge funds filed the lawsuit on Monday against Standard & Poor’s, Fitch and Moody’s. DealBook »

Injuries to I.P.O. Players Raise Questions on Plan | Fantex, the start-up that is promoting initial public offerings of football stars, had a setback on Sunday when its first two prospects were sidelined because of injuries. DealBook »

DEALBOOK SPECIAL SECTION

Graphic: Where Credit Is Due | Starting from a simple loan, credit markets have featured many innovations as well as costly crises. Track the history of debt from 400 B.C. to today. The New York Times »

DealBook Column: Plan to Finance Philanthropy Shows the Power of a Simple Question | Several ideas about using financial instruments and a for-profit approach in the world of nonprofits are now taking hold, writes Andrew Ross Sorkin. DealBook »

Boardrooms Rethink Tactics to Defang Activist Investors | After trying to ignore shareholder activism, companies are realizing that preparation and engagement can bring better results. DealBook »

The Rush to Coin Virtual Money With Real Value | Bitcoin’s emergence has brought a field of competitors. One payment system, Ripple, serves as a platform for currencies both digital and real. DealBook »

For Better Performance, Hedge Funds Seek the Inner Trader | The industry is increasingly turning to self-help programs, sometimes referred to as “mindware” products, to try to improve its game. DealBook »

Slowing the Revolving Door Between Public and Private Jobs | Countless prosecutors, regulators and congressional aides swap their government résumés for seven-figure salaries at law firms and lobbying shops. DealBook »

For $99, Eliminating the Mystery of Pandora’s Genetic Box | Anne Wojcicki, the co-founder and chief executive of 23andMe, the DNA testing start-up, discusses the future of genetics and health care. DealBook »

Stepping Up With a Plan to Save American Cities | Borrowing an idea from New York’s fiscal crisis, a municipal bankruptcy expert is trying to help troubled communities restructure their pension debts. DealBook »

Strategies: One Answer to the Index Fund: Build a Better Index | Funds based on so-called fundamental indexes try to beat the market by giving value stocks greater weight, writes Jeff Sommer. DealBook »

Another View: Honesty That Benefits All | Doug Steiner, a consultant at a behavioral economics firm, discusses studies that show how minor changes to work practices can have effects on honesty. DealBook »

Deal Professor: The Case Against Too Much Independence on the Board | While crony-filled boards are gone, Steven M. Davidoff argues there is no evidence that a supermajority of independent directors does any better. DealBook »

Private Equity’s Online Courtship | For private equity firms, the process of finding investors may soon be as simple as logging on to a website. DealBook »

Separating the Market-Moving Tweets From the Chaff | Wall Street has recognized the value of Twitter as an investing tool, but a question remains about how best to sift half a billion daily messages to gain an edge on the market. DealBook »

White Collar Watch: Markets Evolve, as Does Financial Fraud | Regulators and investors face the challenge of finding the fine line between permissible trading and market manipulation, writes Peter J. Henning. DealBook »

Life@Work: Powering Employees With More Than a Paycheck | Employers need to look beyond the payroll and invest more generously in employees’ physical, emotional, mental and spiritual needs, writes Tony Schwartz. DealBook »

Rules Force Banks to Innovate for Survival | Despite the industry’s complaints of overbearing regulation, it has responded to a government overhaul by starting to innovate to maintain profits. DealBook »

SUNDAY, NOV. 10

BlackBerry’s Woes Draw Canada’s Contrarian Mogul Into Spotlight | The saving of BlackBerry may represent a patriotic, as well as a personal, calling to V. Prem Watsa, an immigrant success story. But he is not used to dealing in as public an arena as the wounded tech company does. DealBook »

Nitro Circus, Brash Athletic Brand, To Merge With Touring Company | The high-octane entertainment brand will announce that the separate entities that produced the live shows and television programs are becoming one company. DealBook »

WEEK IN VERSE

‘In the Air Tonight’ | From their desks at some of the world’s biggest banks, traders exchanged a series of instant messages that earned them the nickname “the cartel.” YouTube »

‘I Think I Love You’ | JPMorgan Chase’s strategy for accumulating influence in China: Put the relatives of the nation’s ruling elite on the payroll. YouTube »

Convoluted Language Makes Cooper Tire Deal Harder to Execute

Cooper Tire is facing more legal issues in its snarled deal with Apollo Tyres Ltd. of India.

Last week, Vice Chancellor Sam Glasscock III of the Delaware Chancery Court ruled that Apollo Tyres had not breached its agreement to acquire Cooper Tire.

Cooper had previously accused Apollo of acting in bad faith after Apollo tried to renegotiate the terms of the deal. That came after Cooper Tire had problems at its Chinese joint venture operations and received a surprise arbitrator ruling requiring that Cooper Tire renegotiate its contracts with the United Steelworkers.

The basis of the ruling lies in convoluted provisions of Cooper and Apollo’s acquisition agreement. And it leaves Cooper with few good options.

To understand the crux of the ruling, we need to step back and look at the acquisition agreement provisions that the two tire companies negotiated at the time that the deal was announced in June. The vice chancellor’s ruling focused on two provisions that are required of Apollo.

Section 6.3 of the acquisition agreement requires that Apollo “in the most expeditious manner possible” use its “reasonable best efforts” to obtain all necessary consents “under any applicable laws.” This provision, which is in every acquisition agreement, generally requires Apollo to obtain regulatory clearance for the transaction for things like antitrust approvals. That is what obtaining consents under “applicable laws” refers to.

