After 2 Days, No Jury for Insider Trading Case

After a full day of questioning dozens of potential candidates in a federal courtroom in Lower Manhattan on Wednesday, lawyers still had not selected the 12-member jury for the insider trading trial of Mathew Martoma, a former hedge fund manager at SAC Capital Advisors.

By the end of the day, Judge Paul G. Gardephe of Federal District Court raised concerns that he might have to bring in a fresh group of candidates on Thursday, postponing opening statements by another day. Jury selection began on Tuesday.

The judge also issued a ruling that would affect the trial. Judge Gardephe said lawyers for Mr. Martoma could not introduce as evidence excerpts from a May 2012 deposition by Steven A. Cohen, the billionaire founder of SAC Capital. In the deposition, Mr. Cohen told Securities and Exchange Commission investigators that he had sold shares of Wyeth after discussing the company with another analyst at SAC Capital. Mr. Martoma’s lawyers said that the testimony would help clear him.

Mr. Martoma’s trial is the latest in a decade-long investigation by the Justice Department into insider trading at SAC Capital. Just one month ago, in the same Manhattan courthouse, Michael S. Steinberg, the highest-ranking employee at SAC Capital to stand trial, was found guilty of insider trading. Six former traders have also pleaded guilty to insider trading while at the fund.

In November, SAC Capital agreed to pay $1.2 billion and plead guilty to five counts of insider trading violations. As part of this agreement, Mr. Cohen said he would manage only his own pool of money, worth around $9 billion. The rest of SAC’s $15 billion fund is being returned to investors.

Mr. Martoma has been accused of obtaining confidential information from two doctors involved in clinical trials for a drug for Alzheimer’s disease and making trades in the drug companies Wyeth and Elan based on information that a clinical trial had failed to meet its goals. The trades helped SAC Capital to avoid losses and generate profit of $276 million.

Dressed in a black suit and a maroon tie, Mr. Martoma, 39, sat directly in front of his wife, Rosemary, who wore a matching maroon turtleneck and took notes during the day.

The jury selection began at 9:30 a.m. as 54 candidates filed into the courtroom. Soon after, Judge Gardephe began excusing candidates based on their answers to his questions about whether they had any conflicts of interests or biases toward Wall Street or the financial world.

One of the eight potential jurors excused before lunch was a lawyer who said she had concerns about her ability to be impartial. Another was a man who said he questioned the value of insider trading laws on economic grounds.

By the afternoon, potential jurors were excused for more mundane reasons, like being unable to take three and a half weeks off from work for the trial.

The group of remaining candidates included the chief executive of a footwear and accessory company who wore four-inch boots, a film professor at New York University who spent much of the day chewing on an unlit cigar and an employee at the accounting firm PricewaterhouseCoopers.

The Meaning for Businesses in Delaware’s Judicial Nomination

Given that Leo E. Strine Jr. has a reputation for being both brilliant and a workaholic as the head of Delaware’s Chancery Court, the nation’s leading court for litigation of business disputes, it is no surprise that he was nominated to become the state’s next chief judge. But what does that mean for corporate America?

On Wednesday, in a move first reported by The Wall Street Journal, the governor of Delaware, Jack Markell, nominated Chancellor Strine to be chief judge of the Supreme Court of the State of Delaware. Chancellor Strine had been appointed only two years ago to be the head of the Chancery Court.

Chancellor Strine was a leading contender to replace former Chief Justice Myron T. Steele for the job mainly because of Chancellor Strine’s standing as one of the nation’s leading corporate law jurists. Chancellor Strine has spent about the last 15 years as a judge on the Chancery Court. Besides the acuity of his legal mind, the chancellor has also been known for his willingness to speak freely on a variety of topics, often peppering his remarks with pop culture references, including Paris Hilton and the reality television show “Hillbilly Handfishin’.”

All of this spells big changes for the chancellor but probably not much difference for corporate America.

The chancellor will no longer be a trial judge but a member of a five-person court where the majority of cases do not involve corporate law. The Delaware Supreme Court has a unanimity norm, and most decisions lack dissents. So the chancellor’s influence will have to be in bending the ear of his fellow judges, unlike his current job, where he has total control over the opinions he writes.

As for corporate law, the Supreme Court prefers to leave things mostly to the Chancery Court to decide. Nonetheless, the Supreme Court has stepped in recently to reverse Chancery Court judges in the Activision Blizzard and Airgas cases.

In large part, the Delaware Supreme Court’s decisions have had a business-friendly bent. The court has largely deferred to company boards and directors who are acting in good faith and looked to allow transactions that those directors support. The result in the case involving Air Products’ hostile bid for Airgas, for example, was to preserve the board’s ability to fight off a takeover by Air Products. And in Activision Blizzard, the court allowed the company’s takeover to proceed.

It is unlikely that things will change with Chancellor Strine in the top seat. In his capacity as chancery judge, he was seldom overruled and appears to be in accord with the idea of deferring to directors who act in good faith (notably, he also came down quite hard when he thought he saw bad conduct, as in his $1.26 billion dollar judgment in the Southern Peru case and when he chastised Goldman Sachs in the Kinder Morgan case. The only change may be that Chancellor Strine may be even more likely to defer to the Chancery Court judges.

The consequence is that any changes to the Delaware Supreme Court will probably come in the vast bulk of its cases that involve noncorporate matters and the regular affairs of any state. It is here where the judge is likely to make his mark. We will still hear from the chancellor in the corporate decisions from time to time, but his biggest job in the corporate arena will now be as cheerleader for Delaware, encouraging businesses to incorporate there. He already does that by speaking at conferences and other places.

Change is a bit more likely at the Delaware Chancery Court. There will be a new chief judge position that will have to be filled if the chancellor’s nomination is confirmed by the Senate. That process will probably start after the confirmation, but will involve jockeying among a small handful of top Delaware lawyers, which occurs every time for these coveted seats opens up.

