Federal authorities have opened a criminal investigation into a recent $400 million fraud involving Citigroup’s Mexican unit, according to people briefed on the matter, one of a handful of government inquiries looming over the giant bank, Ben Protess and Michael Corkery write in DealBook. The investigation, overseen by the F.B.I. and prosecutors from the United States attorney’s office in Manhattan, is focusing in part on whether holes in the bank’s internal controls contributed to the fraud in Mexico.
The decision by the F.B.I. and prosecutors to open a formal investigation, a move that has not been previously reported, has now drawn a faraway crime to Citigroup’s doorstep and represents yet another setback for the bank. Last week, the Federal Reserve rejected Citigroup’s plan to increase its dividend, embarrassing the bank and raising questions about the reliability of its financial projections.
The scrutiny coincides with Citigroup’s recent announcement that it faces a separate investigation from federal prosecutors in Massachusetts. Prosecutors in that case are examining whether the bank lacked proper safeguards against clients laundering money, stemming from their suspicion that drug money was flowing through an account at the bank. But the government scrutiny could be short-lived. Citigroup has not been accused of wrongdoing, and prosecutors might ultimately close the cases without extracting fines or imposing charges.
ANOTHER DEPARTURE FOR JPMORGAN  | Blythe Masters, the head of JPMorgan Chase’s giant commodities unit, is leaving the bank, underscoring that Chase, the nation’s largest bank, is not immune to the boom and bust cycles that periodically sweep through Wall Street, Jessica Silver-Greenberg writes in DealBook. The move comes as the bank is selling its physical commodities business, which trades hard assets, to the Mercuria Energy Group of Switzerland for $3.5 billion in cash.
JPMorgan’s partial retreat from the commodities business is particularly noteworthy because the bank, under Ms. Masters, made ambitious efforts to increase its presence in commodities after the financial crisis. New regulations, greater competition and relatively stable commodities prices have combined in recent years to make the business far less profitable for big banks, Ms. Silver-Greenberg writes.
Since joining the firm in 1991 after college, Ms. Masters has held several roles, including chief financial officer of the investment bank. She took over the commodities unit in 2007, but came under scrutiny there, with investigators finding that JPMorgan had engaged in illegal trading in the California and Michigan electricity markets. Last week, Michael J. Cavanagh , a top lieutenant to the bank’s chief executive, Jamie Dimon, said he would leave the bank for the Carlyle group, a private equity company.
What Ms. Masters will do with her free time was not disclosed, but “it’s a good bet that she will be spending some of it with horses,†William Alden writes in DealBook. In addition to running JPMorgan’s commodities business, Ms. Masters occasionally competes in horse shows and has enjoyed success recently in her equestrian pursuits.
THE NEXT WALL STREET?  | “There isn’t much to see in Qianhai today except for a tract of muddy, mostly undeveloped land that has been reclaimed from the sea in the southern Chinese city of Shenzhen, near the border with Hong Kong,†Neil Gough writes in DealBook. But officials there envision that, six years from now, Qianhai will be a thriving, international finance district in Shenzhen that will be China’s answer to Wall Street, the City of London or Hong Kong’s Central District.
The local government anticipates a working population of 650,000 people generating annual gross domestic product of around $25 billion in Qianhai by 2020 â€" plans that call for total investment of about $65 billion. “For China, the challenge is fundamental; gently easing the state’s grip on the financial system after decades of heavy-handed control. It’s a bold blueprint, but, so far, not much more than that,†Mr. Gough writes.
Qianhai is one of more than 10 newly created or proposed special zones where China plans to experiment with a new wave of financial overhauls. Mr. Gough writes: “The changes, first outlined in November by President Xi Jinping, serve as a recognition of the dangerous imbalances created by the investment-led growth model that has powered China since the financial crisis. Policy makers want to deflate these risks by reining in the nation’s reliance on cheap debt, modernizing the state-controlled financial system and refocusing the economy on domestic consumption.â€
ON THE AGENDA Â |Â The Challenger job cut report is out at 7:30 a.m. The Gallup payroll to population report comes out at 8:30 a.m. International trade data for February is out at 8:30 a.m. Weekly jobless claims are released at 8:30 a.m. The ISM nonmanufacturing index is out at 10 a.m. Eric T. Schneiderman, the New York State attorney general, is on CNBC at 3:30 p.m. European Central Bank officials meet in Frankfurt to set monetary policy.