Section 6.12 of the acquisition agreement requires that Apollo use its “reasonable best efforts” to obtain all third-party consents that “may be required in connection with the consummation of the merger” based on the terms of any contract set forth on an undisclosed schedule to the acquisition agreement.

This provision is meant to deal with consents to outside parties, like provisions in contracts requiring consent for their transfer.

The big difference between the two provisions is that Section 6.3 requires that the party to act “expeditiously” while Section 6.12 does not. In addition, Section 6.12 specifically says that no payment is required to obtain any third-party consents that are listed.

Not surprisingly, Cooper Tire argued that Section 6.3 applied because it wants Apollo to move as fast as possible. Because the United Steelworkers could get an injunction any time to enforce their agreement, Cooper Tire argued that the provision applied. Why elevate form over substance by waiting for the union to sue?

Apollo countered that neither Sections 6.3 nor 6.12 applied. Section 6.3 concerned only legal clearances, it argued, and an arbitrator’s ruling was nothing of the sort. And it argued that Section 6.12 referred only to the contracts that are listed on a schedule to the agreement. Apollo noted that the United Steelworkers contract was not listed on the schedule. In such a case, Apollo was not required to do anything to renegotiate the United Steelworkers contracts.

Apollo’s argument was based on the fact that when the two parties negotiated this agreement, they did not want to acknowledge in any way that the steelworkers’ contracts might be required to be renegotiated in connection with the takeover.

Indeed, Cooper and Apollo thought the contract’s change-of-control provisions applied only to sale of the covered plants directly, not the entire company. Cooper Tire and Apollo didn’t want to give any reason for the United Steelworkers to argue the opposite, and so they didn’t draft a specific provision to show how the parties should conduct themselves if the contracts were required to be renegotiated.

Not only that, but Section 6.12 did not specifically reference the union contracts, meaning its provisions arguably did not require Apollo to negotiate anything with the United Steelworkers.

This delicate provision, which the two companies thought would sidestep labor issues, has now blown up into litigation. The steelworkers won an arbitration ruling that found that their contracts did need to be renegotiated, and Apollo is now asking for a price reduction to compensate the company for any raises it must give under the renegotiated contracts.

Vice Chancellor Glasscock’s ruling addressed the issue that the parties deliberately did not address. He ruled that Section 6.3 did not apply because “applicable law” did not include an arbitration ruling, only governmental orders and the like.

Then he did something curious. He ruled that Section 6.12 also did not apply because the United Steelworkers contracts were not listed on the disclosure schedules. However, once the arbitrator had ruled, the clause sprang back to life and now required Apollo to negotiate a new contract because it was now a contract “required in connection with the consummation of the merger,” even though it was not listed on the schedule.

Judge Glasscock’s ruling is a bit of a tortured reading. Section 6.12 seems to say on its face that it applies only to contracts listed on the schedule, and the United Steelworkers contract is not listed. Even if it were listed, there is a second provision in Section 6.12 that says no payments are required in connection with any efforts undertaken to obtain consents under the contracts listed there. The only way Judge Glassock’s ruling makes sense is to interpret the clause as requiring things beyond the listed contracts, something that does not appear to be the natural reading but may have been supported by the evidence at trial.

Despite applying Section 6.12, Judge Glasscock still found for Apollo. He ruled that Apollo did indeed use reasonable best efforts by meeting with the steelworkers’ union to try to negotiate. This was despite the fact that Apollo had also asked for a price reduction from Cooper because of this issue.

The ruling leaves Cooper Tire in a bind. With Apollo found to be not in breach of this agreement, Apollo’s delay in closing the deal is now judicially approved. As I discussed in a previous column, a delay for Cooper Tire means it needed to provide Apollo third-quarter financials this week, or the banks could arguably refuse to finance the acquisition. Cooper has already said that it can’t do that. If Cooper doesn’t produce these financials, then Apollo can terminate the agreement for Cooper’s breach.

So what happens next?

Cooper has appealed to the Delaware Supreme Court, an appeal the court accepted to hear on Wednesday. But even though the court will take up the case, I don’t think it means much. It will be a steep uphill battle for Cooper.

The judge’s bench ruling is vague in some points and the reading of the agreement is not the natural one. These are the perils of an oral rather than written decision as the judge did here when he ruled at the end of the trial. Nonetheless, it appears clear that the basis of his ruling is a factual one that Apollo used “reasonable best efforts” to negotiate with the United Steelworkers.

The Delaware Supreme Court will defer to Vice Chancellor Glasscock on his finding of the facts. Cooper will try to counter this by arguing that there are legal issues here - namely, if you ask for a price reduction for an already agreed-to deal, it is per se acting in bad faith.

In addition, Cooper will try to argue that the opinion seems to say that that the standard for reasonable best efforts was not set correctly. It appears that the judge found that reasonable best efforts can include asking for a price reduction, something that would upset the takeover world due to its effect on future deals.

Meanwhile, Apollo will just reargue its old points â€" and that if anything, Section 6.12 doesn’t even apply.

Cooper knows it has an uphill battle. Its success on appeal will ultimately depend on how convincing this argument is to the Supreme Court judges and how much a policy impact the judges think this ruling will make if not overturned. After all, the Delaware Supreme Court seems particularly strategic in overruling the lower Chancery Court, appearing to overturn the lower court most often when reputational issues of the Delaware courts are at stake.