The Chancery Court judges are lords of their own individual fiefdoms and have wide latitude to run their courts. But still, the quite competent judges are usually in sync â€" these days, largely with the idea of deferring to boards and directors acting in good faith. Still, the judges have also been active lately in penalizing officers and directors, as well as investment banks, who act in their self-interest to the detriment of the company they serve. Just ask those who were involved in the Del Monte buyouts, where the settlement was about $90 million.

But Chancery Court judges tend to have an outsize impact when they first join. In Chancellor Strine’s case, he led a movement to rework the laws governing when a company is taken private. Another recent appointee, Vice Chancellor J. Travis Laster, has taken innovative approaches to appointing class counsel and working to address the issue of the deluge of merger litigation to hit the court. It’s likely that any new judge on the court may want to burst out of the gate by seeking to reform Delaware law.

Still, don’t expect huge changes. In short, the business of Delaware will continue to be doing what it does best, business.

A Banner Year for Boutique Investment Banks

The big investment banks, most notably Goldman Sachs and JPMorgan Chase, continue to take the majority of fees from advising on mergers and acquisitions. But boutique and independent investment banks are gaining on them.

In 2013, boutiques and independents earned a combined 30 percent of fees for completed transactions, according to Thomson Reuters, the highest since it began keeping track in 2000. The figure was a big jump from 2011, when it was about 25 percent, and was almost double from where it stood a decade ago, at about 15 percent. In 2012, the number was 28 percent.

With global M.&A. advisory fees topping $19.1 billion in 2013, boutiques and independents collectively earned $5.73 billion for their work. By contrast, the four top banks â€" Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America â€" collected nearly $5 billion in fees combined.

As the top banks continue to hold their own, and boutiques and independents continue to gain market share, the second-tier big banks are getting squeezed. Barclays, UBS and Deutsche Bank all posted double-digit percentage declines in advisory revenue last year, according to Thomson Reuters. Credit Suisse was hit the hardest, with a 36 percent drop.

The Thomson Reuters numbers are estimates, and banks dispute their accuracy at times. Nonetheless, the figures provide a snapshot of an M.&A. advisory world in flux.

Boutiques and independents have been taking share in part because companies and boards are seeking high-quality independent advice rather than just big balance sheets to finance their deals.

“We’re in a period where trust is paramount on important decisions,” said Antonio Weiss, global head of investment banking for Lazard, which took the most fees of any independent or boutique, at $662 million. “Trust is something you build over a long period of time, but you can lose quickly. For firms focused on client relationships, that’s been an advantage.”

In addition to advising on many of the smaller deals that make up the so-called middle market, boutiques and independents continued to break into the upper echelons of M.&A. advisory work. In 2013, at least one was involved in almost all of the biggest deals of the year.

In the largest transaction of the year â€" Verizon Communications’ $130 billion buyout of the stake in Verizon Wireless that it did not already own from Vodafone â€" Guggenheim Securities and Paul J. Taubman, the former Morgan Stanley banker who helped strike the original deal, advised Verizon.

In the second-largest deal of the year, Lazard was the lead adviser to 3G Capital and Berkshire Hathaway in their $23 billion purchase of H. J. Heinz. Meanwhile, Centerview Partners, a private advisory shop, advised the seller.

The third- and fourth-largest deals of 2013 also involved boutiques and independents. Moelis & Company advised Omnicom on its merger with Publicis, while Publicis was advised by Rothschild. And Evercore Partners advised the board of Dell as it considered going private, while LionTree Advisors and Centerview advised the buyer group.

Boutiques and independents are often brought in to provide fairness opinions, offering a measure of independence in deals where a bulge bracket bank might be the lead adviser. But increasingly, they are also taking the lead adviser roles. One explanation is that in the wake of the financial crisis, companies and boards have also grown wary of their financial advisers becoming counterparties when things go wrong.

“The memory of boards is long in respect to the financial crisis,” Mr. Weiss said.

What’s more, many of the larger investment banks have been tightly focused on regulatory concerns. Meanwhile, the smaller firms have been able to remain focused on individual clients, taking share along the way. But as boutiques and independents look ahead to 2014, which many deal watchers believe will be a busy year, they are sure to face renewed competition from the big banks, pressure that is likely to keep them on their toes.

“It’s nice to be independent,” Mr. Weiss said. “It’s better to be good.”

Q. and A. With ‘Frontline’: How Do You Catch a Trader?

On Tuesday evening, “Frontline” took a comprehensive look at the investigation of insider trading on Wall Street in “To Catch a Trader.” This is a report about how hedge funds, including Steven A. Cohen’s SAC Capital Advisors, sought an “edge” by gathering information about companies to trade ahead of other investors, reaping outsize gains. Interviews with federal investigators and reporters who followed the story, including The New York Times’s Peter Lattman, provide a clear view of how the government built cases that have led to more than 75 convictions.

The latest chapter in the insider trading investigation is being played out in the United States District Court in Manhattan, where the trial of Mathew Martoma, a former SAC portfolio manager, is starting. This case involves the largest dollar amount in any insider trading case to date, approximately $276 million, and will feature Mr. Cohen, even though he will not testify. “Frontline” looks at how he professed a lack of knowledge about his own firm’s compliance policy and what constitutes insider trading.

Peter J. Henning, who writes the White Collar Watch column for DealBook, is moderating an online conversation with the show’s producers, Martin Smith and Nick Verbitsky. Watch the show above and you can leave a question in the chat window below to join the live discussion.

Dalio’s Bridgewater Associates Posts Lackluster Returns

Ray Dalio’s Bridgewater Associates, one of the world’s biggest hedge fund firms, had a largely lackluster year when it came to the performance of its two main portfolios.

