Witnesses in Trading Trial Give Peek at SAC’s Operations

The insider trading trial of Michael S. Steinberg, a former senior employee of SAC Capital Advisors, offered a glimpse inside the wildly successful hedge fund on Thursday as the first two witnesses took the stand.

Daniel Berkowitz, SAC’s chief financial officer and the government’s first witness, told the 12-member jury that portfolio managers were encouraged to come up with good ideas and were rewarded special “Cohen tag bonuses” â€" named for the hedge fund’s founder, Steven A. Cohen â€" for ideas that translated into windfall gains.

Mr. Berkowitz said that if Mr. Cohen liked the ideas, they “would receive a bonus, depending on how big the trade was.”

As one of the 100 portfolio managers at the fund, Mr. Steinberg oversaw a team of five analysts who provided research and data for his investment ideas, Mr. Berkowitz said.

The second witness, Jesse Tortora, a former technology stock analyst at another hedge fund, Diamondback Capital Management, testified that he and one of Mr. Steinberg’s analysts, Jon Horvath, formed a circle of friends and analysts at other firms to share tips to give their portfolio managers the edge they demanded.

Mr. Steinberg has been accused of using confidential information to trade the technology stocks Dell and Nvidia, gaining over $1 million in returns for SAC. His trial is at the heart of a decade-long government investigation into the firm that has led to criminal charges against eight former SAC employees, six of whom have pleaded guilty to securities fraud.

This month, SAC agreed to pay $1.2 billion and plead guilty to charges of insider trading violations. Mr. Steinberg is the first former employee to stand trial. And on Thursday, Sol Kumin, SAC’s chief operating officer, announced that he was resigning, underscoring the firm’s transformation from one of the most powerful hedge funds on Wall Street to a symbol of corporate crime.

Both witnesses took the stand at the federal courthouse in Lower Manhattan, speaking to a gallery nearly filled with friends and family of Mr. Steinberg and members of the news media. The assistant United States attorney Antonia M. Apps began to lay the foundation for what she called a “corrupt conspiracy” that Mr. Steinberg and Mr. Horvath tapped into.

Much of the government’s case against Mr. Steinberg will turn on testimony from Mr. Horvath, who obtained and shared confidential information through a close-knit network of friends and other hedge fund analysts that included Mr. Tortora.

Mr. Tortora pleaded guilty to insider trading and conspiracy to commit insider trading in April 2011 and is cooperating with the government in exchange for a lighter sentence. He told the jury that his sentence would be decided after Mr. Steinberg’s trial.

In their opening arguments on Wednesday, Mr. Steinberg’s lawyers contended that Mr. Horvath, who has also pleaded guilty to insider trading, had rewritten the facts to strike a deal similar to Mr. Tortora’s. “He needed to trade his freedom for that of another,” Barry H. Berke, Mr. Steinberg’s lead lawyer, said.

The government argued that, when pushed to provide “edgy proprietary information” of the kind that would satisfy Mr. Steinberg, Mr. Horvath sought confidential and market-moving information.

Under questioning by Mr. Berke, Mr. Berkowitz of SAC described what sources analysts used for their research. “They meet with companies, suppliers, vendors, and other market participants,” he said. Mr. Berke then asked whether “proprietary company specific analysis” was legitimate and proper. “Yes,” Mr. Berkowitz replied.

Mr. Tortora told the jury that under pressure from a verbally abusive boss at Diamondback for a “read” on certain companies and information with an “edge,” he turned to his network. He described this as information that “someone else does not have that is unique.”

When asked why he engaged in insider trading, Mr. Tortora said, “It allowed us to be more effective, more efficient and more profitable than working alone.”

Among a dozen or so exhibits shown to the jury was an email from Mr. Tortora to Mr. Horvath and their network of friends.

“Enjoy. Your perf will now go up 100% in 09 and your boss will love you,” Mr. Tortora wrote, referring to the performance of their portfolio after trading on the sensitive information the group shared.

Most of Mr. Tortora’s testimony focused on Mr. Horvath, but he told the jury that he had met Mr. Steinberg when Mr. Steinberg requested an interview with him.

While the defense team made painstaking efforts over the nearly two-day jury selection process to make sure that jurors selected would have little knowledge of or reference to Mr. Cohen or the settlements with the firm and other former employees, his name came up several times during the day.

But it was not until Mr. Tortora told the jury that he and Mr. Horvath shared details about their bosses and referred to Mr. Steinberg as “Steven Cohen’s right-hand man,” that Mr. Steinberg’s lawyer called an objection.

Service Members Left Vulnerable to Payday Loans

Petty Officer First Class Vernaye Kelly winces when roughly $350 is automatically deducted from her Navy paycheck twice a month.

Month after month, the money goes to cover payments on loans with annual interest rates of nearly 40 percent. The monthly scramble â€" the scrimping, saving and going without â€" is a familiar one to her. More than a decade ago, she received her first payday loan to pay for moving expenses while her husband, a staff sergeant in the Marines, was deployed in Iraq.

Alarmed that payday lenders were preying on military members, Congress in 2006 passed a law intended to shield servicemen and women from the loans tied to a borrower’s next paycheck, which come with double-digit interest rates and can plunge customers into debt. But the law failed to help Ms. Kelly, 30, this year.

Nearly seven years since the Military Lending Act came into effect, government authorities say the law has gaps that threaten to leave hundreds of thousands of service members across the country vulnerable to potentially predatory loans â€" from credit pitched by retailers to pay for electronics or furniture, to auto-title loans to payday-style loans. The law, the authorities say, has not kept pace with high-interest lenders that focus on servicemen and women, both online and near bases.

“Somebody has to start caring,” said Ms. Kelly, who took out another payday loan with double-digit interest rates when her car broke down in 2005 and a couple more loans this summer to cover her existing payments. “I’m worried about the sailors who are coming up behind me.”