As for Apollo, it might not decide to exercise its right to terminate the agreement when Cooper arguably breaches the agreement by failing to deliver the third-quarter financials.

Instead, Apollo could let the acquisition hang until the drop dead date of Dec. 31. Such a stance would give Apollo a public-relations coup by showing it still wants to negotiate. And if this is really true, it makes sense for Apollo to keep the agreement alive as it is easier to renegotiate an agreement than resurrect a dead deal.

All in all, it still remains the case that Cooper Tire still has a lot of hoops to go through for $35 a share, and things just became a little more difficult.

Zulily Surges in Market Debut

It may not be a globally popular social network or a highly regarded human resources software company. But Zulily is finding plenty of demand from investors all the same.

Shares in the retailer, which focuses on flash sales of products for children and mothers, jumped more than 80 percent in their market debut on Friday. Even by early afternoon, the stock was still up 72 percent, at $37.85.

It was an auspicious opening for Zulily, which had already priced its offering at $22 a share, $2 above its expected range. Over all, the company raised $253 million, but could raise more if underwriters exercise an overallotment option.

Now, the public markets value the three-year-old retailer at roughly $4.6 billion.

Zulily’s glowing reception will probably change what Dan Primack of Fortune described as a virtual lack of interest from the technology press. Unlike Twitter or Workday, the company isn’t a hot technology stock. It sells goods like the Bubblegum Vintage Kitchen, a Hogwarts train set from Lionel and women’s sweaters.

That may not excite the technology enthusiasts at the Creamery Cafe in San Francisco, but it has created a fast-growing business. Zulily more than doubled its sales in the first nine months of the year, to $438.7 million. And it reported a small $155 million profit, reversing from a $13.6 million loss in the year-ago period.

That may augur well for other online retailers like Gilt Groupe and One Kings Lane, both of which are the subjects of I.P.O. buzz.

At Friday afternoon’s stock price, the I.P.O. has made a paper billionaire of the company’s chairman, Mark Vadon, and a near-billionaire of its chief executive, Darrell Cavens. The two men, who founded Zulily, previously worked at Blue Nile, which Mr. Vadon founded.

Neither sold shares in the offering. Those who did include Maveron, the investment firm co-founded by the Starbucks chief Howard Schultz, and the venture capital firms August Capital and Andreessen Horowitz.

The offering was led by Goldman Sachs, Bank of America Merrill Lynch and Citigroup.

Finding Strength in Humility

Humility doesn’t get much respect in the corporate world. How often do you hear a leader say publicly, “I’m sorry, I got that wrong,” or, “I didn’t do that very well,” or even something as simple as, “I don’t know.”

Now think about a time - if you can remember one - in which your boss apologized for something, accepted responsibility for a misstep or admitted to simply not having an answer to a significant question. Did it make you respect that person less, or more?

As human beings, we tend to choose sides when it comes to qualities such as confidence and humility. Confidence is one of a constellation of qualities - including strength, courage and decisiveness â€" that we tend to admire in our leaders. Simultaneously, we - and they â€" disdain opposite qualities such as meekness, cowardice and timidity.

It’s a false choice. When we identify with a particular strength, the opposite we’re avoiding is almost always negative. For confidence, it’s insecurity or self-doubt. But what happens when we overuse confidence? It turns into arrogance, hubris and even grandiosity. Any strength overused eventually becomes toxic. Excessive honesty becomes cruelty. Tenacity congeals into rigidity. Bias for action can overwhelm thoughtful reflection.

This is where positive opposites serve as a balancing and humanizing role. Humility comes from the Latin word “humilis,” which literally means “low.” It resides just a stone’s throw from “humiliation.” Sure enough, excessive humility eventually softens into obsequiousness and self-subjugation. False humility is even worse: a conscious manipulation covertly aimed at winning praise, often to compensate for unacknowledged feelings of inadequacy.

But genuine humility is a reflection of neither weakness nor insecurity. Instead, it implies a respectful appreciation of the strengths of others, a lack of personal pretension and a more relaxed sense of confidence that doesn’t require external recognition.

In a complex world that so plainly and painfully defies easy answers, humility is also an antidote to overconfidence. It gives leaders permission to accept and acknowledge their limitations, to learn from them and continue to grow and evolve.

No one has captured this paradox for me better than the psychologist James Hillman. “Loving oneself is no easy matter,” he once wrote, “because it means loving all of oneself including the shadow where one is inferior and socially so unacceptable … The cure is a paradox requiring two incommensurables: the moral recognition that these parts of me are burdensome and intolerable and must change, and the loving, laughing acceptance which takes them just as they are, joyfully, forever.”

In one study of leaders, those who expressed the highest opinions of themselves turned out to be the least receptive to criticism or feedback. At the same time, those who reported the highest levels of self-esteem were more likely to “irritate, interrupt and show hostility to others.”

In his book “Good to Great,” Jim Collins wrote that leaders of the most enduringly successful companies were marked by a paradoxical blend of fierce resolve and personal humility. “Level 5” leaders, as he termed them, never look in the mirror to apportion credit, but rather out the window. When it comes to taking responsibility for missteps, they look in the mirror rather than focusing on others.

Humility is a way of acknowledging that none of us stand at the center of the universe. No matter what role we occupy, or how much we know, we don’t have a lock on the answers. A position of authority over others scarcely guarantees that you have real authority.

When leaders openly accept the whole of who they are - for better and for worse - they no longer have to defend their value so vigilantly. I make missteps and mistakes as a leader, and they’re often a reflection of the same overused strengths and blind spots I’ve been struggling with my whole life.