The firm’s Pure Alpha fund, with $80 billion in assets, rose 5.25 percent in 2013. But Bridgewater’s All Weather fund, with $70 billion in assets, ended the year down 3.9 percent, said a person briefed on the numbers but not authorized to discuss them.

In theory, an investor who allocated an equal amount of dollars to the two Bridgewater funds ended last year with a roughly flat return.

Bridgewater’s performance is underwhelming in comparison to the American stock market. The broader market in 2013 posted its best gains since the 1990s, with the benchmark Standard & Poor’s 500-stock index rising 30 percent.

The performance of the two Bridgewater portfolios also lagged far behind hedge fund peers, which on average, posted a 9 percent gain last year.

The All Weather fund, which invests heavily in bonds, including Treasury inflation-protected securities, or TIPS, underperformed the Barclays Aggregate Index, a widely followed bond index, which ended the year down 2.03 percent.

The fund also fared slightly worse than a Bank of America index, which tracks the total returns on all United States government bonds and which fell 3.2 percent.

The rough year for Bridgewater is a blow to Mr. Dalio’s reputation as one of Wall Street’s most savvy money managers and whose views on global economic trends are closely monitored. The firm’s funds rank as some of the largest in the $2.2 trillion hedge fund industry and are a favorite investment for many public and corporate pensions and sovereign wealth funds.

One reason Bridgewater has managed to attract so much money from institutional investors is the firm’s history of producing steady, although not necessarily spectacular, performance in its main portfolios. Including last year, Pure Alpha has generated an average 14.4 percent return for investors in each of the last five years, while the All Weather fund has returned an average of 12.4 percent over the same time period.

Last year proved particularly challenging for Bridgewater’s All Weather fund, which is supposed to perform best when there is a sharp sell-off in either stocks or bonds. The fund help popularize the so-called risk-parity trade, which uses a combination of investments in bonds and stocks to try to adjust for a variety of economic scenarios such as rising or falling inflation, and rising or falling growth.

A number of risk-parity funds like All Weather were caught off guard by a sudden rise in Treasury yields last summer. Treasury yields began to rise last May after speculation began that the Federal Reserve would soon scale back its monthly purchases of United States Treasury’s and mortgage-backed securities. The Fed began slowly scaling back its purchases, which are intended to stoke economic growth, last month.

Last year also was a particularly rough one for TIPS and other inflation-protected securities. TIPS tend to perform poorly when Treasury yields rise and inflation is low. Last year iShares TIPS, an exchange traded fund that tracks the inflation-protected securities market, fell about 9 percent last year.

In the coming weeks, Mr. Dalio is expected to release to investors his widely followed year-end investor letter, a lengthy dossier that not only will take a look at 2013 but also offer his outlook for 2014.

Elliott Bids $3.2 Billion for Riverbed Technology

Elliott Management is using its trusted playbook to force another technology company into a sale.

The hedge fund offered on Wednesday to buy Riverbed Technology, a maker of networking equipment and software, for $3.2 billion, in hopes of pushing the company into selling itself.

Under the terms of its proposal, Elliott would pay $19 a share, a 6.4 percent premium to Tuesday’s closing price and a 26 percent premium to when it first disclosed a position in the stock.

“By any measure, we believe our proposal represents a compelling opportunity that your stockholders will find extremely attractive,” Jesse Cohn, a portfolio manager at Elliott, wrote in a letter to Riverbed’s board.

The hedge fund already owns about 9.1 percent of the company’s outstanding shares, and it has economic exposure to an additional 1.5 percent through derivatives.

Shares in Riverbed were up 10 percent by midday on Wednesday, at $19.70, as investors bet that a higher offer was in the offing.

A representative for Riverbed wasn’t immediately available for comment. The company has been working with bankers at Goldman Sachs, a longtime adviser.

The company has become the latest target of Elliott, which has made a lucrative business of getting technology providers to sell themselves. The hedge fund, and Mr. Cohn in particular, have succeeded in helping to catalyze the sales of the likes of BMC Software, Novell and Blue Coat in recent years.

It’s a time-tested move in the activist hedge fund playbook, one that the veteran Carl C. Icahn has frequently employed.

Now, Elliott has set its eyes on Riverbed, whose offerings are meant to speed up wide-area networks. The stock price of the nearly 12-year-old Riverbed has stayed roughly flat for more than a year, as growth in its core products has slowed while spending on research and development has risen.

The hedge fund first began buying shares in Riverbed several months ago, disclosing a 1.4 percent stake in November. In his letter to the company’s board, Mr. Cohn wrote that he had met with directors, including the founder and chief executive, Jerry Kennelly, to urge a sale.

“Though this mostly private dialogue has been amicable, we have become concerned that Riverbed has not indicated a desire to explore the significant acquisition interest of numerous potential bidders, including us,” the hedge fund executive wrote.

While Mr. Cohn wrote that he was prepared to pay up, he tipped his hand by noting that Elliott’s offer included a “go-shop” provision that would let the networking company seek potentially higher takeover bids. The investment firm has already heard from a number of private equity firms and strategic competitors of Riverbed’s that have expressed interest in potentially making a bid, a person briefed on the matter said.

“This structure guarantees that the company will secure a healthy premium for its stockholders while holding open the opportunity to obtain an even higher premium,” he wrote.

Elliott would prefer to participate in any takeover, even if it played a junior role, this person added.

Five Lessons From Bitcoin

Bitcoin is not over yet. But the pseudo-currency is close enough to collapse to merit an early retrospective.