The short-term loans not covered under the law’s interest rate cap of 36 percent include loans for more than $2,000, loans that last for more than 91 days and auto-title loans with terms longer than 181 days.

While it is difficult to determine how many members of the military are struggling with loans not covered by the law, interviews with military charities in five states and more than two dozen service members â€" many of whom declined to be named for fear that disclosing their identity would cost them their security clearances â€" indicate that the problem is spreading.

“Service members just get trapped in an endless cycle of debt,” said Michael S. Archer, director of military legal assistance for the Marine Corps Installations East.

Shouldering the loans can catapult service members into foreclosure and imperil their jobs, as the military considers high personal indebtedness a threat to national security. The concern is that service members overwhelmed by debt might be more likely to accept financial inducements to commit espionage.

The Military Lending Act followed a series of articles in The New York Times in 2004 that documented problems in the sale of life insurance and other financial products. Those problems were also highlighted in congressional hearings and reports from the Government Accountability Office. The 2006 law was meant to stamp out the most dangerous products while ensuring that service members did not lose access to credit entirely.

“The law did wonders for the products that it covered, but there are simply many products that it doesn’t cover,” Holly K. Petraeus, the assistant director for service member affairs at the Consumer Financial Protection Bureau, said in an interview.

Short-term lenders argue that when used prudently, their loans can be a valuable tool for customers who might not otherwise have access to traditional banking services.

Yet government agencies are now scrutinizing some of these financial products, including installment loans, which have longer repayment periods â€" six to 36 months â€" than a typical payday loan.

There is a growing momentum in Washington to act. On Wednesday, the Senate Commerce Committee convened a hearing on abusive military lending. And the Defense Department has begun soliciting public feedback on whether the protections of the Military Lending Act should be expanded to include other types of loans.

“Federal protections are still insufficient” to protect the military, said Senator Jay Rockefeller, the West Virginia Democrat who is chairman of the Commerce Committee.

Interest rates on the loans offered by companies like Just Military Loans and Military Financial, can exceed 80 percent, according to an analysis by the Consumer Federation of America.

Pioneer Financial and Omni Military Loans, which dominated the military business before the passage of the 2006 law, now offer products that fall into its gaps. These two companies and others pitch loans for more than $2,000 â€" the amount of money covered under the law â€" or simply make loans beyond the 91-day period covered, according to a review by The Times of more than three dozen loan contracts held by the service members interviewed.

Omni and Military Financial did not respond to requests for comment.

Joe Freeman, Pioneer’s president, said in a statement that none of its loans had interest rates above 36 percent.

For short-term lenders, the military, made up of many young, financially inexperienced people, is an attractive customer base, especially because they have reliable paychecks, a rarity in lean economic times. And a fixture of military life makes it even easier for lenders to collect.

Under the so-called allotment system, service members can have the military siphon off money from their paychecks before the cash hits their accounts. Service members often agree to use the allotment system to cover their monthly payments.

Even lenders acknowledge that the allotment system helps keep service member defaults low.

“We have very good success because they are able to pay us back through their paycheck in the form of the allotment,” said Rick Rosen, who was a manager at a Pioneer Services branch that was situated near the main entrance to Fort Bliss, Tex., one of the nation’s largest bases. During an interview earlier this year outside the branch, which has since been closed, Mr. Rosen emphasized that soldiers could choose whether to pay through allotment.

Service members say, though, that they had no choice. Nikea Dawkins, a 23-year-old sergeant in the Army, said she had to agree to pay her $1,500 loan from Pioneer through allotment. “There was no way that they would give the loan to me unless I agreed,” she said.

Some lenders, military members say, use threats to ensure that they are repaid. The service members said they were told that if they fell behind, the lenders would go to their commanding officers.

The warning can be enough to induce military members to borrow more money to cover their existing loans. Since taking out her first loan with Pioneer in 2002, for example, Ms. Kelly said she and her husband had together taken out four more loans, from lenders including Military Financial and Patriot Loans.

Such official-sounding company names â€" along with advertisements featuring men and women in uniform â€" can lull service members into believing that the loans are friendlier for the military, according to Dave Faraldo, the director the Navy-Marine Corps Relief Society office in Jacksonville, Fla.

It’s a simple mistake to make.

“We know the military because we are former military,” Omni says on its website. “Most of our loan specialists are former military personnel who have been in your shoes.”

Others try to persuade military members to pitch the loans to their friends, offering a $25 referral fee or a Starbucks gift card, according to service members. Some lenders have thrown loan parties near bases, drawing people with the promise of free Buffalo wings, service members say.

The sheer availability of the loans can make it tough to abstain. Ana Hernandez, who oversees the so-called financial readiness program at Fort Bliss, says that soldiers on the base readily take out loans to buy things like electronic goods. “They are loans for wants, not for necessities at all,” she said.

Vince Prices Above Its I.P.O. Range as Fashion Stays Hot With Investors

Fashion is still hot on Wall Street judging by Vince Holding’s initial public offering.

The fashion retailer priced its stock at $20 a share on Thursday afternoon, a dollar above its expected range. At that price, investors valued the clothing store chain at $726 million.

The company will begin trading on the New York Stock Exchange on Friday under the ticker symbol “VNCE.”

It’s the latest example of public investors’ demand for fashion, a trend stretching back to Michael Kors‘s wildly successful market debut nearly two years ago. Since then, several fashion companies â€" including elite houses like Prada and Bruno Cucinelli â€" have flocked to the stock markets.

Last month, Marc Jacobs left his high-profile perch at Louis Vuitton to pursue an I.P.O. for his own brand.

Now the 11-year-old Vince will join those ranks. Begun as a seller of women’s knits and cashmere sweaters, it has since added men’s wear and shoes. Its sales have grown at a steady clip in recent years, with the company reporting $114.7 million in revenue for the first six months of the year, up 27 percent from sales in the period a year earlier. Its profits for the same period doubled, to $2.4 million.