That’s a humbling recognition, and sharing it with others on my team requires vulnerability, which can feel unseemly, uncomfortable and even dangerous.
But when I acknowledge to my colleagues that I’ve fallen short in some way, I can feel them relax their own vigilance.

I don’t need to say out loud that I value confidence and strength. I do need to demonstrate that I also value humility and vulnerability - to embrace these opposites. In the end, the less time we spend protecting our own value, the more time we can spend creating value in the world.

About the Author

Tony Schwartz is the chief executive of the Energy Project and the author, most recently, of “Be Excellent at Anything: The Four Keys to Transforming the Way We Work and Live.” Twitter: @tonyschwartz

General Electric Finally Gets Past the Jack Welch Era

General Electric is finally putting the ghost of its former chief executive Jack Welch out to pasture. On Friday, the conglomerate said it intended to spin off its North America retail finance business. That will help return GE Capital to its roots of lending to midmarket companies and its parent’s industrial concerns.

The current chief executive, Jeff Immelt, will take his time in getting rid of the division, which houses private-label credit cards, health care and veterinary finance and some consumer loans. First, GE Capital intends to sell about a fifth of the business through an initial public offering next year, using the proceeds to build up the unit’s capital as a standalone company. It’ll then spin off the rest to General Electric shareholders in 2015.

The move will hit earnings. The consumer finance business is expected to contribute $2.2 billion to the bottom line this year, according to General Electric â€" 13 percent of the conglomerate’s net income as forecast by analysts. GE Capital expects to have to cut costs, be more efficient with its balance sheet and grab new business to keep the return on tangible common equity at last quarter’s annualized level of 15 percent.

The benefits, though, should shine through. First, earnings per share won’t fall too much, if at all, as the planned 2015 exchange of stock in the new company for outstanding General Electric shares will reduce General Electric’s share count. Without the volatile consumer business, earnings should be steadier, and GE Capital’s share of overall earnings will shrink to about 30 percent. Moreover, the finance-related divisions that will remain are better aligned with the company’s industrial units.

The more General Electric focuses on those core businesses, the more likely it is that investors will value the company as an industrial powerhouse rather than applying a discount for the businesses in the financial sector, which commands a much lower multiple. That should mean a boost for shareholders.

GE Capital can do more still: Even after the spinoff, almost a quarter of its leases will remain consumer-related. And its real estate portfolio remains a drag, though things are improving. It has taken Mr. Immelt 12 years to get to this point. But at least he’s finally ending the mission creep that started under Mr. Welch.

Antony Currie is an associate editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Forbes Media Seeks Buyer

Forbes Says It Is for Sale

Forbes Media, which publishes Forbes magazine and has been making an extensive push into digital media and native advertising, is up for sale, the company confirmed in an email to the staff Friday morning.

In the email, Mike Perlis, the chief executive of Forbes Media and the first non-family member to run the 96-year-old business title, wrote, “We have received more than a few ‘over the transom’ indications of interest to buy Forbes Media.” He added: “The frequency and serious nature of these overtures have brought us to a decision point. We’re organizing a process to test the waters regarding a sale of Forbes Media.”

Mr. Perlis told employees that Forbes had hired Deutsche Bank to represent the company in the sale and that “we expect interest from numerous suitors.”

One person with knowledge of the process said Forbes Media was expecting to generate at least $400 million in the sale. Forbes, which used to be one of the most powerful news brands in business journalism, hired Mr. Perlis in December 2010 to help restructure the company after Steve Forbes’s two presidential campaigns and the industry-wide shift to digital media wiped out much of the family’s fortune.

During his tenure, Mr. Perlis helped turn the company around by building out a contributor network of 1,200 bloggers and embracing native advertising, which involves using journalists to create marketing material. He also tried to build out other revenue streams, like doubling the number of Forbes conferences and licensing its contributor network software.

These moves have helped Forbes Media attract attention from media executives on the business side and has had its top talent poached by other news organizations, including The New York Times and The Washington Post.

In the announcement, Mr. Perlis took the opportunity to tout Forbes’s accomplishments in building its digital audience. He said Forbes.com now attracts 26 million visitors a month. Digital ad revenue has now surpassed print ad revenue, according to a person familiar with the company, and Mr. Perlis said in his memo that digital revenue is expected to increase 25 percent by the end of the year.

Yet even as Forbes has gained traction with its digital efforts, it appears to have declined in value. Elevation Partners, the Silicon Valley private equity fund run by Roger McNamee, paid $240 million for 45 percent of the company. That would value Forbes Media at more than $530 million, markedly less than the $400 million Mr. Perlis is said to be seeking.

ValueVision Rejects Demands From Activist Investor

ValueVision, the Internet and television shopping network, has rebuffed demands from the activist investor the Clinton Group to overhaul its board, saying that the investor has no legal basis to make those demands.

In a letter sent to the Clinton Group on Friday, the board of ValueVision pushed aside a threat by the hedge fund to mount a proxy battle, indicating that it would be open to suggestions of change but only on its own terms.

The Clinton Group has been agitating for change at the top for more than two weeks, first calling for the chief executive and several board members to step down and then later demanding that the chairman and most of the board step down. Last week, the hedge fund applied more pressure to the board, disclosing that it had joined forces with Cannell Capital, a hedge fund based in San Francisco, to undertake a proxy battle for control of the company.