My prediction is controversial. Many fervent fans are persuaded that this government-free currency is for real. Their ardor may keep it going for a while, but equally Bitcoin could disappear very quickly - that’s the way with speculative bubbles. So now is the moment to learn some economic lessons before the whole phenomenon is forgotten. Here are five:

Money Without Government Appeals to People Without Law

Legal tender has the backing of the issuing state. The government has a proprietary interest in maintaining a reliable currency. It also has the necessary powers to do so. It can regulate lending institutions, pursue fraud and create new money to keep the system afloat.

Bitcoin has none of that protection. On the contrary, governments are either hostile or hands-off. For anyone in the legal economy, the lack of official support is a significant negative. For anyone in the illegal economy, though, the extra-legal status is a positive. Unsurprisingly, the only real business actually to rely on Bitcoin - not merely issue press releases about planning to accept the tokens - has been Silk Road, a now-closed electronic exchange for illegal drugs.

Speculative Fever Can Alight on Almost Anything

Bitcoin is a pretty unlikely target. After all, the more the value of the would-be currency changes, the less it looks like a real currency - so the more liable it is to lose all value whenever the speculators get tired or wise. David Yermack of New York University’s Stern School of Business explained in a recent paper that the unstable value of Bitcoin - in the last three months, its dollar price has quadrupled, then almost halved and increased by about half - leaves it without two of the three basic attributes of a currency. Bitcoin is neither a relatable store of value nor a helpful unit of account.

Mr. Yermack kindly says that Bitcoin satisfies the third attribute - it can be, and occasionally has been, a medium of exchange. But if speculators were thinking clearly, they would stay away from any supposed money which banks don’t accept. After all, banks are involved in almost all exchanges in today’s economies.

The Current Monetary System Is Worth Complaining About

Bitcoin is the wrong answer to a good question: what can be done to make the monetary system less crazy? After so many banks needed to be rescued in 2008, and after five subsequent years of weird monetary policy, it’s clear that the question is legitimate. Something is badly wrong.

People can be excused for thinking that governments, including central banks, have run the money system so poorly that non-governmental money might be better, but that is the wrong answer. The only practical right answer is to improve the government-run monetary system.

Central banks seem to have learned how to reduce consumer price volatility, which was the scourge of the first decades of purely fiat money. Now the monetary authorities need to figure out how to reduce the volatility of asset prices, credit flows and foreign exchange rates. And the base interest rates should be high enough to give savers a real return.

Money Is Misunderstood

Admittedly, money is complicated. It is a social token as well as an economic tool. It is a store of value, but its own value shifts constantly. It is considered a safe and solid asset - “like money in the bank” - but banks cannot really promise always to make good on legitimate demands to liquidate accounts.

I sympathize with anyone who does not want to try to understand how money works, but monetary ignorance can be dangerous. Many Bitcoin investors will find that out, to their personal cost.

The whole economy paid dearly for similar misunderstandings by central bankers and regulators. They did not really consider the risks of speculation and wild credit creation by non-governmental financial institutions. If they had, there would have been no need afterwards to turn so many of them into quasi-governmental financial institutions.

Too Much Entrepreneurial Energy Is Wasted

Bitcoin is basically idle speculation, but it has inspired a great deal of skilled work. This small business - total value of a mere $100 million a year ago, now about $10 billion - has generated scores of websites and seemingly unlimited quantities of enthusiastic and evangelistic commentary. The original programmer, the producers of new Bitcoins and the creators of a remarkable number of sophisticated Bitcoin exchanges are all are very good.

A society in which no project ever attracted this sort of attention, intelligence and ambition would be moribund. The Bitcoin mania shows that ours is still quite alive. But it is a bit discouraging to see so much of what is good in our economy directed to something so misguided.

Edward Hadas is economics editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Facebook to Buy Indian Mobile Analytics Start-Up

Little Eye Labs, an Indian analytics start-up, announced on Wednesday that it would be acquired by Facebook in a move that helps drive the company’s mobile strategy.

Terms of the deal were not disclosed, but some reports put the purchase price at $10 million to $15 million. The company also said that the deal was Facebook’s first acquisition in India.

A spokesman for Facebook declined to comment on the price.

Little Eye, which is based in Bangalore, India, provides monitoring and analysis tools to measure the performance of Android apps. The company plans to move its headquarters to Menlo Park, Calif., where Facebook is based, and said it would offer a free version of its software until June 30 as it transitions.

“With this acquisition, Little Eye Labs will join forces with Facebook to take its mobile development to the next level,” Little Eye said in a statement announcing the deal on its website.

Little Eye’s backers include VenturEast, an Indian venture capital fund, and GSF, an Indian seed investor.

Facebook’s engineering manager, Subbu Subramanian, confirmed the acquisition on, of course, his Facebook page.

“At Facebook, we remain focused on producing useful and engaging mobile apps,” Mr. Subramanian said. “The Little Eye Labs technology will help us to continue improving our Android codebase to make more efficient, higher-performing apps.”

Investors and analysts have been scrutinizing Facebook’s mobile strategy as more of its users gain access through handheld devices. Last quarter, the company reported that nearly half of its users visited the site on their cellphones and tablet computers. The Little Eye acquisition could help Facebook keep tabs on visits because half of all smartphones operated on the Android system as of last year, according to a report from ComScore.

Some analysts worried that Facebook’s mobile strategy would not be able to keep up with the shift in user habits. Those fears have been somewhat allayed by the company’s jump in mobile ad revenue. Mobile ads accounted for 49 percent of the company’s advertising revenue in the third quarter, up from 41 percent in the previous quarter.

Despite Stock Market Exuberance, a Tempered Reaction

What a spectacular year was 2013.

Markets boomed. Stocks hit a record, with the Standard & Poor’s 500-stock index up almost 30 percent, the best performance in almost 16 years. Capital-raising is back, baby, with initial public offerings, like the one for Twitter, giving us that sweet 1990s feeling all over again. Investment banks had a great year.