The I.P.O. is a comeback of sorts for Vince’s owner, Sun Capital Partners. The private equity firm bought Kellwood, a collection of retail brands, for about $955 million five years ago. The deal has caused some heartburn for Sun Capital, which reportedly wrote the company down to zero at one point.

Even after the offering is completed, Sun Capital will retain at least a 68.1 percent stake in Vince.

The I.P.O. was led by Goldman Sachs and Baird.

Vince Prices Above Its I.P.O. Range as Fashion Stays Hot With Investors

Fashion is still hot on Wall Street judging by Vince Holding’s initial public offering.

The fashion retailer priced its stock at $20 a share on Thursday afternoon, a dollar above its expected range. At that price, investors valued the clothing store chain at $726 million.

The company will begin trading on the New York Stock Exchange on Friday under the ticker symbol “VNCE.”

It’s the latest example of public investors’ demand for fashion, a trend stretching back to Michael Kors‘s wildly successful market debut nearly two years ago. Since then, several fashion companies â€" including elite houses like Prada and Bruno Cucinelli â€" have flocked to the stock markets.

Last month, Marc Jacobs left his high-profile perch at Louis Vuitton to pursue an I.P.O. for his own brand.

Now the 11-year-old Vince will join those ranks. Begun as a seller of women’s knits and cashmere sweaters, it has since added men’s wear and shoes. Its sales have grown at a steady clip in recent years, with the company reporting $114.7 million in revenue for the first six months of the year, up 27 percent from sales in the period a year earlier. Its profits for the same period doubled, to $2.4 million.

The I.P.O. is a comeback of sorts for Vince’s owner, Sun Capital Partners. The private equity firm bought Kellwood, a collection of retail brands, for about $955 million five years ago. The deal has caused some heartburn for Sun Capital, which reportedly wrote the company down to zero at one point.

Even after the offering is completed, Sun Capital will retain at least a 68.1 percent stake in Vince.

The I.P.O. was led by Goldman Sachs and Baird.

As SAC Shrinks, Its Operations Chief Departs

In 2007, before the financial crisis and before federal prosecutors began listening to traders’ phone calls, the hedge fund SAC Capital Advisors was in aggressive expansion mode. And a charismatic young executive named Sol Kumin played an important role in its rise.

On Thursday, Mr. Kumin announced that he was leaving SAC, underscoring the firm’s transformation from one of the most powerful hedge funds on Wall Street to a symbol for corporate crime. Earlier this month, SAC pleaded guilty to a decade-long insider-trading scheme.

In a memo to his staff, Steven A. Cohen, the owner of SAC, paid tribute to Mr. Kumin, the firm’s chief operating officer and a key architect of its growth.

“The outside world tends to focus on me, but our success has been built by many people, one of whom is Sol,” Mr. Cohen wrote. “He has been responsible for transforming our business development and investor relations functions and has helped create our global strategy and footprint. Without his tireless work, we would not have had a strong London presence or our current business in Asia.”

Mr. Cohen said that because SAC was morphing into a “family office” that manages just his and his employees’ money, “we will not need the same degree of business development activity or investor relations as before.” As part of its guilty plea, SAC agreed to pay a $1.2 billion penalty and no longer manage money for clients. The firm has been retrenching all year, shutting down its London office and reducing its headcount.

This left Mr. Kumin with little to do. A former lacrosse player at Johns Hopkins University who grew up in the Boston suburbs, Mr. Kumin landed at SAC in his late 20s after stints at Lazard Asset Management and Alliance Bernstein. He joined SAC when the firm was expanding. Until the middle of last decade, Mr. Cohen had run SAC like a small business. But about that time, the firm began to add new businesses and professionalize the firm, making it more appealing to large investors like pension and endowment funds.

Mr. Kumin found himself in the right place at the right time. As head of business development and later chief operating officer, he helped oversee the firm’s growth â€" and made tens of millions of dollars. At one point, SAC met with investment bankers and considered an initial public offering.

But over the last year, as the insider-trading investigation into SAC turned more serious, Mr. Kumin has instead played a leading role in managing the firm through its crisis. Last spring, as the government began preparing an indictment of SAC, Mr. Kumin was one of five senior executives, including Mr. Cohen, who received subpoenas to testify before a grand jury. He never testified but agreed to meet with prosecutors as part of their investigation, according to people briefed on the case.

“The last year has been unbelievably difficult for all of us, and although I am incredibly proud of how, together, we have come through this, I am looking forward to taking a break, to recharging my batteries and to figuring out what the next chapter of my life will look like,” Mr. Kumin said in an email to his colleagues. He will leave SAC at the end of January.

“I am moving back to Boston in June of 2014 and look forward to resuming life close to where I grew up,” he said. “Working at SAC Capital is a full-time, seven-day-a-week job and I can’t wait to spend more time with my family.”

In his note, Mr. Cohen was unusually emotive in reflecting on Mr. Kumin’s role at the firm and his imminent departure.

“We owe Sol a great deal of thanks for his leadership here at SAC,” Mr. Cohen said. “It is never easy to part with a colleague with whom you have worked so closely, but it is even more difficult when that colleague is someone you consider a good friend. We know his talent, creativity and hard work will ensure Sol will succeed in whatever he chooses to do next. Please join me in wishing Sol well.”

Micron Shares Rise Amid Praise From Einhorn

Micron Technology can officially call itself a member of the David Einhorn club.

Shares in the memory chip maker jumped over 6 percent on Thursday after Mr. Einhorn disclosed that his hedge fund, Greenlight Capital, owned a stake in the company. They closed at $19.98.

Micron was just one of several stocks to move in part because of the hedge fund manager’s widely followed commentary. Shares in Apple Inc. reversed losses earlier in the day after Mr. Einhorn offered encouraging words about the iPhone maker, while those in the St. Joe Company briefly tumbled after he reiterated his pessimism toward the real estate concern.