ValueVision, which sells watches, jewelry and appliances through infomercials, has lagged behind its peers, the Home Shopping Network and QVC, for several years. The Clinton Group wants to give it a makeover and has proposed a list of prominent candidates to help, including Thomas D. Mottola, the former chairman and chief executive of Sony Music Entertainment, and Thomas D. Beers, the chief executive of FremantleMedia, which produces “American Idol” and “The X Factor.”

But on Friday, ValueVision, which is based in Eden Prairie, Minn., fought back and threw cold water on the Clinton Group’s proposals.

“Following a careful review of these materials, we have determined that neither the demand letter nor the proposals and nominations letter satisfy” the requirements outlined in ValueVision’s bylaws and the Minnesota Business Corporation Act, the company said in its letter to the Clinton Group.

The two hedge funds â€" which together hold about 10.7 percent of the company’s stock â€" do not have enough shares to meet the threshold requirement of 25 percent to mount a proxy war, according to the Minnesota Business Corporation Act.

ValueVision said it planned to hold its own special meeting of shareholders and announced that it had formed a committee of independent directors to oversee an “accelerated board candidate evaluation process.”

The company said that it would be “receptive to listening to and considering the views of its shareholders” and adding new and qualified independent directors, but that the current dispute with Clinton Group was “not in the best interests of ValueVision for its shareholders,” citing the need for the management to focus on the holiday season.

The battle between the hedge fund and senior executives heated up last week after the company responded to the Clinton Group for the first time, asking the investor to hold off on its campaign to shake things up until after the holiday season so that executives could remain “laser focused” during the critical period.

The Clinton Group quickly fired back a letter accusing ValueVision of “surreptitiously” seeking to push off a special meeting for shareholders to consider the hedge fund’s proposals.

Shares of ValueVision fell 1.1 percent, to $5.23, during morning trading.

Jeffries is acting as a financial adviser to ValueVision, while Simpson Thacher & Bartlett and Barns & Thornburg are acting as legal advisers.

Jury Finds Pipe Maker Defrauded Governments

A federal jury in California found on Thursday that the nation’s largest maker of plastic pipe defrauded states and municipalities over a decade by knowingly selling them defective pipe for use in their drinking water, firefighting, irrigation and other essential public systems.

The jury’s decision entitles the states and municipalities to be compensated for their losses by the manufacturer, JM Eagle, a private company based in Los Angeles that has 20 plants in the United States and Mexico. The amounts are to be determined in the next phase of the proceedings, a second trial under the same judge but with a different jury. The case was brought under a law that calls for triple damages, plus additional penalties for each false claim submitted to a body of government.

Three states and 42 municipalities participated in the seven-week trial, and hundreds more qualify to participate in the second one because they also bought the affected pipe.

“This pipe is buried under the streets of every major city in the country,” said Eric R. Havian, a lawyer with Phillips & Cohen who represented the states and municipalities. In some places, pipes that were supposed to last 50 years or more exploded in their first year, causing injuries, floods and other dangers.

“JM sold billions and billions of this pipe over those 10 years,” Mr. Havian said. “It is enormously disruptive and terribly expensive to replace these pipes.”
JM Eagle said in a statement that it would appeal the verdict “because the jury was not permitted to see all of the evidence.”

“We believe we have valid grounds for an appeal, which we will file as immediately as possible,” the company’s vice president for marketing and waterworks sales, Neal Gordon, said in the statement. “We look forward to having this verdict reviewed and set aside.”

JM Eagle’s former corporate parent, the Formosa Plastics Group, was a co-defendant, but it has offered to settle its part of the case for $22.5 million, the parties disclosed on Thursday. The settlement must still be approved by the Federal District Court in Los Angeles.

The case was brought under the False Claims Act, a law that allows private citizens to sue on behalf of government agencies that they believe have been defrauded. Such cases are typically brought on behalf of a federal agency, like the Pentagon or the Medicare program. The case against JM Eagle was unusual because it was joined by dozens of local governments. They were on the front lines because water is generally supplied at the municipal level in the United States.

The federal government purchased only a small amount of pipe from JM Eagle, for use on federal properties such as Army bases. It has said its own investigation into the matter remains open.

N.Y. State Comptroller Invests in Lerer-Backed Tech Company

The New York State comptroller’s office said on Friday that it had invested in a website backed by Kenneth Lerer, the veteran venture capitalist, as it continues to support homegrown technology companies.

The latest investment is The Dodo Inc., which focuses on human rights. It’s the latest venture supported by Mr. Lerer, who co-founded the Huffington Post and is now the chairman of both BuzzFeed and the technology incubator Betaworks.

The comptroller, Thomas P. DiNapoli, has sought to promote New York’s tech scene through a series of investments made via the In-State Private Equity Program. It dovetails with Mayor Michael R. Bloomberg‘s “Made in N.Y.” initiative for New York City start-ups.

Mr. DiNapoli’s investment in The Dodo was done through SoftBank Capital, one of the managers participating in the program.

G.E. Announces Plans to Take Retail Finance Unit Public

General Electric formally disclosed its plans to hold an initial public offering of its North American retail finance unit on Friday, as part of an effort to shrink its enormous finance arm.

G.E. said in a filing that it planned to sell as much as 20 percent of the unit in the stock sale. The conglomerate plans to file a prospectus in the first three months of next year, with the offering being completed later that year.

Then in 2015, the company plans to distribute the remainder of its holdings in the retail finance unit to its shareholders in exchange for G.E. common shares. But it may also sell its interests in the subsidiary.