In previous eras, all of this might have been enthusiastically celebrated. Street vendors would break out Dow 16,000 hats. The chief executive of Snapchat would be named Time magazine’s man of the year, children’s division. The media would serve up adulatory profiles of successful investors, glorious winners, implying they had achieved something close to heroic.

This time around, reaction is tempered. We are older and more jaded. It’s almost as if we are displaying wisdom.

Well, maybe that goes too far, but at a minimum, people know not to be too excited. Today, these successes are underscored with three vital observations: that the exuberance could just as easily disappear, leaving a crash in its wake; that strong capital markets don’t necessarily signify a strong economy; and that the gains are unequal.

Sadly, those hard lessons had to be won by living through two huge bubbles, stagnating wages and an economy suffering from chronic fatigue syndrome.

First, the most widely and easily grasped lesson. There is an innate skepticism about the stock market. Investors and the media voice a steady undercurrent of concern about high valuations. I did research on the news search service Factiva for mentions of the “Dow Jones industrial average” and “bubble,” comparing 2013 with the great bubble year of 1999. Last year, 1,832 articles shared both terms, while in 1999, there were only 1,342.

Perhaps we are not in a bubble today â€" it’s something that doesn’t have a clear definition, after all. Perhaps in many of those articles, bubbles are mentioned only to dismiss the notion that we are experiencing one. Perhaps investors in those articles are invoking the cliché that stocks have more room to rise because they can climb the proverbial wall of worry. (In investing circles, markets are due to rise if there is a sufficient number of worried people on the sidelines, holding their money back.) No matter. It’s a good sign that bubble-caution lines the intestines of investors and the media.

Bubble-consciousness means that investors, the media and the public may finally be mistrustful. Considering how treacherous the markets are, that mistrust is warranted.

In more financially naïve times, the stock market served as shorthand, a neat little number that told us whether the United States had a good day or poor one, depending on whether the market went up or down. That antiquated notion has been more or less retired. Now, when we see the markets doing well, we understand that it has little to tell us about the broader economy. Large publicly traded companies make up a small portion of the overall economy, and large portions of their profits come from overseas. The Dow Jones industrial average accounts for a relatively small sliver of employment and wages. Today, job growth remains weak, while the portion of employment-age workers is low. The stock market is not us.

So as companies’ profits zoom upward, we react more cautiously. Last year, corporate profit margins were about twice as high as where they have been on average since World War II, according to the economist Mark Zandi. Investors care about whether those margins are sustainable. Investors think about margins relative to the price of stocks.

But the public â€" especially the non-stock-investing portion â€" doesn’t. Today, the public cares more about the other side of the corporate equation: wages. Median income hasn’t gone up in more than a decade and is actually down from the late 1990s, when adjusted for inflation. Those rising profits reflect companies’ success in keeping labor costs low.

Investment banking fees rose 3 percent, to almost $80 billion globally, the best year since 2007, according to Thomson Reuters. I need not remind you that was the year before the crash. Bonuses for traders and bankers will provide plenty of rolling-on-a-pile-of-money time. The bonuses will be especially lucrative for those paid in deferred stock of their own banks, the current solution to linking pay to performance.

But again, we understand how to interpret that. High profits at financial firms mean that someone, somewhere has taken on added risk. And it also means that we have a simple number to use when assessing how seriously to take the constant whining from bankers about how governments are regulating them out of existence and threatening our capitalist way of life.

The wealth of billionaires soared. In a measure of 300 billionaires, Bloomberg News calculated that they added more than half a trillion dollars to their fortunes last year for an aggregate total of $3.7 trillion. Today, no longer is the 1 percent viewed through the prism of celebration and envy. Now, wealth is inextricably linked to income inequality. Half of the United States population is either poor or “near poor,” according to census statistics.

We haven’t solved the problems of depressed employment and wages, widening income inequality or inequitable economic growth. But at least we are beginning to define the issues correctly. The interesting test will be whether the lessons we seem to have learned will stick this time. Or will these niggling complications invading our prosperity be sloughed off as the markets continue to rise?

Forest Labs to Buy Specialty Drug Maker for $2.9 Billion

Forest Laboratories said on Wednesday that it had agreed to buy Aptalis, a privately held drug maker, for $2.9 billion in cash.

Aptalis, based in Bridgewater, N.J., produces treatments for cystic fibrosis and gastrointestinal disorders, among other things. It had sales of $668 million in its fiscal year, which ended in  September.

It is the biggest acquisition by Forest â€" which makes Namenda for Alzheimer’s disease and Linzess for the treatment of irritable bowel syndrome, among other drugs â€" since it bought Clinical Data for $1.2 billion in 2011, according to the research service Standard & Poor’s Capital IQ. It is also the first acquisition for Forest’s new chief executive, Brenton L. Saunders.

Aptalis was Axcan Pharma when it was bought out by the private equity firm TPG for $1.3 billion in 2007. TPG merged the business with Eurand Pharmaceuticals in 2011.

Forest said that it expected to use cash on hand and debt to finance the deal. It has a secured commitment for a $1.9 billion bridge facility.

Morgan Stanley advised Forest. Debevoise & Plimpton and Cleary Gottlieb Steen & Hamilton served as Forest’s legal advisers. JPMorgan Chase and the law firm Ropes & Gray advised Aptalis.

For Carlyle, Private Equity Business Is a Standout

The Carlyle Group manages a range of different investments, including private equity, hedge funds and real estate. But its bread-and-butter business of private equity was a standout last year.

The big investment firm, which is based in Washington, said on Wednesday that its private equity funds rose in value by 9 percent in the fourth quarter of 2013, bringing the year’s gains to 30 percent. Its real assets, which include real estate and energy, decreased by 1 percent in the fourth quarter and were up just 1 percent for the year.

