Over Just 7 Days, Lenovo Wraps Up Two Deals Totaling $5.2 Billion

The chief financial officer of the Chinese technology giant Lenovo was scheduled to spend last week rubbing elbows with Hollywood celebrities, corporate chieftains and government leaders in Davos, Switzerland.

Instead, the executive, Wong Wai Ming, a 54-year-old former investment banker, was shuttling between law firm offices in frigid Manhattan, putting together two of the most transformative deals in Lenovo’s 30-year history.

In just seven days, Lenovo announced a $2.3 billion deal to buy IBM’s low-end server business and a $2.9 billion pact to acquire Motorola Mobility from Google. A delicate balancing act was required: Neither the IBM team in Midtown nor the Google contingent downtown could know what was happening in negotiations three and a half miles away.

Each acquisition alone would have been enough to occupy the attention and resources of most other technology giants. But Lenovo is a company in a hurry.

Lenovo ascended to the top tier of technology companies two years ago, surpassing Hewlett-Packard to become the world’s largest maker of personal computers. But with the PC market in steady decline, Lenovo had already been making drastic moves to ensure its future viability.

“We’re already seeing the demise of the PC market,” said Shahid Khan, a managing partner at the Meridian Advisory Group. “This is foresight on their part.”

In early 2012, Lenovo’s chief executive, Yang Yuanqing, began laying out a plan to branch out into smartphones and other devices in what the company began calling its “PC-plus” strategy.

With the IBM server deal, Lenovo is now positioned to take on Dell and H.P. Even though many companies are transitioning to higher end servers for complex tasks, the x86 servers Lenovo agreed to buy from IBM will remain in demand for years to come, generating steady cash flow.

And with the Motorola acquisition, Lenovo will vault into a clear No. 3 position in smartphones, behind Samsung and Apple. Lenovo’s own smartphones are already popular in China, but buying Motorola gives the company a global brand.

“In order to be a global operation, the brand is very, very important,” Mr. Wong said.

In an interview with Fortune on Thursday, the chief executive, Mr. Yang, was blunt: He said he hoped his company would surpass Apple and Samsung.

The voracious acquisition strategy raises questions about whether Lenovo is trying to do too much, too quickly. In the coming months, Lenovo will have to integrate the money-losing Motorola business, as well as its new servers business.

“The biggest risk is whether the executive management has the wherewithal to do a good job in the integration,” said Andrew Costello, a principal at IBB Consulting. “If they don’t, they’ll lose good people as they work to pull it all together.”

The Motorola deal has obvious risks. Its recent phones have not sold as well as Google hoped they would. On Thursday, not 24 hours after the Motorola deal was announced, Google reported that Motorola had lost $384 million in the fourth quarter.

But Lenovo executives emphasize the value of the Motorola brand. And analysts agree that the deal includes other assets that could give Lenovo a better chance of eventually challenging the top two smartphone makers.

“Lenovo now has extra scale in smartphones and a seat near the top table,” said Neil Mawston, an analyst with Strategy Analytics, a research firm.

If the company can successfully integrate Motorola, it could gain considerable advantages.

For one, there would be geographical benefits. Although the company has been pushing to expand its smartphone business internationally, more than 90 percent of its sales are still in China.

Lenovo executives said they would retain both brand names, and in some cases, the two brands might be sold alongside each other.

“We are not restricting Lenovo to China or Motorola to the U.S.,” said Mr. Wong, the chief financial officer. “They are two different brands with different sets of propositions for the customers. The key for us is to sell more devices to the market.”

Although Motorola is not a big player globally, it has distribution relationships with more than 50 mobile carriers, Mr. Wong said.

Lenovo had long been eyeing Motorola. It remained interested even after Google bought Motorola for $12.5 billion in 2012, believing that the smartphone business would come up for sale again.

Though Google had purchased Motorola primarily for its patents, it still had a hardware business to turn around, an effort that ran up hundreds of millions of dollars in losses. By last fall, Larry Page, Google’s chief executive, had grown weary of answering analyst questions about Motorola on quarterly conference calls, according to a person briefed on his thinking, and had resolved to finally put the deal behind him and look for a buyer.

Lenovo’s persistence paid off. Google was not going to sell Motorola to competitors like Microsoft or Samsung, and Lenovo, as the world’s largest PC maker, was an ideal partner.

Around Thanksgiving, Google’s executive chairman, Eric E. Schmidt, called Lenovo’s chief executive and asked if he was still interested in a deal, said a person briefed on the talks.

The two sides began negotiating soon afterward. On one side were Mr. Wong and his advisers at Credit Suisse and the law firm Cleary Gottlieb Steen & Hamilton. On the other were an array of Google executives â€" among them Mr. Page, Mr. Schmidt and Nikesh Arora, the company’s chief business officer, with the latter two sometimes calling from Davos â€" and investment bankers from Lazard.