Other hedge fund managers moved stocks on Thursday as well. Hologic gained nearly 2 percent after Carl C. Icahn disclosed a 12.6 percent stake in the medical device maker, prompting the company to adopt a “poison pill” defense plan.

But it was Mr. Einhorn whose comments drew the most attention. In discussing Micron â€" a company he bet against over a decade ago â€" the investor described the company as one of the survivors of the market for memory chips. It’s a tough industry with only three major players, but the upside remains big, as flash memory continues to be in high demand in devices ranging from smartphones to videogame consoles.

Mr. Einhorn also touched on Apple, which he pressed to return more money to shareholders earlier this year. The company agreed this past spring to increase its stock buyback program fivefold, to $60 billion, and raised its dividend payouts, winning some praise from Mr. Einhorn. (Which happened to be a little tepid at points on Thursday: He described the company’s capital management policies as rising from a D- to a C+.)

Now, Mr. Icahn is pressing for an even bigger $150 billion buyback. But Mr. Einhorn declined to comment on his fellow investor’s campaign.

“Carl’s view is not particularly important to mine, because I really don’t know what he’s thinking and I need to form my own view,” he told CNBC.

Tax Proposal for an Economy No Longer Rooted in Manufacturing

A tax proposal released on Thursday by the chairman of the Senate Finance Committee, Max Baucus, addresses a topic that tends to make my students’ eyes glaze over: cost recovery.

Cost recovery is a technical topic but one that may shape our economic future, since it affects the calculations of every business manager making a decision about what projects to pursue and what assets to buy.

Under current law, cost recovery (better known as depreciation) is accelerated, meaning that the value of assets can be written off for tax purposes faster than the assets actually decline in value in economic terms.

Accelerated depreciation has a long history rooted in the goals of the 20th century manufacturing economy. Facing the rising threat of world war, Congress introduced accelerated cost recovery in 1940 to encourage investment in property considered necessary for the national defense. (Before acquiring property that would benefit from accelerated depreciation rules, taxpayers had to seek a certificate of necessity from the War Production Board.) Liberal depreciation allowances were expanded with the enactment of the 1954 Internal Revenue Code. The current accelerated depreciation system was in place by the 1980s, and revised in the 1990s, again with an eye toward encouraging investment in productive machinery, equipment and other tangible assets.

But it is no longer clear that we should use the tax system to encourage investment in tangible assets. After all, a system that encourages investment in tangible assets makes investments in other assets â€" intangible assets and human capital â€" look worse by comparison. The Baucus proposal aims to make the tax system match economic reality, removing the tax distortions from the equation. It would group tangible assets into just four different pools, with a fixed percentage of cost recovery applied to the tax basis of each pool each year, ranging from 38 percent for short-lived assets to 5 percent for certain long-lived assets.

This policy change is more important than it sounds. Imagine three types of assets a business might invest in: (1) tangible assets, like office furniture, livestock and manufacturing equipment; (2) intangible assets, like patents, technology licenses, customer lists and marketing rights; and (3) human capital in the form of salaries and training for employees. If the goal is to improve our long-term economic growth and prosperity, which type of investment is most important?

It would be hard to make the case for giving the priority to tangible assets, and yet that is precisely what current law does by allowing rapid depreciation. At a minimum, the tax depreciation system should strive for neutrality and not discourage investment in intangibles and human capital. If we want to give incentives to a particular activity that generates positive effects beyond the company making the investment â€" an argument often made in favor of subsidizing research and development â€" then refundable tax credits, scientific grant programs or other indirect government expenditures are better approaches.

Cost recovery provides an uneven benefit to taxpayers, making it an especially weak instrument to subsidize activities that we want to encourage. For companies that pay little income tax, like many start-ups, accelerated depreciation offers little benefit. While net operating losses increase through the use of accelerated depreciation, the value of those losses is deferred and often lost because of limitations that kick in when the company is acquired or goes public. And yet these start-ups are often the companies that engage in the innovative research and development that can build a healthier economy in the long run.

As with Senator Baucus’s international tax proposal, revenue raised from modernizing cost recovery would be used to pay for a reduction in corporate tax rates. Industries that benefit from the current rules, like the oil and gas industry, are expected to denounce the change. While the prospects of the legislation moving forward are uncertain in the short term, the proposal shifts the burden onto old economy companies to explain why their industries should be subsidized at everyone else’s expense.

Victor Fleischer is a professor of law at the University of San Diego, where he teaches classes on corporate tax, tax policy, and venture capital and serves as the director of research for the Graduate Tax Program. His research focuses on how tax affects the structuring of venture capital, private equity, and corporate transactions. Twitter: @vicfleischer

Treasury Seeks an Exit From G.M. by Year End

The Treasury Department said on Thursday that it would sell its remaining shares in General Motors by year end, allowing the government to finally sever ties to the bailed-out automaker a few months sooner than expected.

If the government meets that projected timeline â€" the plan is subject to market conditions â€" it would clear the last vestiges of its 2009 rescues of G.M. and Chrysler, controversial moves that the Obama administration has defended as crucial to saving jobs. In exchange for providing loans to the two carmakers, the Obama administration took majority stakes in the companies.

The lifelines to G.M. and Chrysler have cost taxpayers several billion dollars. Others that the government extended during the crisis, including those to the American International Group and a host of banks, generated profits by the time they were concluded.

After having sold 70.2 million shares as part of its already-disclosed plan, the Treasury Department now owns about 31.1 million shares, or about 2 percent of the company’s outstanding shares. As of Thursday, that stake is valued at about $1.2 billion.

Barring a sudden jump in G.M.’s stock price, the government is on track to lose about $10 billion on its investment. So far, it has recovered about $38.4 billion. By contrast, other rescue efforts, including the bailout of the American International Group, have generated profits for taxpayers.