A TALE OF JUSTICE DENIED  | In a settlement with Kenneth D. Lewis, the former Bank of America chief, “regulators put on a master class in how to take a strong case and render it weak,†Jesse Eisinger writes in The Trade column. Mr. Lewis received a modest penalty, paid for by his former employer, and a temporary ban from an industry he is no longer a part of.
To understand the case involves a trip down memory lane. As the world economy imploded in the middle of September 2008, Bank of America rushed into another acquisition, taking over Merrill Lynch, which was failing and facing the same short-term funding run that would have collapsed all of the investment banks had it not been for the government’s intervention. But as the two banks moved to finalize the merger in the fourth quarter of 2008, “Merrill bled billions while paying huge bonuses to its executives,†Mr. Eisinger writes.
The case against Bank of America contended that the bank misled its shareholders and the public about the losses and the bonuses by failing to disclose them before shareholders voted on the merger. The case seemed strong, but a number of factors made it especially difficult. And the outcome, Mr. Eisinger writes, left the public, with “as much justice as we have come to expect.â€
HOW TO EXPLAIN BITCOIN TO YOUR MOM Â |Â Have questions about how virtual currencies work? The comic artist Rami Niemi and Rachel Abrams of DealBook have all the answers.
Â
Vivendi Blocks Activist Group From Accessing Documents in SFR Sale  | The French media conglomerate said an association representing the rights of minority shareholders had sent a bailiff to Vivendi’s offices, but that the bailiff was denied access.
DealBook »
Small Banks Look to Sell Themselves as Regulations Take Toll  | More small banks are selling themselves, with executives saying the increasing regulatory burden was a factor in their decisions, The Wall Street Journal writes.
WALL STREET JOURNAL
Minneapolis Newspaper Gets a New Life  | With his billionaire résumé as a former state legislator, an owner of a sports team and a captain of industry, Glen Taylor fits the mold of trophy seeker, David Carr writes in The New York Times. But in signing a letter of intent to purchase The Star Tribune in Minneapolis from its private equity backers, Mr. Taylor said the newspaper was well run and he had no desire to be involved in its day-to-day operations.
NEW YORK TIMES
Baxter to Acquire Chatham Therapeutics  | Baxter International has agreed to buy Chatham Therapeutics, which has a gene therapy platform that focuses on hemophilia treatments, for $70 million upfront, plus potential milestone payments, The Wall Street Journal reports.
WALL STREET JOURNAL
DealBook »
Handler, Leucadia’s Chief, Takes Pay Cut in New Role  | Richard B. Handler was one of the better paid chief executives on Wall Street when he ran the Jefferies Group. Now, after the Leucadia National Corporation acquired Jefferies, his compensation has fallen by more than 80 percent.
DealBook »
R.B.S. Plans to Shut 44 Branches  | The Royal Bank of Scotland said on Wednesday that it would close 44 branches in Britain, Reuters writes. The bank announced in February that it planned to cut costs by 5.3 billion pounds over the next three or four years.
REUTERS
High-Frequency Trading May Be Too Efficient  | “If for nothing else, IEX and other venues that try to limit ‘predatory’ high-frequency trading are good for making fundamental investors feel like there’s a safe place for them â€" and for encouraging them to keep doing their jobs. The efficiency of the markets may depend on it,†Matt Levine writes in Bloomberg View.
BLOOMBERG VIEW
Lone Star Funds to Buy DFC Global  | DFC Global, which offers alternative financial services, announced on Wednesday that it had agreed to be acquired by the private equity firm Lone Star Funds for about $367 million, The Wall Street Journal writes.
WALL STREET JOURNAL
Freeman Spogli and Investcorp to Buy Umbrella Marketer  | The buyout firm Freeman Spogli and the investment company Investcorp, which is based in Bahrain, have agreed to acquire the Totes Isotoner Corporation, the world’s biggest marketer of umbrellas, gloves and rainwear, Reuters reports, citing unidentified people familiar with the situation.
REUTERS
Blackstone in Talks to Sell Office Properties  | The Blackstone Group is in talks to sell six prime office properties in the Boston area for about $2.5 billion, Bloomberg News writes, citing an unidentified person familiar with the situation.