Google saw real benefits in placing its smartphone hardware in the hands of a trusted partner. The prospect that the world’s largest PC maker might become a big proponent of Android, Google’s mobile operating system, was an added benefit.

For Lenovo, the deal instantly made it a preferred hardware producer for the most influential technology company in the world.

“What IBM’s ThinkPad business did for them in the PC era, Motorola will do for them in the post-PC era,” said Mr. Khan of Meridian Advisory.

The simultaneously negotiations with IBM and Google created several memorable moments for negotiators. At one point members of the two deal teams ran into each other at the Midtown offices of Cleary Gottlieb.

When news leaked that Lenovo and IBM were nearing a deal, Google executives and their advisers suddenly understood why Lenovo had proposed an unusual structure that would allow it to pay off $1.5 billion over time, reducing near-term cash demands.

On the day the IBM deal was announced, Mr. Wong was back at the negotiating table that afternoon, working on the Motorola deal. Days later, he flew to Mountain View, Calif., where he and Mr. Arora hashed out final details over dinner at the Google executive’s home.

The Motorola deal was originally intended to be announced on Friday. But that would have fallen on the Chinese Lunar New Year, when the Hong Kong Stock Exchange is closed. So the wearied deal teams pushed the announcement â€" and Lenovo’s latest transformation â€" up by a day.

Goldman Deal Threatens Danish Government

There are groundbreaking business deals. And then there are ones that threaten to break up governments.

When Denmark gave the global financial giant Goldman Sachs the go-ahead on Thursday to buy a stake in its state utility, the move was not exactly followed by a celebratory signing ceremony.

So divided was the Socialist People’s Party that it withdrew its ministers from the country’s governing coalition. Some party members said the deal ceded too much power to Goldman. Annette Vilhelmsen, the party’s leader, who supported the deal, stepped down from her leadership role since she could not reach agreement within her party.

The party’s withdrawal from the coalition left the government of Helle Thorning-Schmidt, the prime minister, with a tenuous grip on power.

That so many Danes have been aghast at the idea of giving Goldman Sachs a prominent role in the country’s energy future reflects how far the damage to the investment bank’s reputation has spread since the financial crisis.

However much the financial world might envy Goldman’s trading prowess, many Danes see Goldman as an emblem of an industry that helped cause the crisis and then profited handsomely even as much of the Continent still struggles to recover.

Thousands of people have taken to the streets in recent weeks to protest the deal; a prominent banner featured the vampire squid that critics have come to embrace as a symbol of Goldman Sachs. Nearly 200,000 Danes signed an online petition against the deal, a record.

The deal was approved on Thursday by a parliamentary committee. The departure of the Socialists left the two remaining parties in a precarious position.

But Prime Minister Thorning-Schmidt, who is best known internationally for her recent “selfie” with President Obama at the funeral of Nelson Mandela, said she would form a new government. The two remaining parties in the coalition government, her Social Democrats and the Social Liberal party, hold about a third of the seats in the Parliament. The Socialists said they would still support the coalition in parliamentary votes. The governing coalition is also backed by a far left party.

“It is quite an odd day in the Danish Parliament, considering one of the three parties that was in the government has left,” Benny Engelbrecht, a Social Democratic lawmaker, said in an interview. He said the departure of the Socialist People’s Party “was over a number of things, but inspired by this.”

“In Danish, we have an expression, ‘The drop that makes the glass spill over,’ ” he said, “and this was what made the glass spill over.”

Under the terms of the deal, Goldman would invest about $1.45 billion for an 18 percent stake in Dong Energy, the state utility, which has become a green energy exemplar in its push for electricity from wind turbines. Though the deal buys far from a controlling share, the minority stake would come with special privileges.

Goldman would get a seat on the utility’s board. And the bank, along with two Danish pension funds, would have veto power over changes in the utility’s strategy or its executive suite â€" specifically the utility’s chief executive or chief financial officer. The Danish pension funds are investing about $550 million.

Among the questions about the deal is whether it is being structured to avoid taxes. Goldman’s investment will be made through a company based in Luxembourg. Danish Broadcasting has reported that shares in the Luxembourg company are partly owned by entities based in the Cayman Islands and Delaware.

In a statement, Goldman Sachs said it “complies, and will continue to comply, with all applicable tax laws in Denmark, Luxembourg, the United States and other relevant jurisdictions.” A Cayman Island partnership was set up primarily for investors outside the United States and a Delaware partnership was for investors in the United States, Goldman said.

Goldman expressed its “long-term commitment” and its support for the current management and its strategy, which the bank said included “significant renewable energy investments.”

Dong Energy has a number of businesses, but it is perhaps best known of late for its leading role in building offshore wind farms. Dong also drills for oil and gas in the North Sea, has about one million gas and electric customers and operates coal and biomass power plants.

Karsten Anker Petersen, a Dong spokesman, said building wind farms “requires huge investments upfront, and that’s part of why we need the capital injection from our new investors.”