But administration officials have long argued that the aim was not to make a profit from its investments in the automakers. Instead, it was meant to preserve an already struggling industry badly wounded by the financial crisis.

“Treasury’s investment in the American auto industry was part of President Obama’s broader response to the financial crisis, and it helped save more than one million jobs,” Tim Bowler, a Treasury deputy assistant secretary, said in a statement. “Had we not acted to support the automotive industry, the cost to the country would have been substantial â€" in terms of lost jobs, lost tax revenue, reduced economic production, and other consequences.”

And government officials have long been loath to hold onto G.M. shares longer than necessary. The Treasury Department first began selling its stake in the fall of 2010, pricing an initial public offering at $27.50 a share. Last year, it sold 200 million shares back to the company for $5.5 billion and paved the way for a full exit from the automaker.

A sale of the Treasury Department’s stake also would allow G.M. to finally shed any lingering concern about “Government Motors.” The full divestiture of the administration’s shares will lift restrictions on executive pay and dividends to shareholders. It could also help the company in its plan to replace its current chief executive, Daniel F. Akerson, who has signaled that he planned to step down by the end of next year.

G.M. has rebounded since its return to the markets: It reported a nearly 16 percent rise in auto sales during October, the biggest jump among the three big Detroit manufacturers. Its core brands, including Chevrolet and GMC, showed double-digit gains.

Over all, G.M. shares have risen about 12 percent. It has remained above the I.P.O. price since April. And this past summer, the company rejoined the Standard & Poor’s 500-stock index, a position it had held for 84 years until its Chapter 11 filing.

“While the U.S. Treasury’s equity stake draws to a close, our work to transform G.M. continues,” the company said in a statement on Thursday. “We’re making great progress in our efforts to make the most of this second chance by building outstanding cars and trucks, creating jobs and reinvesting in our country.”

Blackstone’s Version of Peak Oil

A $6 billion oil deal signals yet another apex for the Blackstone Group.

The sale of private equity-backed GeoSouthern Energy to Devon Energy comes at a high price by one important measure. Blackstone also has an uncanny knack for timing. The glut of undeveloped land owned by oil companies suggests finding buyers will get tougher.

Devon can justify the purchase price to its own shareholders, who roundly embraced the deal, using one metric. It is paying just 2.5 times projected 2015 earnings before interest, taxes, depreciation and amortization for GeoSouthern’s assets in the Texas-based Eagle Ford shale formation. Peers like Rosetta Resources are trading at a multiple of four.

At $135,000 an acre, however, Devon shelled out about six times more than Marathon Oil paid two years ago to buy land in the same area from KKR and Hilcorp Resources. What’s more, Blackstone got in early. Since its 2011 investment, GeoSouthern has increased production roughly tenfold, to more than 50,000 barrels of oil a day.

There are other reasons to reflect on the timing of this sale. Activity in the sector is waning. Between 2010 and 2012, oil companies globally purchased a record $260 billion of virgin exploration land, about four times the annual average over the previous decade, according to the consulting firm IHS.

Developing this inventory has underpinned the rapid growth in capital expenditures and thus left less for chunky acquisitions. At Chevron, for example, such investment is up nearly 80 percent since 2010. That partly explains why the dollar value of oil and gas deals in the United States is 15 percent lower than last year, even after including GeoSouthern, according to data from Thomson Reuters, making it the slowest year since 2009.

Blackstone’s prescient track record, however, may be the most telling sign. Its 2007 initial public offering, just ahead of the financial collapse, was timed impeccably to maximize the price it could fetch. That same year, it pulled off a similar trick by swiftly offloading a slug of the office buildings it bought as part of a $39 billion Equity Office Properties deal. For the shale industry, the GeoSouthern sale is the latest reason to believe in a new form of peak oil.

Christopher Swann is a Reuters Breakingviews columnist in New York. For more independent commentary and analysis, visit breakingviews.com.

Deutsche Telekom to Sell Stake in Online Ad Company Scout24

LONDON â€" Deutsche Telekom said on Thursday that it would sell a 70 percent stake in the online classified advertising company Scout24 to the private equity firm Hellman & Friedman of San Francisco for 1.5 billion euros, or about $2 billion, in cash.

The German telecommunications company will retain a 30 percent stake in Scout24 when the transaction closes, which is expected to be in the first quarter of 2014. The deal values the business at €2 billion.

“We are extremely pleased to announce this transaction, which represents the partial realization of the significant value we have created in the online investment strategy we have pursued over the last years,” said René Obermann, Deutsche Telekom’s chief executive.

The deal, which is subject to regulatory approval, represents the latest sale by a European telecommunications company as the industry consolidates and companies look to streamline their operations.

Earlier this month, PPF Group, which is controlled by the billionaire Petr Kellner, agreed to buy a controlling stake in the Czech Republic operations of Spanish telecommunications company Telefonica for €2.5 billion.

On the same day, the French conglomerate Vivendi sold its 53 percent stake in the Moroccan company Maroc Telecom to Emirates Telecommunications, or Etisalat, for €4.2 billion.

In September, the British telecom company Vodafone agreed to sell its 45 percent stake in Verizon Communications’ wireless unit in the United States for $130 billion, the largest deal so far this year.

The American telecom giant AT&T is also looking at possibly making acquisitions in Europe as early as next year.

Timotheus Höttges, Deutsche Telekom’s chief financial officer, said the Scout24 transaction allows the company to pass along value to its shareholders immediately, while still retaining a meaningful equity stake for profits in the future.

The buyer, Hellman & Friedman, invests in a variety of areas, including financial services, software and marketing. Its investments include the television ratings and market research company Nielsen, the reinsurer Paris Re and Kronos, an employment software provider.

“We see tremendous growth potential for the company, and look forward to continuing the Scout24 growth story over the years to come,” said Patrick Healy, deputy chief executive of Hellman & Friedman.

Goldman Sachs and Jefferies were financial advisers on the deal, while Hengeler Mueller acted as legal adviser to Deutsche Telekom.