The firm’s global market strategies business, which includes hedge funds, also turned in a relatively strong performance, with a gain of 10 percent in the fourth quarter and 28 percent for the year, Carlyle said. The metrics announced on Wednesday are preliminary, the firm said.

Still, the annual gains in Carlyle’s private equity and market strategies businesses were roughly in line with the performance of publicly traded stocks, which had a particularly strong year. The benchmark Standard & Poor’s 500-stock index rose nearly 10 percent in the fourth quarter, with a gain of almost 30 percent for the year.

Private equity is Carlyle’s oldest business, representing 34 percent of the firm’s $185 billion of assets under management as of Sept. 30. The firm made its name on leveraged buyouts, but it also runs a so-called growth capital business, in which it takes smaller stakes in companies.

Those growth capital funds, a subset of private equity, rose 20 percent in the fourth quarter and 32 percent for the year, Carlyle said.

Carlyle on Wednesday did not elaborate on the reasons behind the performance of its funds in the fourth quarter. Its real assets were weighed down by its energy investments, which declined 3 percent, the firm said.

For the third quarter, the firm reported lower earnings amid a slow period in selling its investments. At that time, Carlyle said it experienced losses in certain real estate investments in Latin America and Europe.

The fund performance announced on Wednesday reflects Carlyle’s so-called carry funds, from which it collects profit.

Chinese E-Commerce Giant Alibaba to Ban Bitcoins on Its Sites

LONDON â€" The Chinese e-commerce giant Alibaba Group said on Wednesday that it not allow the sale of Bitcoins on its website.

Alibaba becomes the latest in a growing chorus of governments and businesses to raise questions about Bitcoin, which has seen its value rise dramatically as more people embrace virtual currency.

“In the interest of consumer protection, Taobao Marketplace has banned the listing or sale of Bitcoins over the platform,” said Florence Shin, an Alibaba spokeswoman.

Bitcoin wasn’t an accepted form of payment on the website; the vast majority of transactions are processed through Taobao’s Alipay system. But some merchants still offered to accept Bitcoin as payments for their products or sold the virtual currency. The ban goes in effect on Jan. 14.

The announcement comes as Alibaba is considering an initial public offering as early as this year. Wall Street is anticipating that the Chinese company could be valued at more than $150 billion.

Alibaba’s decision also follows a move by China last month to ban the nation’s banks from accepting Bitcoins as a currency over concerns about potential money laundering and its potential threat to financial stability.

In a notice in December, the People’s Bank of China and other agencies said that Bitcoin was “not a currency in the real meaning of the word” but rather was a “virtual commodity that does not share the same legal status of a currency.” The notice went on, “Nor can, or should, it be circulated or used in the marketplace as a currency.”

Bitcoin was created in 2009 and has a limited supply. As a result, the price of those units has increased as investors have bet on a continued growing demand for the virtual currency.

Morning Agenda: JPMorgan Settles Madoff Charges

JPMORGAN SETTLES MADOFF CHARGES  |  Over the last year, JPMorgan Chase has agreed to legal penalties now totaling $20 billion, but the settlements have not taken as large a toll on the bank as the numbers might suggest, Peter Eavis writes in DealBook. On Tuesday, Preet Bharara, the United States attorney in Manhattan, imposed a record $1.7 billion fine for felony violations of the Bank Secrecy Act for failing to report Bernard L. Madoff’s suspicious activities. On top of that, the bank agreed to pay $350 million to the Office of the Comptroller of the Currency, bringing the total settlement to $2 billion.

But while the now $20 billion sum “could cover the annual education budget of New York City or finance the Yankees’ payroll for 10 years,” the bank has been able to withstand the legal hits in part because it has set aside funds over the last few years to pay out future settlements, Mr. Eavis writes. The bank continues to report solid earnings â€" its shares are up 28 percent over the last 12 months â€" and its shareholders and clients remain loyal.

Mr. Eavis writes: “JPMorgan’s financial success highlights a deep quandary that regulators have to grapple with as they press the largest banks to clean up their acts. The government’s penalties may seem large on paper â€" JPMorgan’s mortgage settlement with the Justice Department last year cost it a record $13 billion â€" but the largest banks seem capable of earning their way out of serious legal trouble.”

The penalty JPMorgan Chase incurred related to Mr. Madoff’s Ponzi scheme is significant, but it could have been worse for the bank, Ben Protess and Jessica Silver-Greenberg write in DealBook.

While the Madoff settlement is small compared with the record $13 billion it paid to the Justice Department in November over its sale of questionable mortgage securities leading up to the financial crisis, the size of the fine and the rarity of the deferred-prosecution agreement reflect the magnitude of the accusations. At one point, the prosecutors had been considering demanding that JPMorgan plead guilty to a criminal violation of the Bank Secrecy Act, an outcome that could have had devastating collateral consequences.

At a news conference on Tuesday, Mr. Bharara said that the bank’s failure to recognize warning signs enabled Mr. Madoff to commit fraud for decades. “The bank connected the dots when it mattered to its own profit, but was not so diligent otherwise when it came to its legal obligations,” Mr. Bharara said.

Still, the settlement shows that prosecutors are becoming more creative about returning money to victims of fraud rather than pocketing it themselves, Peter J. Henning writes in the White Collar Watch column. As part of the deal, the government will treat the $1.7 billion as the forfeiture of proceeds from Mr. Madoff’s fraud, meaning it can be returned to victims of the crime. Prosecutors also included a provision in the deferred prosecution agreement that does not allow the bank to deduct the fine from its taxable income, so taxpayers are not subsidizing the payment to the victims.