Goldman has a long history of buying up or investing in big public infrastructure companies and projects, and it manages investment funds dedicated to those efforts. In 2010, it bought a Spanish natural gas distribution network. This month, one of its funds sold its stake in SSA Marine, a global port operator.

There has been no shortage of Danish ire about the deal. In an editorial, Berlingske, a national newspaper, has argued that “Goldman Sachs might send a lot of its earnings from the investment to the Cayman Islands to avoid Danish taxes.” It added, “This happens at the same time the Danish government is fighting against exactly this type of tax evasion.”

On Wednesday, an estimated 4,000 people gathered in front of Parliament to protest the deal. A few supporters also turned up, including Rasmus Jarlov, a member of the Copenhagen City Council and the Conservative Party.

During an interview, he was hit by a snowball, and later, he and three other conservatives were attacked by protesters.

An earlier plan to make a public offering of stock in 2008 was abandoned during the financial crisis. Under the current deal, Goldman and the Danish pension funds will be able to sell their shares back if there is not a public offering by 2018.

Supporters said Goldman had offered the best deal. Mr. Engelbrecht, the parliamentarian, who voted for the deal, said: “I’m not interested in being a shield for Goldman Sachs â€" they’ve done a lot of crazy things over time with regards to the financial crisis. They’ve got a bad reputation, no doubt about that.”

But he added, “Now they support green growth and green energy, which is something I’m quite proud of. That someone as focused on revenue as Goldman Sachs thinks green growth and green energy, especially wind energy, holds big potential for the future.”

Former Chief of S.E.C. to Leave Consulting Job

Mary L. Schapiro spent four years as head of the Securities and Exchange Commission. Her next act was far shorter.

Just nine months after joining the Promontory Financial Group, a consulting firm that straddles the worlds of Wall Street and Washington, Ms. Schapiro is planning to leave her full-time role there. Ms. Schapiro, a managing director and chairwoman of the governance and markets practice at Promontory, will instead become the vice chairwoman of the firm’s advisory board.

In a statement, a Promontory spokesman attributed Ms. Schapiro’s decision to “her desire to devote more time to her outside activities.” The spokesman, Christopher Winans, added that “Mary Schapiro is a public figure who is in high demand around the world.”

Ms. Schapiro said on Thursday that she had an array of university lectures, speaking engagements and corporate board work ahead of her. Her last day as a Promontory employee is Friday.

“Promontory is a great firm but I’ve learned over the last nine months that there are lots of things I’m interested in doing and this move frees me up to do them,” she said.

Even so, the abrupt departure capped a rare wrong turn through Washington’s revolving door.

Like many S.E.C. officials before her, Ms. Schapiro spun her government résumé into a lucrative private sector role at Promontory, which has advised some of the world’s most powerful corporations and banks, including Morgan Stanley and the Vatican Bank. At first, representing such companies would seem to suit her sweet spot. During her nine-month stint, she advised corporate clients on structuring their boards and managing risk.

But Ms. Schapiro pledged never to represent a Promontory client before a government agency, saying that she was loath to trade on the secrets of an agency she helped overhaul after the financial crisis. That restriction exceeded her legal obligation. Under executive order, President Obama barred all his appointees from formally lobbying his administration after leaving it, a ban that would expire once he left office.

The harsher, self-imposed restriction limited Ms. Schapiro’s role at Promontory, people close to her say. And after spending her entire career as a regulator â€" at the S.E.C., the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority, Wall Street’s self-regulatory group â€" Ms. Schapiro privately remarked to friends that consulting work was not the right fit.

“There’s so much money to spin through the revolving door that it’s almost irresistible,” said Craig Holman, a government affairs lobbyist for Public Citizen whose report “A Matter of Trust” laid the groundwork for Mr. Obama’s executive order. “After appearing to have taken advantage of this, it now appears that Mary is resisting that very powerful temptation, and I applaud her for that.”

Still, Ms. Schapiro will keep a foot in the private sector. She will continue to earn about $250,000 annually as a director at General Electric.

Ms. Schapiro â€" who left Finra after 13 years with a payout of roughly $7 million that included pension and deferred compensation â€" will also collect compensation for serving on Promontory’s advisory board. She will join a who’s who of former regulators, including Alan S. Blinder, the former vice chairman of the Federal Reserve, and Arthur Levitt, one of Ms. Schapiro’s predecessors at the S.E.C.

Libya Says Goldman Didn’t Explain Options

In early 2008 â€" months before the financial crisis began â€" Goldman Sachs put $1.2 billion of Libyan money into leveraged bets that six stocks would rise over the next three years.

None of them did. Libya lost every dollar that was invested. In a lawsuit filed against Goldman in London, the Libyan Investment Authority said that Goldman made at least $350 million from putting the country’s sovereign wealth funds into investments that the investment banking firm did not explain and that Libya did not understand.

The suit provided, for the first time, details on the investments that were made.