Mark Scott contributed to this story.

Deutsche Telekom to Sell Stake in Online Ad Company Scout24

LONDON â€" Deutsche Telekom said on Thursday that it would sell a 70 percent stake in the online classified advertising company Scout24 to the private equity firm Hellman & Friedman of San Francisco for 1.5 billion euros, or about $2 billion, in cash.

The German telecommunications company will retain a 30 percent stake in Scout24 when the transaction closes, which is expected to be in the first quarter of 2014. The deal values the business at €2 billion.

“We are extremely pleased to announce this transaction, which represents the partial realization of the significant value we have created in the online investment strategy we have pursued over the last years,” said René Obermann, Deutsche Telekom’s chief executive.

The deal, which is subject to regulatory approval, represents the latest sale by a European telecommunications company as the industry consolidates and companies look to streamline their operations.

Earlier this month, PPF Group, which is controlled by the billionaire Petr Kellner, agreed to buy a controlling stake in the Czech Republic operations of Spanish telecommunications company Telefonica for €2.5 billion.

On the same day, the French conglomerate Vivendi sold its 53 percent stake in the Moroccan company Maroc Telecom to Emirates Telecommunications, or Etisalat, for €4.2 billion.

In September, the British telecom company Vodafone agreed to sell its 45 percent stake in Verizon Communications’ wireless unit in the United States for $130 billion, the largest deal so far this year.

The American telecom giant AT&T is also looking at possibly making acquisitions in Europe as early as next year.

Timotheus Höttges, Deutsche Telekom’s chief financial officer, said the Scout24 transaction allows the company to pass along value to its shareholders immediately, while still retaining a meaningful equity stake for profits in the future.

The buyer, Hellman & Friedman, invests in a variety of areas, including financial services, software and marketing. Its investments include the television ratings and market research company Nielsen, the reinsurer Paris Re and Kronos, an employment software provider.

“We see tremendous growth potential for the company, and look forward to continuing the Scout24 growth story over the years to come,” said Patrick Healy, deputy chief executive of Hellman & Friedman.

Goldman Sachs and Jefferies were financial advisers on the deal, while Hengeler Mueller acted as legal adviser to Deutsche Telekom.

Mark Scott contributed to this story.

Morning Agenda: Dueling Portraits of SAC Trader

DUELING PORTRAITS OF SAC TRADER  | 
According to his lawyer, Michael S. Steinberg is “successful, steady, serious.” According to federal prosecutors, Mr. Steinberg, the most senior employee at SAC Capital Advisors to be charged with insider trading, tapped into a corrupt insider trading conspiracy to make “big money” for himself. He also, prosecutors claim, pushed a lower-level employee at SAC to provide “edgy” and illegal information about technology companies, Alexandra Stevenson and Ben Protess report in DealBook.

Those dueling portrayals emerged on Wednesday from opening arguments in Mr. Steinberg’s criminal insider trading trial at Federal District Court in Lower Manhattan. Mr. Steinberg, the first SAC employee to stand trial in the government’s decade-long investigation of SAC Capital, went on trial two weeks after the hedge fund agreed to pay $1.2 billion and plead guilty to five counts of insider trading violations. Authorities say the trial will illuminate the culture at SAC that opened it to such scrutiny.

The assistant United States attorney, Antonia M. Apps, said in her opening argument that the evidence would provide a “unique window” into the world of insider trading and the “secret pipeline” that Mr. Steinberg had into certain companies. Mr. Steinberg’s lawyer, Barry H. Berke, sought to distance Mr. Steinberg from the sharp-elbowed world of Wall Street, emphasizing how SAC managed millions of dollars on behalf of pension funds and universities.

“The government’s proof hinges largely on the testimony of a cooperating witness that Mr. Steinberg understood he received tainted information from a source who should not have been revealing it. In this case, the star witness will be Jon Horvath, a former SAC analyst who pleaded guilty in 2012 to insider trading charges,” Peter J. Henning writes in the White Collar Watch column.

EX-U.S. ATTORNEY TO JOIN DAVIS POLK  | 

Neil H. MacBride, the former United States attorney in Alexandria, Va., is joining Davis Polk & Wardwell as a partner, the firm is expected to announce on Thursday, in the latest example of a government prosecutor jumping to a high-paying law firm, DealBook’s Peter Lattman reports. Mr. MacBride will start in Davis Polk’s white-collar criminal defense practice early next year after four years in one of the country’s most prominent federal prosecutor’s offices, where his cases included the criminal charges against Edward J. Snowden.

“We have been looking for a senior ex-prosecutor, and Neil is a great fit both professionally and personally,” the managing partner of Davis Polk, Thomas J. Reid, said in an interview. “Neil can provide the best risk advice to our clients on both regulatory and white-collar matters.”

TRACKING JPMORGAN’S $13 BILLION  |  Fannie Mae and Freddie Mac, federal taxpayers, state pension funds, credit unions and homeowners â€" some of the biggest losers in the 2008 financial crisis â€" ended up on the receiving end of JPMorgan Chase’s record $13 billion settlement, which was struck over the bank’s sale of troubled mortgage securities to investors in the run up to the crisis, Ben Protess and Jessica Silver-Greenberg report in DealBook.

Of the $13 billion, the only fine in the case came from federal prosecutors in Sacramento, who extracted a $2 billion penalty â€" called “the largest recovery ever in a case handled” by the office. “No, prosecutors cannot pocket the cash to purchase a life-size gold statue of Jamie Dimon. Instead, JPMorgan must wire the $2 billion to the Justice Department, which will then deposit the money into a fund at the United States Treasury,” Mr. Protess and Ms. Silver-Greenberg write. “The next chunk of cash, roughly $7 billion, will flow to a range of government authorities, some more obscure than others.”