ONE-TIME WAFFLE MAKER TO TESTIFY AT SAC TRIAL  |  Timothy W. Jandovitz, a former employee of SAC Capital Advisors who made a brief foray into waffle making, is expected to be the first witness called on Wednesday in the trial of Mathew Martoma, a former SAC trader accused of insider trading, Alexandra Stevenson writes in DealBook. Mr. Jandovitz will likely face questions from the prosecutors on the years he worked with Mr. Martoma at SAC as a health care analyst.

Mr. Martoma is accused of obtaining inside information from a doctor about clinical trials for an Alzheimer’s drug before SAC sold its shares in two companies developing the drug, Elan and Wyeth. The trades helped the firm generate profits of $276 million and avoid losses during the financial crisis.

SHAKE UP AT GOLDMAN  |  Goldman Sachs is reshuffling its prominent technology, media and telecommunications investment banking group, David Gelles reports in DealBook. In a series of internal memos, the firm outlined the changes, which call for George Lee, who has been the co-head of the group since 2008, to become the group’s chairman and serve as the chief executive officer for the investment banking division.

The other co-head of the group, Anthony Noto, will continue in his role, joined in San Francisco by Daniel Dees, who has been one of Goldman’s most senior bankers in Asia. The investment banking group has won a number of high-profile assignments recently, including leading Twitter’s I.P.O.

ON THE AGENDA  |  Minutes for the Federal Reserve’s December meeting are out at 2 p.m. ADP’s payroll report for December is out at 8:15 a.m. The Consumer Credit report for November is released at 3 p.m. The Senate conducts a hearing on support for bank holding companies at 10 a.m. Bed, Bath & Beyond reports earnings after the market closes.

A MODEL FOR ACTION ON INCOME INEQUALITY IN ISRAEL  |  In the wake of Mayor Bill de Blasio’s pledge to fight inequality, Israel’s economy could offer a lesson, Steven M. Davidoff writes in the Deal Professor column. Despite intense lobbying efforts to kill the bill, the Knesset unanimously passed the bill, which broke up the “pyramids,” a family or individual who owns a public company that controls other public companies.

Though the United States faces growing inequality and large banks that concentrate assets, the American economy is different. But Mr. Davidoff writes: “Still, while we await the outcome of Israel’s great experiment, it is clear that where there is the perception that harm is being done and where there is the will to change, a democracy can overcome even the most powerful corporate lobbyists.”

Mergers & Acquisitions »

Sandvik to Buy Texas Oil Drilling Equipment Company for $740 Million  |  The deal allows Sandvik, a Swedish company that provides specialized equipment for the mining and construction industries, to enter a new product area.
DealBook »

Nestlé Agrees to Biotech Deal  |  Nestlé has entered into a long-term agreement with Cellular Dynamics International, a United States biotechnology firm, to aid its research on the link between diet and diseases, Reuters writes.
REUTERS

Citizens Financial to Sell Chicago-Area Branches to U.S. Bancorp  |  As part of the deal, U.S. Bancorp’s banking unit will acquire about $5.3 billion in deposits and $1.1 billion in loans, giving it about $11.3 billion in deposits in the Chicago area. Citizens Financial is a unit of the Royal Bank of Scotland.
DealBook »

Oracle Agrees to Buy Cloud-Based Service  |  Oracle’s purchase of Corente pushes the once web-shy technology giant further into the Internet age.
DealBook »

European Cable Operator Altice Plans $1 Billion I.P.O.  |  Altice, whose operations include cable businesses and mobile assets in several European countries and the Caribbean, is expected to use the money to reduce debt, which could allow it to potentially bid for new assets.
DealBook »

INVESTMENT BANKING »

Swiss Banks Prepare to Limit Investment Banking  |  UBS and Credit Suisse will curtail their investment banking operations if Swiss capital regulations become too strict, The Financial Times reports.
FINANCIAL TIMES

Another Federal Inquiry Into Banks Over Mortgage Bonds  |  Federal investigators are looking into mortgage-bond sales by banks in the years after the financial crisis, The Wall Street Journal reports. The examination is the first known widespread investigation of these bond sales since the financial crisis and targets many of the large banks, including Goldman Sachs, JPMorgan Chase, Citigroup and Morgan Stanley.
WALL STREET JOURNAL

Bank Shutters Commodities Trading Desks  |  Bank of America-Merrill Lynch closed its European power and gas sales and trading operations on Tuesday, the fourth large bank to do so, Reuters writes.
REUTERS

PRIVATE EQUITY »

Chuck E. Cheese’s Parent Considers Sale  |  CEC Entertainment Inc. may be looking to sell Chuck E. Cheese’s, the family dining and entertainment franchise, to private equity, Reuters reports, citing unidentified people familiar with the situation.
REUTERS

Blackstone Plans to Grow Indian Real Estate Portfolio  |  The private equity firm Blackstone is accelerating the pace of its acquisitions in Indian office property, The Financial Times reports.
FINANCIAL TIMES

Pantheon Said to Purchase Illinois Private Equity Stakes  |  Pantheon, the London-based private equity firm, has won a $500 million bid for buyout fund stakes sold by the Teachers’ Retirement System of the State of Illinois, Bloomberg Businessweek reports, citing unidentified people familiar with the situation.
BLOOMBERG BUSINESSWEEK

Consortium Said to Seek $2 Billion for Skillsoft  |  The private equity firms Berkshire Partners, Advent International Corporation and Bain Capital are exploring selling Skillsoft, an educational software provider, for $2 billion, Reuters reports, citing unidentified people familiar with the situation.
REUTERS

HEDGE FUNDS »

Middling Performance at Brevan Howard  |  Brevan Howard Asset Management, one of the world’s largest hedge funds, is reporting disappointing returns in its flagship fund and taking a hit in its emerging markets portfolio, Reuters reports, citing unidentified people familiar with the situation.