Had the Libyans understood them, they would have known that the fund was effectively buying long-term call options on the six stocks. As with all options, they could expire worthless if the shares failed to gain over the period. On the other hand, if the stocks rose substantially, the Libyan fund could have profited.

The companies whose shares Libya bet on were Citigroup, an American bank; Électricité de France, a French government-controlled utility; Banco Santander, a Spanish bank; Allianz, a German insurance and investment company; ENI, an Italian oil company; and UniCredit, an Italian bank.

The investments generally involved both a forward contract and a put option. Economically, the suit says, they amounted to long-term call options on the shares, giving the fund the right to profit if the shares rose, but limiting its possible losses to the amount invested. Part of the Électricité de France investment had an additional provision that would have limited Libya’s profit if the stock rose by more than 40 percent before the contracts expired in early 2011.

The Citigroup transactions were the first entered into in January 2008. There were two transactions, with similar terms, and they are combined in this analysis.

Essentially, the Libyan fund had options to buy 22.3 million Citigroup shares, then worth $5.7 billion. But it would profit only if the value of those shares rose to at least $5.9 billion by early 2011, since it paid $200 million up front to acquire the investment. If the value was less than $5.7 billion when the options expired, Libya would get nothing and lose the entire initial investment.

There was a sweetener. The exercise price of the option could be reduced by up to 10 percent if Citigroup shares fell over the following nine months. That did happen, but that meant only that Libya’s investment would have value if the shares wound up being worth at least $5.1 billion.

In fact, they were worth about $100 million when the option expired.

All the other investments cited in the suit also expired worthless, although none of them appear to have expired as far out of the money as did the Citigroup transaction. While many stocks did badly during the three years, financial stocks, the ones in which about 75 percent of the fund’s money was invested, performed particularly badly.

Had the Libyan fund bought the shares instead of options, it would have lost money but not nearly all of its investment.

By the Libyan fund’s account, Goldman did not explain the disputed transactions until well after they were made, and did not provide confirmations of the trades until weeks, or in some cases months, after they were made. It says Goldman did not require it to sign the normal agreement required to trade in derivatives.

The suit adds that as the value of the investments deteriorated, “Goldman had to be chased on a number of occasions before it provided the L.I.A. with account statements” regarding the trades.

How Much Is Too Much to Pay for Jos. A. Bank?

Men’s Wearhouse may be willing to raise its bid to buy its rival, the men’s suit retailer Jos. A. Bank, but analysts on Wall Street are wondering: How much is too much?

“Joseph A. Bank is about fairly valued right now, according to our work,” said Craig Sterling, an analyst with EVA Dimensions, referring the company’s closing share price on Wednesday of $54.86 a share. “If they were to pay more than that, they’re overpaying.”

In its letter on Thursday, Men’s Wearhouse said, “We are prepared to increase our offer price if you can demonstrate or we can discover additional value through discussions or limited due diligence.” The company also put pressure on Jos. A. Bank’s independent directors to negotiate a deal.

The two sides have been fighting out for months. The companies have lobbed bids back and forth. And they have put in place defensive measures - like lowering their poison pill thresholds - to keep each other away.

To complicate matters, both retailers share a number of overlapping investors. Eminence Capital, which owns stakes in both companies, has been pushing Jos. A. Bank to make a deal.

Men’s Wearhouse is willing to pay a premium. Jos. A. Bank rejected Men’s Wearhouse’s offer of $57.50 a share earlier this month, calling it “inadequate and opportunistic.”

But Jos. A. Bank’s most recent annual report shows that the company had more than $13 a share in cash on hand at the beginning of last year. Given its historical performance, one could assume that number has bumped up a bit higher now, bringing Men’s Wearhouse’s bid down somewhere below $44 a share.

A company is worth, of course, as much as someone is willing to pay for it. Both retailers have identified up to $150 million in savings a sale would yield, but Men’s Wearhouse may see other synergies.

If Men’s Wearhouse wanted to increase its offer, it has significant room to do so, because the company doesn’t have too much debt on its books.

According to data from Richard Jaffe, an analyst with Stifel, an offer of $57.50 a share would give a combined Jos. A. Bank/Men’s Wearhouse a ratio of 2.6 next year on its debt-to-Ebitda â€" or earnings before interest, taxes, depreciation and amortization. That’s at the top of the range for peers like Abercrombie & Fitch and L. Brands, which have ratios of closer to two times, but still not a huge outlier.

Plus, that debt ratio is likely to go down.

“It’s reasonable to assume that management is optimistic that Ebitda will improve, that the performance of both businesses can and will get better,” Mr. Jaffe said.

Box, an Online Storage Start-Up, Is Said to File for an I.P.O.

Box, an online storage and document-sharing provider, has filed confidential paperwork to go public, a person briefed on the matter said on Thursday.

The company has picked Morgan Stanley, Credit Suisse and JPMorgan Chase as its top underwriters and is aiming to hold its initial public offering in the second quarter, this person added.