The watchword in the settlement is “accountability,” Peter J. Henning writes in the White Collar Watch column. “The question is, accountable to whom, and for what? The case does not involve a criminal charge against JPMorgan that would typically be resolved through a deferred prosecution agreement requiring a company to affirm that its conduct was illegal.”

ON THE AGENDA  |  The Producer Price Index for October is out at 8:30 a.m. Eastern time. Target reports earnings before the market opens, while Berry Plastics and Pandora Media announce results after the market closes. The hedge fund titan David Einhorn appears on CNBC at 12:15 p.m.

A MYSTERY MAN PICKED TO REGULATE DERIVATIVES  |  “President Obama has nominated Timothy G. Massad to head the Commodity Futures Trading Commission. If you thought, ‘who?’ â€" well, that may be the point,” Jesse Eisinger of ProPublica writes in his column, The Trade. “It’s difficult to escape the suspicion that his nomination is an effort to send a once-obscure agency back to obscurity. In choosing a cautious lawyer like Mr. Massad, an assistant secretary at the Treasury Department, the Obama administration seems to be tacitly renouncing the era of the outgoing head of the agency, Gary S. Gensler,” who was “a spine-stiffener among regulators who mostly went invertebrate.”

“Even friends of his whom I spoke with don’t know his views on regulation of derivatives, the signature issue facing the trading commission as it puts Dodd-Frank rules into effect,” Mr. Eisinger writes.

Mergers & Acquisitions »

Devon Clinches Deal for GeoSouthern Assets  |  Buying GeoSouthern’s holdings in the Eagle Ford shale formation in southern Texas will bolster Devon’s position in one of the most popular oil fields in recent years.
DealBook »

Men’s Wearhouse Investor Continues to Push for Deal With Jos. A. Bank  |  Eminence Capital unveiled a presentation trumpeting the benefits of a merger of the men’s suit retailers and pressed for a special meeting of its fellow investors.
DealBook »

Tribune Company to Lay Off Newspaper Employees  |  The New York Times reports: “The Tribune Company, owner of The Chicago Tribune and The Los Angeles Times, will lay off 700 employees at those newspapers and the six others it owns, it said in memos to the staff on Wednesday.”
NEW YORK TIMES

Mobius Says Fund Has Sold Stake in TNK-BP  |  Reuters reports: “Veteran emerging markets investor Mark Mobius said on Thursday he had sold his fund’s stake in Russia’s TNK-BP Holding, walking away from his attempt to get a better buyout deal from the firm’s new owner, Rosneft.”
REUTERS

INVESTMENT BANKING »

Credit Suisse to Wall Off Swiss Banking Business  |  The move, known as “ring fencing,” is designed to protect the Zurich bank’s retail customers and shield the overall bank from another financial crisis.
DealBook »

Russia Revokes License of Bank With Ties to Putin  |  The New York Times reports: “Russia’s central bank on Wednesday revoked the license of a midsize Russian bank, Master Bank, and accused its management of siphoning off assets in insider deals, in one of the larger bank failures here in recent years.”
NEW YORK TIMES

Goldman Stung by Currency Bets in Third Quarter  |  Goldman Sachs “lost more than $1 billion on currency trades during the third quarter, recent regulatory filings show, offering some insight into why the firm, considered one of Wall Street’s most savvy traders, reported its worst quarter in a key trading unit since the financial crisis,” Reuters reports.
REUTERS

Wall Street Could Benefit From Tax Proposal  |  A proposal by Senator Max Baucus to revise international tax rules would help financial services firms that tend to have high effective tax rates, Victor Fleischer writes in the Standard Deduction column.
DealBook »

PRIVATE EQUITY »

Santander in Talks to Sell Unit to Apollo  |  The Spanish bank Santander “is nearing a deal to sell its property management unit Altamira Real Estate to U.S. private equity group Apollo Global Management, two sources familiar with the situation said on Thursday,” Reuters reports.
REUTERS

Bain Capital Is Said to End Buyout Talks With TI Automotive  |  Reuters reports: “Private equity firm Bain Capital LLC has ended advanced talks with auto parts supplier TI Automotive Ltd over a possible buyout after failing to meet TI’s price expectations of close to $2 billion, according to people familiar with the matter.”
REUTERS

From Carlyle, a Primer on a Structured Financial Product  |  Linda Pace, the head of United States structured credit at the Carlyle Group, is featured on a podcast titled “Everything You Always Wanted to Know about C.L.O.’s,” or collateralized loan obligations.
CARLYLE GROUP

Career Advice From an Investor in Real Estate  |  In a video with PrivcapRE, Marjorie Tsang, who leads the New York State Common Retirement Fund, says she is a champion of emerging managers and offers advice to a younger generation.
PRIVCAPRE

HEDGE FUNDS »

Penney Reports Losses, but Shares Jump Higher  |  “J. C. Penney may have reported a bigger-than-expected loss on Wednesday, but investors say they are seeing signs that the retailer’s business is improving,” Michael J. de la Merced reports in The New York Times.
NEW YORK TIMES

Eton Park, Having a Strong Year, Plans to Cut Fees  |  Reuters reports: “Eton Park, one of the year’s best-performing hedge funds, plans to lower management fees and create a more liquid share class, in a rare change at a fund so popular at its launch that it was able to impose some of the toughest investment conditions in the industry.”
REUTERS

I.P.O./OFFERINGS »

Chrysler Adds Underwriters to I.P.O.  |  Barclays, Goldman Sachs, Morgan Stanley and UBS were added as bookrunners of Chrysler’s initial public offering, which is being led by JPMorgan Chase and Bank of America Merrill Lynch, Reuters reports, adding that the deal could happen as soon as early December.
REUTERS

For Blackstone, a Successful Hilton I.P.O. Would Be a Landmark  |  When the Blackstone Group bought Hilton Worldwide in 2007, the deal was criticized for loading up the company with debt. But now, “people familiar with the company say Blackstone has doubled its initial $6 billion equity investment from its real estate and private equity funds,” The Financial Times reports.
FINANCIAL TIMES