REUTERS

Hedge Funds Distinguished by Polar Fleeces  |  Hedge fund employees, like those at Steven A. Cohen’s SAC Capital Advisors, wear polar fleeces to assert their independence from Wall Street, a CNBC video segment reports. Get your own hedge fund fleece on eBay, where some are currently up for grabs.
CNBC

Elliott International Steady in 2013  |  Paul Singer’s hedge fund Elliott International rose 11.8 percent in 2013 and has not reported a month with negative returns in a year and a half, The Wall Street Journal writes.
WALL STREET JOURNAL

I.P.O./OFFERINGS »

Alibaba Bans Bitcoin  |  Alibaba, the Chinese Internet behemoth that is expected to go public this year, has banned Bitcoin from its shopping websites, The Financial Times reports.
FINANCIAL TIMES

Loss for Container Store on I.P.O. Costs  |  The Container Store, a storage and organization retailer, reported losses in its fiscal third quarter resulting from expenses related to its initial public offering in November despite higher sales, The Wall Street Journal reports.
WALL STREET JOURNAL

Office Depot Mexico Prepares I.P.O.  |  Grupo Gigante aims to use the proceeds from an initial public offering of Office Depot’s Mexican unit to help pay off loans it used in 2013 to buy a stake in the office supply stores, Bloomberg News reports. The offering will be Mexico’s first equity deal of the year.
BLOOMBERG NEWS

VENTURE CAPITAL »

Oscar, a New Health Insurer, Raises $30 Million  |  Oscar, a health insurer co-founded by the venture capitalist Joshua Kushner, has raised $30 million in new capital from existing investors, the firm plans to disclose this week.
DealBook »

Twitter Co-Founder Reveals New App  |  Biz Stone, the co-founder of Twitter, unveiled a new start-up called Jelly, an app that allows users to ask visual questions using Twitter and Facebook and receive answers from followers, the Bits blog writes.
NEW YORK TIMES BITS

Uber Says No I.P.O. is Imminent  |  Travis Kalanick, the Uber chief executive, said he is not planning to take his company public anytime soon. “We’re just growing a business. We’re only three-and-a-half years old,” Mr. Kalanick said, The Wall Street Journal reports.
WALL STREET JOURNAL

LEGAL/REGULATORY »

House Financial Services Chairman to Seek Volcker Rule Change  |  Representative Jeb Hensarling is soon expected to propose legislation that could open up a huge loophole in the Volcker Rule.
DealBook »

The Real Belfort Story Missing From ‘Wolf’ Movie  |  Jordan Belfort has had a great cinematic run in the new Martin Scorsese film “The Wolf of Wall Street,” but for many of his victims the ending is beyond an insult, Joel M. Cohen, a lawyer who prosecuted Mr. Belfort, writes in the Another View column.
DealBook »

Sum of Batista Parts Still Doesn’t Add Up  |  It’s tempting to think there might be investment opportunities in a $2.5 billion collection of companies that were worth $60 billion just a few years ago. But that would be wrong, contends Christopher Swann of Reuters Breakingviews.
DealBook »

Question Over Chief’s Role Resurfaces for JPMorgan  |  With annual meeting season bearing down, JPMorgan’s question on whether to separate the chairman and chief executive positions held by Jamie Dimon is resurfacing, writes David Reilly in The Wall Street Journal.
WALL STREET JOURNAL

Carmignac Gestion Hires Former SAC Investing Team in London

LONDON â€" A group of former employees at the SAC Capital Advisors hedge fund in London has found a new home.

Carmignac Gestion Group, the European asset management company, has hired a four-man European equities team headed by Muhammed Yesilhark, who joined SAC Capital in 2009.

The team will manage three European funds for Carmignac with about 1.6 billion euros, or about $2.2 billion, in assets under management.

“We’re bringing on board a talented team under Muhammed Yesilhark’s leadership to underscore our commitment to generate strong investment performance in European equities,” said Édouard Carmignac, the company’s founder and chairman. “Their experience in long-short management will help us to perform in all market conditions and will complement our risk management.”

Joining Mr. Yesilhark are Malte Heininger, a former investment banker at Morgan Stanley; and the former SAC analysts Huseyin Yasar and Saiyid Hamid.

Mr. Yesilhark will run the Carmignac Grande Europe fund and the long-short Carmignac Euro-Patrimoine fund. He will co-manage the Carmignac Euro-Entrepreneurs fund with Mr. Heininger, who worked with him at SAC for the past three years.

SAC shuttered its London operations last year as it faced pressure from a government insider-trading investigation in the United States.

Preet Bharara, the United States Attorney in Manhattan, has said that insider trading at SAC was “substantial, pervasive and on a scale without precedent in the history of hedge funds.”

Six former employees have pleaded guilty to criminal charges and Michael S. Steinberg, one of the firm’s highest-ranking employees to be charged in the investigation, was convicted of five counts of securities fraud in December.

Jury selection began in Federal District Court in Lower Manhattan on Tuesday in the trial of Mathew Martoma, a former SAC portfolio manager accused of using inside information about a clinical drug trial to help the firm avoid losses and generate profits totaling $276 million.

The firm itself pleaded guilty to insider trading in November and agreed to pay a $1.2 billion penalty. As part of the plea, SAC also agreed to stop managing money for outside investors.

Despite the plea, SAC said at the time that it “never encouraged, promoted or tolerated insider trading,” but was taking responsibility for “a handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability.”

The hedge fund closed its London office, formerly its largest outside its Stamford, Conn., headquarters, and has cut jobs as it becomes a so-called family office that will primarily manage the money of Steven A. Cohen, the firm’s founder.

A number of traders and analysts have also left for other companies as SAC has shrunk its operations.

Mr. Cohen, who has denied wrongdoing, is facing a civil administrative proceeding filed by the Securities and Exchange Commission, which has accused him of failing to properly supervise employees.