Other specifics of the offering, including the size of the planned stock sale, have not yet been determined.

The company was able to file its I.P.O. paperwork confidentially because of the Jump-start Our Business Start-ups Act, known as the JOBS Act, a law meant to make it easier for companies to go public. Among those that have used the confidential filing provision was Twitter.

A spokeswoman for Box wasn’t immediately available for comment.

Founded seven years ago, Box has become one of Silicon Valley’s darlings. Executives have dropped hints that the company was seeking to go public this year, in what would be one of 2014’s most highly anticipated I.P.O.’s.

News of Box’s filing was reported earlier by Quartz.

Goldman Awards Blankfein $14.7 Million in Stock Bonus

Updated, 5:32 p.m. |
Lloyd C. Blankfein, the chief executive of Goldman Sachs, is a bit richer this year.

The company’s board granted Mr. Blankfein 88,422 restricted stock units as part of his pay package for his work in 2013, according to a filing made public on Thursday.

Those shares were worth $14.7 million as of Tuesday, the day he received the grant. Last year, Goldman granted Mr. Blankfein $13.3 million worth of stock for performance during the bank’s 2012 fiscal year. Mr. Blankfein, however, will generally be restricted from selling the stock until 2019, and the shares will be doled out over three years.

Goldman will disclose the cash portion of Mr. Blankfein’s bonus in the coming weeks. Mr. Blankfein and other senior executives are typically awarded a 70-30 split between stock an cash. If that holds true, Mr. Blankfein’s cash award is likely to be around $6 million.

Goldman Sachs on Thursday declined to comment on the cash portion.

Including Mr. Blankfein’s salary of about $2 million, his total compensation for 2013 will probably be around $23 million, up slightly from $21 million in 2012.

Goldman Sachs’s stock price has shot up more than 40 percent in 2013, despite the choppy performance of its fixed-income unit and uncertainties around tightening banking regulations.

Mr. Blankfein’s increased pay is moderate compared with other bank chiefs. James P. Gorman, the chief executive of Morgan Stanley, nearly doubled his stock award in 2013.

Jamie Dimon, the chief executive of JPMorgan Chase, got a 74 percent raise in pay for 2013. However, in the previous year, JPMorgan’s board had significantly slashed Mr. Dimon’s compensation to $11.5 million in the wake of a multibillion-dollar trading blunder known as the London Whale.

This post has been revised to reflect the following correction:

Correction: January 30, 2014

Because of an editing error, an earlier version of the headline in this article misstated the size of Lloyd Blankfein's stock grant. It was $14.7 million, not $14.7 billion.

Emerging Markets Inflow Numbers Point to Exit by Bond Investors

With investors on edge following the recent weeks of turmoil in emerging markets, the release this week of updated capital inflow data by the Institute of International Finance could not have been better timed.

The trade group for global financial institutions, the Institute of International Finance is the most authoritative source on the long- and short-term cash that pours into these markets, and any sign that investors were fleeing en masse would suggest that more pain would be in store for many of them.

On the surface, the news did not seem bad at all.

For 2013, the trade group expects private sector inflows to fall just 1 percent; in 2014, a 3 percent retreat is predicted.

Given the $1 trillion that flows annually into these still maturing economies â€" about 3.5 percent of their total economic output â€" this hardly suggests a broader panic in the making.

A closer look at the data, however, reveals a trend that, if it continues, should be of grave concern to the fragile five club of countries â€" Turkey, Brazil, India, Indonesia and South Africa â€" that rely the most on foreign lenders to finance their growth ambitions.

Of all the categories that make up this $1 trillion figure, so-called nonbank lending to emerging market corporations, banks and governments has experienced the sharpest fall â€" 24 percent expected for 2013.

Broadly speaking, nonbank investors would include hedge funds, mutual funds, insurance companies and pension funds that invest in bonds around the world.

The institute expects these investors to extend $280 billion worth of credit to emerging markets this year, compared with $445 billion in 2012.

Bond investors are notoriously skittish, so it should not be surprising that that they should be at the forefront of an sell-off i emerging markets.

But there is a larger and, in the view of global regulators, worrying message that these figures also convey.

Since 2010, when the Federal Reserve’s bond buying program began to push United States interest rates to all-time lows, these global fixed-income investors â€" like BlackRock or Pimco or a hedge fund looking for a quick profit â€" have become the primary providers of credit to fast-growing banks and corporations in emerging markets.

And in the process, they have displaced commercial banks, which for most of the previous decade were the main lenders to these markets. But with regulatory pressure increasing, many large banks â€" European banks that have in the past been big creditors in these markets â€" have cut back their exposure sharply.

In 2012, for example, global bond investors lent almost half a trillion dollars to emerging market borrowers, compared with $118 billion for traditional lenders â€" by far the largest gap ever in favor of bond investors.