VENTURE CAPITAL »

Snapchat Chief Reveals Detail About App’s Usage  |  At a closed-door Goldman Sachs conference, Evan Spiegel, the chief executive of Snapchat, said that roughly 70 percent of the app’s users are women, The Wall Street Journal reports.
WALL STREET JOURNAL

Broadcasters’ Fight Against Aereo Doesn’t Serve Their Interests  |  Too often, media content producers seem to fear technological shifts that ultimately help them grow, Jeffrey Goldfarb of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

LEGAL/REGULATORY »

Fed Seeks Other Ways to Aid Economy  |  “Federal Reserve officials, many of them reluctant to continue the Fed’s economic stimulus campaign in its current form, wrestled at their most recent meeting with other ways of supporting an economy that still needs help,” The New York Times writes.
NEW YORK TIMES

E.C.B. Nominates New Banking Regulator  |  The governing council of the European Central Bank nominated Danièle Nouy to lead a new agency that will act as a central overseer over banking regulations across the euro zone.
DealBook »

The Ramifications of JPMorgan’s Settlement  |  “In all, the settlement is surely more than JPMorgan ever wanted to pay. Just as surely, it puts other banks on notice,” the editorial board of The New York Times writes.
NEW YORK TIMES

Shareholders Press AT&T and Verizon to Detail Roles in U.S. Surveillance  |  The New York Times reports: “Shareholders are putting AT&T and Verizon Wireless on notice: Tell the public more about the companies’ role in government surveillance efforts or risk a ding to the bottom line.”
NEW YORK TIMES

British Regulators Said to Be Reviewing Gold Benchmarks  |  The review by Britain’s Financial Conduct Authority is the latest area of focus by regulators on whether traders manipulated a variety of financial benchmarks.
DealBook »

Activist Pushing for Change at Darden Hires Outside Advisers

The activist hedge fund pushing for change at Darden Restaurants signaled on Thursday that it was ramping up its pressure.

Barington Capital, which it owns over 2 percent of the restaurant group’s shares, announced that it has hired the investment bank Houlihan Lokey to conduct “an independent review” of its recommended changes to the company’s strategy.

In perhaps a more intriguing move, Barington said that it had also hired MacKenzie Partners, a proxy soliciting firm often used in board fights.

The move comes a month after the hedge fund publicly disclosed a letter that it had sent to Darden’s board urging the company to break itself up into as many as three separate businesses. The plan includes separating the mature Olive Garden and Red Lobster chains from faster-growing brands like LongHorn Steakhouse and the Capital Grille.

Barington says that its initiatives could bolster the company’s stock price by up to 50 percent.

“Although Darden’s performance has been disappointing over the past few years, we are convinced that the recommendations we shared with the company’s management team in June can meaningfully enhance the long-term profitability of Darden,” James A. Mitarotonda, Barington’s chairman and chief executive, said in a statement on Thursday.

For now, relations between Darden and Barington remain cordial, according to a person briefed on the matter. The hedge fund â€" which prides itself on quietly and constructively working with its targets â€" is hoping for a peaceful resolution. Mr. Mitarotonda added in his statement that his firm is “committed to doing whatever we can to assist the company in improving long-term shareholder value for the benefit of all Darden shareholders.”

But investors and analysts are likely to see the hiring of Houlihan and MacKenzie as a way to add pressure on the company’s board to widen the scope of its own turnaround plan.

It’s unclear whether Barington has garnered significant support from the investment community. While analysts broadly agree that Darden should tighten operations at its core Red Lobster and Olive Garden restaurants, such as by slowing the opening of new locations and cutting costs, some have expressed skepticism that separating the brands would create value.

Still, shares in Darden have risen nearly 5 percent since word of Barington’s efforts emerged. They closed on Wednesday at $52.96.

Credit Suisse to Wall Off Swiss Banking Business

LONDON - The Swiss bank Credit Suisse said Thursday that it planned to separate its retail and private banking business in its home market from its riskier investment banking and trading operations in Britain and in the United States.

The move, known as “ring fencing,” is designed to protect the Zurich bank’s retail customers and shield the overall bank from the impact of problems in a single unit in the event of another financial crisis. Its larger rival UBS announced a similar move last month.

Although Credit Suisse avoided a government bailout during the financial crisis five years ago, the bank is facing tougher capital rules and tighter regulation at home designed to prevent a bank from being labeled “too big to fail” in the future. Swiss taxpayers injected billions of dollars into UBS during the crisis.

Credit Suisse said part of the goal of the newly announced program was to more closely align its investment banking operations to the regions in which they originate.

Under the plan unveiled Thursday, Credit Suisse will create a subsidiary for its Swiss-booked business, including wealth management and its retail and corporate and institutional clients in Switzerland.

Britain will remain the hub for its European investment banking business, where two operating subsidiaries will be combined into one unit.

Credit Suisse will shift responsibility for its United States derivatives business, which is currently recorded on its books as part of its international operations in London, to the United States subsidiary.

The restructuring has been approved by the bank’s board and is subject to regulatory approval, including final approval by the Swiss Financial Market Supervisory Authority, or Finma.

The program is “well underway” and is expected to be implemented by mid-2015, Credit Suisse said.

The changes come as are part of an overall plan to make the bank less susceptible to collapse and better align the bank to a stricter regulatory regime.

The bank said last month it planned to streamline its investment banking business, including shifting its fixed-income operations and other businesses it is exiting to a non-strategic unit within the investment bank. Credit Suisse and UBS have shed loans and other debt in recent years to meet Swiss regulatory rules, while also bolstering their capital reserves.

Credit Suisse also said last month that it would create a unit within its private bank to absorb legal and restructuring costs associated with reductions in its business aimed at overseas clients. Those costs include expected settlements related to tax investigations by the United States.