The move is meant to help the conglomerate shrink its enormous finance arm, GE Capital, which ran into trouble during the financial crisis because of its huge holdings in real estate loans. The goal has been to transform it into a smaller, stable industrial lending business.

The business has steadily shrunk over recent years, in part through divestitures of smaller operations.

People briefed on the matter have previously said that JPMorgan Chase and Goldman Sachs were advising G.E. on the effort and would likely run the I.P.O.

Jos. A. Bank Ends Bid for Men’s Wearhouse

Jos. A. Bank said on Friday that it had withdrawn its $2.3 billion takeover bid for Men’s Wearhouse after failing to entice the company into merger talks ahead of a Thursday deadline.

Though Jos. A. Bank left open the possibility of reviving the offer if Men’s Wearhouse changes its mind, the move ends a campaign to combine two of the country’s biggest sellers of men’s suits.

“The MW board has denied our request for limited due diligence and has failed to engage in any discussions whatsoever regarding our proposal,” Robert Wildrick, Jos. A. Bank’s chairman, wrote in a letter to Douglas S. Ewert, the chief executive of Men’s Wearhouse, referring to the company’s ticker symbol. “We are therefore terminating our proposal in order to consider other strategic alternatives which we have been investigating.”

Jos. A. Bank first proposed a merger of the two retailers in September, offering $48 a share. But Men’s Wearhouse held off on discussions, and after the offer was made public last month dismissed the bid as opportunistic and insufficient.

Men’s Wearhouse instead discussed its own turnaround plan, which it said would raise sales by up to $550 million within three years. It refused entreaties from its unwanted suitor, including threats to go hostile and promises to consider raising its bid.

The absence of talks prompted Eminence Capital, a hedge fund that is Men’s Wearhouse’s biggest investor, to put pressure on the retailer to consider the takeover offer or other alternatives. Earlier this week, Eminence disclosed that the company had promised to review strategic options, including the bid.

But the demise of the merger talks appears to have raised Eminence’s hackles. The firm said on Friday that it planned to call for a special meeting of the retailer’s shareholders. The hedge fund said that it planned to call for new bylaws that would let investors remove directors without cause.

Moody’s Cuts Ratings of Four Big Banks

LONDON â€" The rating agency Moody’s lowered its credit ratings late Thursday for four major United States banks, including JPMorgan Chase and Goldman Sachs, reflecting a belief that the institutions wouldn’t receive the same level of government support in another financial meltdown.

Moody’s said that there is less likelihood of a widespread bailout of banks by the United States government as there was during the financial crisis five years ago and that bank debt holders would be forced to shoulder more of the losses in the future.

However, the rating agency said it expects banks will be required by regulators in the United States to hold a higher level of capital, which will likely result in higher recoveries for creditors in any future bank default.

In its report Thursday, Moody’s lowered by one notch the holding company ratings for Morgan Stanley, Goldman Sachs, JPMorgan and Bank of New York Mellon. The rating agency also confirmed the holding company ratings for Bank of America, Citigroup, State Street, and Wells Fargo.

“Rather than relying on public funds to bail-out one of these institutions, we expect that bank holding company creditors will be bailed-in and thereby shoulder much of the burden to help important subsidiaries in a stress scenario,” said Robert Young, a Moody’s managing director.

“As a result, the holding company creditors of systemically important US banks are unlikely to receive government support, signaling a higher risk of default.”

Under the Dodd-Frank Act, the Federal Reserve has been limited in its ability to provide taxpayer funds to individual banks, and failing banks would be wound down in a so-called orderly liquidation, in which creditors would bear the bulk of the burden of the losses.

However, some critics have expressed doubts that regulators could handle the liquidation of one or more of the nation’s largest banks in a severe financial crisis.

In June, ratings rival Standard & Poor’s made a similar move. It cut JPMorgan’s credit-trading outlook to negative, bringing its outlook in line with other banks that it believes are “systemically important,” including Bank of America and Goldman Sachs.

S.&P. said at the time that it was “clear” that large banks may not receive the same level of government support in another crisis.

The United States government pumped hundreds of billions of dollars into the nation’s largest banks and other financial institutions it deemed “too big to fail” at the height of the financial crisis in 2008. Much of that money has been paid back.

Morning Agenda: Currency Trades Draw U.S. Scrutiny

U.S. INVESTIGATES CURRENCY TRADES BY BIG BANKS  |  Federal investigators suspect that a group of traders at some of the world’s biggest banks shared a mission to alter the price of foreign currencies, the largest and yet least regulated market in the financial world, Ben Protess, Landon Thomas Jr. and Chad Bray report in DealBook. “Much like companies that rigged the price of vitamins and animal feed, the traders were competitors that hatched alliances for their own profits, federal investigators suspect.”

Now, instant messages among some traders, along with similar activity among others, “are at the center of an international investigation into banks like Barclays, the Royal Bank of Scotland and Citigroup, according to recent public disclosures by the banks and interviews with investigators who spoke on the condition of anonymity. The investigators secured the cooperation of at least one trader, a development that has not been previously disclosed. Although the investigation is at an early stage, authorities are already signaling the likelihood of a legal crackdown,” according to the DealBook report.

“The manipulation we’ve seen so far may just be the tip of the iceberg,” the United States attorney general, Eric H. Holder Jr., said in a rare interview discussing an active investigation. “We’ve recognized that this is potentially an extremely consequential investigation.”