BLOOMBERG NEWS
Investcorp Joins Rush to Invest in European Distressed Debt  | The hedge fund arm of Investcorp, the investment firm based in Bahrain, is partnering with the hedge fund Eyck Capital Management to look for opportunities to scoop up European companies slowly emerging from a continentwide financial crisis.
DealBook »
Ackman’s Pershing Square Fell 0.6% in March  | William A. Ackman’s flagship Pershing Square hedge fund fell 0.6 percent in March, The Wall Street Journal writes. Declines in the shares of the mortgage giants Fannie Mae and Freddie Mac hurt the fund’s performance.
WALL STREET JOURNAL
Judge Dismisses Suit Against Madoff Feeder Fund  | A New York State judge has dismissed a lawsuit brought by an investor in a fund managed by Tremont Group Holdings, one of the largest feeders of funds into Bernard L. Madoff’s Ponzi scheme, Reuters reports. The 2009 lawsuit accused Tremont of investing $3.3 billion with Mr. Madoff for more than a decade without investigating “red flags†that he never bought or sold securities.
REUTERS
Former Bankers Plan to Start London Hedge Fund  | The former global head of equity finance at JPMorgan Chase and three other bankers have started a London hedge fund to profit from Europe’s economic recovery, Bloomberg News writes.
BLOOMBERG NEWS
Just Eat, an Online Takeaway Service, Raises $600 Million in I.P.O.  | The food ordering service, similar to GrubHub, priced its offering at 260 pence a share, giving it a market capitalization of £1.47 billion, or $2.44 billion. GrubHub is planning its own I.P.O. this year in New York.
DealBook »
Chinese Tech Company Kingsoft Seeks U.S. Listing for Mobile Subsidiary  | The Hong Kong-listed software company has filed for an initial public offering for its mobile subsidiary in the United States amid a number of successful Chinese tech offerings there.
DealBook »
DealBook »
Reasons for Virtu to Remain Private  | Amid the hullabaloo about high-frequency trading, a delay to an initial public offering would help protect Virtu’s estimated valuation of more than $3.5 billion, writes Richard Beales of Reuters Breakingviews.
DealBook »
DealBook »
Venture Capital’s Need for Secrecy Collides With Public’s Right to Know  | A ruling by a California state court allows venture capital firms to control the amount of information they disclose. But is it the best solution? Probably not, writes Jonathan Axelrad, a partner at Goodwin Procter, in the Another View column.
DealBook »
If You Like Immersion, You’ll Love This Reality  | Jeremy Bailenson, who directs Stanford’s Virtual Human Interaction Lab, says virtual reality is the natural extension of every major technology being used today, Farhad Manjoo writes in the State of the Art column.
NEW YORK TIMES
Diller Says Aereo’s Survival Depends on Justices’ Decision  | With crucial Supreme Court arguments over the legality of Aereo scheduled for later this month, one of the streaming service’s major investors, Barry Diller, said on Wednesday that its viability as a business was riding on the decision, The New York Times reports.
NEW YORK TIMES
DealBook »
Giving a Debtor a Big Club Against Lenders  | A federal district court’s view on a sale of a piece of a loan is problematic, writes Stephen J. Lubben in the In Debt column.
DealBook »
G.M. Chief Faces Harsher Tone at Second Hearing  | Setting the tone for Wednesday’s questioning of Mary T. Barra, the chief of General Motors, Senator Claire McCaskill said the company had a “culture of cover-up†that discouraged quick action to fix a defective part, The New York Times reports.
NEW YORK TIMES
March Hiring Data Shows a Spring Thaw  | Companies stepped up hiring in March for a second month, offering fresh evidence that the American economy was regaining momentum after a weather-driven lull over the winter.
REUTERS
The Perpetual Bubble Economy  | Absent extraordinary intervention in the economy through fiscal policy, monetary policy or both â€" growth and employment will prove lackluster, according to a theory developed by Lawrence H. Summers, the former Treasury secretary and prominent public intellectual, the Economix blog reports.
NEW YORK TIMES ECONOMIX
China Leans Toward More Stimulus Measures  | As the economy shows signs of further slowing, government officials are making clear their willingness to step in, The New York Times writes.
NEW YORK TIMES