In a recent paper that has been widely circulated in the global regulatory community, Hyun Song Shin, a financial economist at Princetony and the incoming head of research at the Bank for International Settlements, the idea factory catering to global central banks, gave voice to this concern.

In particular, he warned of the risks that prevail when bond investors, who traditionally have a shorter-term approach compared with commercial lenders, pile into and out of the same markets at the same time.

“We have never seen anything like this before,” he said. “It is unprecedented and it is dangerous.”

Mr. Shin also worries that regulators, in pushing hard for large banks to increase their cash reserves, are missing the larger issue: Aggressive borrowers in some of the larger emerging markets have been relying on fickle bond investors to fund their investments.

And when these bond investors pull out â€" as they have been doing in Turkey, Brazil, India and other such countries, according to this week’s data from the Institute of International Finance â€" the broader economic effect could be pronounced.

“It may not be an acute crisis,’ Mr. Shin said. “But it will be slow and simmering and the impact on global growth will be damaging.”

For Blackstone, a Pot of Gold Remains Out of Reach

Eight years after its inception, the biggest private equity fund in history has yet to meet its own minimum expectations.

The investment performance of the fund, a $21.7 billion war chest raised by the Blackstone Group, remains below a threshold that it must clear in order for Blackstone to start collecting profit from it, according to a disclosure on Thursday.

The fund is getting closer to that goal, but it was still about $1.3 billion short as of Dec. 31, Blackstone said. The fund, known as Blackstone Capital Partners V, represents a potentially lucrative source of profit for Blackstone â€" but one that remains locked up for the immediate future.

The predicament underscores how the financial crisis continues to haunt Blackstone, the biggest alternative investment firm on Wall Street.

As a result of the crisis and the economic recession, the fifth buyout fund was forced to stay invested in deals longer than it otherwise would have, raising its target for minimum performance. The deteriorating economy also put a strain on some of the fund’s big deals, like Hilton Worldwide Holdings.

Private equity firms like Blackstone get their income in the form of performance fees, also called carried interest, which represent 20 percent of an investment’s profit. The firms get paid when a company they own is sold or taken public, realizing a gain. But Blackstone, like many other firms, sets a hurdle that the fund must meet before “carry” can be paid.

The BCP V fund, raised at a time when private equity was booming, was hailed as a milestone in the buyout business. It got to work in December 2005, investing in companies and achieving gains. In that context, the fund paid out cash to its investors.

Even more investors wanted in, and Blackstone raised a separate vehicle tied to BCP V, calling it BCP V-AC, for “additional capital.”

But in 2007, the crisis struck, putting pressure on Blackstone. The cash that BCP V had paid to investors now translated into a shortfall for the fund, because of its particular accounting rules. The legal arrangement was such that the subsidiary fund, BCP V-AC, could not pay carried interest until it had made up the shortfall for BCP V.

The situation seemed worrisome for Blackstone. But the private equity firm managed to avoid disaster.

Hilton did much better than many thought it would. Blackstone, which bought the company with its big private equity fund along with a group of real estate funds, took Hilton public last December, having increased the value of its investment by nearly $10 billion.

Another major investment for the private equity fund, SeaWorld Entertainment, more than doubled Blackstone’s capital when it went public last April.

Over all, the value of BCP V has increased to $29.7 billion as of Dec. 31, Blackstone said on Thursday. Last year, BCP V fund grew 34.5 percent.

But that’s not enough for Blackstone to start making serious money. Blackstone doubled its profit in the fourth quarter of 2013, but an additional trove of potential profit remains locked up in BCP V, just out of reach.

The threshold for the fund is 8 percent of invested capital, compounded annually. That means that the longer the fund holds its investments, the higher the bar climbs.

When the fund reaches its threshold, it will create a sort of bonanza.

Blackstone will be entitled to all of the profit that it would have earned on those gains. It will start taking 80 cents on every dollar earned until it catches up. Then, it will transition to collecting the standard 20 percent of profits.

This goal is growing closer. As of the fourth quarter, the BCP V-AC subsidiary has paid what it owed to BCP V and become eligible to pay carried interest to Blackstone. The larger BCP V fund, however, is still 4 percent short of its threshold.

At this rate, the big private equity fund could reach its carry threshold in late 2014 or early 2015, said William R. Katz, an analyst at Citigroup. Blackstone’s shares rose 4.2 percent on Thursday, possibly in anticipation of that future profit.

“The market has underestimated the earnings power once that shifts back into carry,” Mr. Katz said. “Today’s results provide a line of sight to that probability.”

One Kings Lane Raises $112 Million

One Kings Lane, an e-commerce company for home decor and furniture, has raised $112 million in Series E funding, bringing the company’s total funding to date to $229 million. The round was led by new investor Mousse Partners, with two public market institutional investors (who wish to remain undisclosed) also joining as new investors in the round. The company’s post-money valuation in the round was just shy of $1 billion, at $912 million (up from $440 million in the company’s Series C round).