The banks all declined to comment, and no one has been accused of wrongdoing. Any improper actions probably would have involved only a corner of the overall market, DealBook writes.

MORGAN STANLEY CHIEF’S VISION SHOWS SOME SUCCESS  |  Morgan Stanley’s recent earnings report reflected the results of a three-year effort by James P. Gorman, the chief executive, to reduce risk-taking and to expand into the safer business of advising people on how to manage their wealth, Susanne Craig and Rachel Abrams report in DealBook. “I felt for a long time that path was clear, but it was disputed and we were doubted many times,” Mr. Gorman said recently.

Ms. Craig and Ms. Abrams write: “The transformation has not been easy, and Mr. Gorman still has some naysayers. Despite the strong third-quarter results, Morgan Stanley produced a return on equity of just 6.2 percent in the quarter, excluding a charge related to its credit spreads. Simply to cover its debt expenses and other capital costs, Morgan Stanley must achieve a return on equity closer to 10 percent. Mr. Gorman said he hoped the bank would hit that number by 2015.”

TEPPER GIVING $67 MILLION TO CARNEGIE MELLON  |  Carnegie Mellon University, which traces its roots to the giants of America’s Gilded Age a century ago, has received a major gift from a product of a new gilded age, the hedge fund billionaire David A. Tepper, DealBook’s Peter Lattman reports. The school will announce on Friday that Mr. Tepper has given it $67 million, bringing his total giving to Carnegie Mellon in the last decade to more than $125 million.

“Carnegie Mellon tied everything together for me and gave me a great foundation,” said Mr. Tepper, founder of Appaloosa Management and a graduate of the university’s business school. “My earlier gifts were a payback to the university, and this is a continuation of that.”

ON THE AGENDA  |  Frederick Smith, the chief executive of FedEx, is on CNBC at 8:40 a.m. Noah Glass, an often overlooked co-founder of Twitter, is on CNBC at 10 a.m. Data on industrial production in October is released at 9:15 a.m.

HEDGE FUNDS TURN TO FEDEX  |  Daniel S. Loeb announced his firm’s position in FedEx at the DealBook conference earlier this week, but it turns out that at least two his fellow hedge fund moguls had the same idea in the third quarter, Michael J. de la Merced reports in DealBook. While Third Point disclosed that it had accumulated two million FedEx shares in the quarter, firms run by George Soros and John Paulson also disclosed new positions. Soros Fund Management disclosed that it had bought 1.5 million shares and call options representing an additional 375,000 shares, and Paulson & Company showed that it had bought 646,800 shares.

Mergers & Acquisitions »

Jos. A. Bank Ends Effort to Buy Men’s Wearhouse  |  Jos. A. Bank sent a letter to the chief executive of Men’s Wearhouse, calling off its proposal to buy the company for $48 a share in cash. In a statement, Jos. A. Bank said a Nov. 14 deadline had passed for the board of Men’s Wearhouse to engage in talks.
PRESS RELEASE

Berkshire Buys $3.45 Billion Stake in Exxon Mobil  |  Warren E. Buffett’s firm owned roughly 40 million shares of Exxon Mobil at the end of September, less than 1 percent of the oil giant’s 4.4 billion outstanding shares.
DealBook »

Under Armour Buys MapMyFitness for $150 Million  |  “Under Armour is making a major play to gain a foothold in the fitness-tracking market, which is led by the likes of Nike, Fitbit, and Jawbone,” The Verge writes.
THE VERGE

A Sign of Desperation in Facebook’s Snapchat Offer  |  There’s a disquieting element about a company spending billions for a simple application it could almost certainly have replicated for next to nothing, Robert Cyran of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

INVESTMENT BANKING »

Moody’s Downgrades Show Doubts About a Government Backstop  |  The credit ratings company Moody’s downgraded the senior holding company debt ratings of Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of New York Mellon, “reflecting the agency’s belief that there is an increased likelihood the government wouldn’t support them in the event of a crisis,” The Wall Street Journal reports.
WALL STREET JOURNAL

Morgan Stanley Is Said to Seek Dual Status for Financial Advisers  |  Morgan Stanley “is seeking regulatory approval to make financial advisers dual employees of its bank subsidiary in addition to the broker-dealer as the firm increases mortgage lending, a person briefed on the matter said,” Bloomberg News reports.
BLOOMBERG NEWS

Wall Street Reaches Out to Gay Students  |  Bloomberg News writes: “Beyond embracing gay rights, the country’s largest banks, brokerages and consulting firms are vying to retire their conservative image and try to improve profits along with diversity.”
BLOOMBERG NEWS

Competing Views on the Stock Market  |  “If you’ve been wondering whether it’s possible to regularly beat the stock market averages â€" a natural question with the market at an all-time high â€" you didn’t get any guidance from the Nobel Prize committee this year,” the financier Steven Rattner writes in an opinion essay in The New York Times.
NEW YORK TIMES

PRIVATE EQUITY »

Carlyle to Buy Stake in Insurance Broker  |  The Carlyle Group has agreed to buy a controlling stake in Edgewood Partners Insurance Center, the company said.
REUTERS

HEDGE FUNDS »

Speculation Over Sale of Cohen’s Artworks at Auction  |  The answer to the whispered question at art auctions this week â€" “How’s Steve’s stuff selling?” â€" in the wake of the guilty plea by Steven A. Cohen’s hedge fund, SAC Capital Advisors.
DealBook »

Starboard Joins Fight Over Fate of Compuware  |  The hedge fund disclosed on Thursday that it owns a 5 percent stake in the business software maker as it urged the company to consider a sale or other changes.
DealBook »