All existing investors participated in the round including Scripps Networks Interactive, Kleiner Perkins, Greylock Partners, IVP and Tiger Global Management. Charles Heilbronn, Chairman of Mousse Partners, will be joining the Board of One Kings Lane, were told.

One Kings Lane, which has its origins as a flash-sales site for home decor, fashion accessories and more, is the brainchild of former merchandiser and fashion executive Susan Feldman and digital media exec Ali Pincus (who happens to be the wife of Zynga co-founder Mark Pincus).

Launched in 2009, One Kings Lane differed from some of its competitors like Gilt and RueLaLa by focusing on a single vertical: deep discounts on all things home. Since that time, OKL has expanded into other areas beyond the home, including jewelry and accessories. And more recently, OKL expanded into producing its own branded merchandise such as candles and bedding. The company says it now has 10 million members, which is up from 6 million in 2012.

In contrast to the Amazon model, One Kings Lane is an aspirational brand, says CEO Doug Mack. But that doesn’t mean shoppers are necessarily paying much more. Mack maintains that the site has broad appeal, with 60 percent of the items on the site under $100. Last year, One Kings Lane launched a new vertical, entering into the marketplace model with Hunters Alley. Hunters Alley focuses on selling consumer-to-consumer, similar to the way eBay operates. So far, this new venture has done fairly well, Mack says, with results well above expectations.

Curation is another area that One Kings Lane has been known for, long offering Tastemaker Tag Sales, which allows well-known interior designers and celebrities to select sales of home decor items from around the world. In terms of branding and partnerships, One Kings Lane is able to participate early on with a number of successful marketing and development opportunities, including a significant part of the hit Bravo TV interior design reality show, “Million Dollar Decorators.” And One Kings Lane has dabbled in its own content on TV with commercials.

With Scripps as an investor, the company expanded this with integrations on the network’s hit series “Design Star,” as well as spots on HGTV. One Kings Lane has also debuted a partnership with Starwood.

As for sales, Mack wouldn’t reveal numbers. As of 2012, he says, One Kings Lane had around $200 million in sales, and sales have definitely increased. He said that OKL saw a record fourth quarter last year, and enjoyed a record week in sales last week. Sales from mobile devices are now one-third of the company’s total revenue, and he says mobile traffic continues to grow at a fast clip. As of last year, OKL was unprofitable.

Mack explains further that with the large amount of capital raised, the company’s in no hurry to IPO, but does want to focus on building itself into a long-term major brand business. Beyond just funding new ventures like Hunters Alley, OKL plans to double down on personalization and data mining to improve the product experience. One of these features, says Mack, could be giving merchants intelligence on what types of items to sources based on customer interest. Other areas where OKL will be focusing on is better search and developing mobile.

And the company doesn’t plan to add additional verticals in the near future, adds Mack.

I’m personally a huge fan of One Kings Lane and shop on the site on a regular basis. I also love the story of the founders who have a genuine passion for home decor and style, which shows in the way OKL merchandises its products. In short I want the company to win.

But e-commerce in a post-Amazon world is tough. Fab has had its troubles and the flash-sales model hasn’t churned out many billion-dollar businesses. In fact, there are only a handful of e-commerce companies that have successfully been able to build a billion-dollar-plus business in e-commerce (without having physical stores) in a post-Amazon world.

Zulily, which focuses on kids clothing and merchandise for moms and also has a flash-sales model, is one of those companies. Another one is Boston-based Wayfair, which competes with OKL with its Joss & Main vertical, but has focused on a broader market in general.

There is still an opportunity, however, in creating a powerful niche brand.

Boosting personalization and data mining is one way that OKL can differentiate itself (an area where Zulily has been particularly masterful). Media and brand partnerships can help with exposure. But what will help the company is creating a product that continues to delight customers, new and old, and creates loyal buyers.

In a world where there are so many options for the “where” to buy an item, I am going to go for the one that makes me feel like I am getting a good deal on something that I desire â€" whether that be a piece of furniture or a vase or a frame. OKL has done that for me; hopefully it can accomplish that for others.

Banks Could Still Face Tougher Capital Requirements to Prevent Crises

FRANKFURT â€" Ever since the end of the 2008 financial crisis, the world’s leaders have searched for ways to shore up the banking system.

Earlier this month, the committee that sets standards for the global financial system proposed changes to a crucial indicator of bank risk in a way that critics considered a sop to big European lenders like Deutsche Bank.

But what looked like capitulation may set the stage for stiffer requirements.

Stefan Ingves, the Swede who leads the Basel Committee on Bank Supervision, hinted in an interview this week that the panel could place further restrictions on the amount of borrowed money that banks are allowed to use to do business.

The Basel Committee has no binding authority to set national banking rules, but it serves as a forum for nations to discuss banking issues and try to harmonize oversight of the financial system.