I.P.O./OFFERINGS »

Kimberly-Clark to Spin Off Health Care Unit  |  The business that would be separated focuses on selling surgical and anti-infection products and medical devices for pain management, respiratory and digestive health.
DealBook »

Zulily, E-Commerce Site, Prices I.P.O. Above Range  |  Zulily raised $253 million in its initial public offering, pricing its shares at $22 each.
WALL STREET JOURNAL

VENTURE CAPITAL »

Milner Invests in Genetics Company  |  The Russian investor Yuri Milner is backing a genetics start-up called GenapSys, which raised a total of $37 million in the financing round, VentureBeat reports.
VENTUREBEAT

LEGAL/REGULATORY »

When a Deal Goes Bad, Blame the Ratings  |  Trustees for two Bear Stearns funds that collapsed contend that credit ratings agencies should be held responsible for the dubious securities that ended up in the funds. But even if the ratings agencies are found to have acted wrongly, that in no way should absolve money managers from blame for investing billions of dollars in securities they knew little about, Floyd Norris writes in the High & Low Finance column in The New York Times.
DealBook »

Virtual Money Draws Notice of Regulators  |  New York’s financial services superintendent, Benjamin M. Lawsky, will conduct a hearing on the feasibility of methods making the virtual currency market more like that for more traditional money.
DealBook »

In Yellen Hearing, Senators Push for Changes at Fed  |  “The questions that Janet L. Yellen faced on Thursday from senators considering her nomination to lead the Federal Reserve made two things fairly clear: The job is hers, and it’s not going to be easy,” The New York Times writes.
NEW YORK TIMES

Yellen on Stimulus: Full Speed Ahead  |  Monitoring the remarks on Thursday of Janet L. Yellen, President Obama’s choice to lead the Federal Reserve, “traders concluded that she would stick with policies that have sent shares soaring,” The New York Times writes.
NEW YORK TIMES

Ireland to Exit Bailout Without Safety Net  |  “Ireland announced on Thursday that it would make a clean break from its international bailout program next month and do it without first seeking a precautionary credit line,” The New York Times reports.
NEW YORK TIMES

Berkshire Buys $3.45 Billion Stake in Exxon Mobil

LONDON â€" Berkshire Hathaway took a stake valued at $3.45 billion in Exxon Mobil in the third quarter, the latest major addition to the portfolio controlled by the legendary value investor Warren E. Buffett, according to a regulatory filing late Thursday.

Berkshire owned roughly 40 million shares of Exxon Mobil at the end of September, representing less than 1 percent of the energy company’s 4.4 billion outstanding shares, according to the filing with the Securities and Exchange Commission.

During the quarter, Berkshire also reduced its position in oil firm ConocoPhillips by about 10.5 million shares. At the end of the quarter, Berkshire retained a stake of about 13.5 million shares in ConocoPhillips valued at $938 million.

Over all, Berkshire’s portfolio of companies, which include large investments in names like Coca-Cola, IBM and American Express, was valued at about $92 billion at the end of the third quarter. The value of Berkshire’s holdings were $89.03 billion at the end of the second quarter, according to their S.E.C. filing.

News of the investment comes as Exxon Mobil, the largest American oil company, has moved to bring more oil-and-gas development projects on line to take advantage of higher prices, but its refining margins have been pressured by increased capacity in the industry.

Exxon Mobil, based in Irving, Tex, reported last month that its third-quarter earnings declined 18 percent to $7.9 billion.

The S.E.C. filing does not indicate whether Mr. Buffett himself or others at his firm, based in Omaha, Neb., made the decision to acquire Exxon Mobil shares.

Mr. Buffett, Berkshire’s chairman and chief executive, has said he tends to make the firm’s bigger bets while other executives manage smaller investment positions.

Berkshire Buys $3.45 Billion Stake in Exxon Mobil

LONDON â€" Berkshire Hathaway took a stake valued at $3.45 billion in Exxon Mobil in the third quarter, the latest major addition to the portfolio controlled by the legendary value investor Warren E. Buffett, according to a regulatory filing late Thursday.

Berkshire owned roughly 40 million shares of Exxon Mobil at the end of September, representing less than 1 percent of the energy company’s 4.4 billion outstanding shares, according to the filing with the Securities and Exchange Commission.

During the quarter, Berkshire also reduced its position in oil firm ConocoPhillips by about 10.5 million shares. At the end of the quarter, Berkshire retained a stake of about 13.5 million shares in ConocoPhillips valued at $938 million.

Over all, Berkshire’s portfolio of companies, which include large investments in names like Coca-Cola, IBM and American Express, was valued at about $92 billion at the end of the third quarter. The value of Berkshire’s holdings were $89.03 billion at the end of the second quarter, according to their S.E.C. filing.

News of the investment comes as Exxon Mobil, the largest American oil company, has moved to bring more oil-and-gas development projects on line to take advantage of higher prices, but its refining margins have been pressured by increased capacity in the industry.

Exxon Mobil, based in Irving, Tex, reported last month that its third-quarter earnings declined 18 percent to $7.9 billion.

The S.E.C. filing does not indicate whether Mr. Buffett himself or others at his firm, based in Omaha, Neb., made the decision to acquire Exxon Mobil shares.

Mr. Buffett, Berkshire’s chairman and chief executive, has said he tends to make the firm’s bigger bets while other executives manage smaller investment positions.