All of the world’s largest economies are represented on the Basel Committee, including the United States, China, India, Japan, Germany, France and developing countries like Indonesia and Brazil.

Tougher capital requirements would be in line with the thinking by American regulators as well as many economists and academic experts, who say that banks remain precariously dependent on credit that can easily dry up in a crisis.

The debate revolves around the so-called leverage ratio, which is considered one of the most important indicators of a bank’s strength. The ratio is a measure of how much capital banks have in relation to the total value of their assets.

Banks want a low leverage ratio, which would allow them to squeeze more profit from every dollar of their own capital but also exposes them to greater risk. In the past, it has often been taxpayers who had to pick up the pieces.

Mr. Ingves, who is also governor of the central bank of Sweden, said in a phone interview that members of the Basel Committee were still debating how high the leverage ratio should be. But, he said, “I don’t think the leverage ratio is going to move down.”

The Basel Committee’s work can seem mind-numbingly specialized, but it is constructing the main defense against financial crises of the kind that nearly plunged the world into depression after the collapse of the investment bank Lehman Brothers in 2008.

Mr. Ingves oversees the committee’s work and brings to bear his own experience dealing with a severe banking crisis in Sweden in the early 1990s, when he was the head of a government bank rescue authority.

There are differences between that crisis and the one now affecting the euro zone, he said, but both revolved around capital and whether banks had enough of it.

The current proposal would set the leverage ratio at 3 percent, meaning banks must have at least $3 of capital for every $100 they hold in outstanding loans, derivatives or other assets. The new rules would not take full effect until 2018. Many economists consider that ratio to be much too low, and there is a growing sentiment that it should be higher.

United States regulators, who take part in the deliberations of the Basel Committee, have said they will require the largest American bank holding companies to maintain a higher ratio of 5 percent.

The decision on whether the Basel Committee will recommend a higher leverage ratio will made by an assembly of central bankers and bank regulators that oversees the committee’s work.

Mario Draghi, president of the European Central Bank, is chairman of the oversight panel. But as chairman of the Basel Committee, Mr. Ingves is an influential voice who is also familiar with the thinking of regulators around the world.

Mr. Ingves disputed the view of some critics that changes in the rules â€" agreed to this month by the central bankers and national regulators who oversee the Basel Committee â€" were a gift to big investment banks, especially European institutions like Deutsche Bank. At most, the changes will allow banks to adjust their ratios by a few decimal points, Mr. Ingves said.

“The end result is something a little bit tighter than what we started out with in 2010,” Mr. Ingves said. “It’s a sensible measure of leverage when you struggle through all the details.”

The change in the rules that got the most attention when it was announced on Jan. 12 was an adjustment in the way banks add up the value of the derivatives they hold in their portfolios. In some circumstances, banks will be allowed to use one derivative to cancel out another. The practice, known as netting, reduces the amount of capital banks must have. It also makes their leverage ratios look better.

For example, a bank that held a derivative bet on a rise in the price of oil would be allowed to offset it with a bet on a fall in the price. Netting is controversial because it assumes that all the people involved in the transaction would be able to deliver on their side of the bargain. One lesson of the financial crisis that began in 2008 was that, with the world on the verge of an economic meltdown, many of these so-called counterparties would not be able to honor their promises.

The decision to allow some netting was seen as a concession to Deutsche Bank as well as French banks like Crédit Agricole that have especially large portfolios of derivatives. In the past, German and French officials have been outspoken in their opposition to a strict leverage ratio, in what was regarded as an attempt to protect their own large banks.

Indeed, Deutsche Bank shares surged after announcement of the revised rules on Jan. 12. Stefan Krause, chief financial officer of Deutsche Bank, said this week that the share rise reflected investor relief that the rule was not more onerous.

“There was some fear in the market it would be even more difficult,” Mr. Krause said at a news conference on Wednesday. But he also said that the new rules on leverage “still require adjustment.”

Mr. Ingves is scheduled to outline the committee’s agenda during a speech in Cape Town, South Africa, on Friday.

Mr. Ingves said he was looking forward to the results of a rigorous review of bank books by the European Central Bank, which will be completed by the end of the year. The so-called asset quality review is intended to expose bad loans or sour investments that banks may have been keeping hidden.

Among bankers and European politicians, there is profound nervousness about what the review might uncover, but Mr. Ingves said the reckoning was overdue.

“Europe will be better off dealing with the problems than hiding them,” he said. “There is not much of an upside to not wanting to know.”

Banks Could Still Face Tougher Capital Requirements to Prevent Crises

FRANKFURT â€" Ever since the end of the 2008 financial crisis, the world’s leaders have searched for ways to shore up the banking system.

Earlier this month, the committee that sets standards for the global financial system proposed changes to a crucial indicator of bank risk in a way that critics considered a sop to big European lenders like Deutsche Bank.

But what looked like capitulation may set the stage for stiffer requirements.

Stefan Ingves, the Swede who leads the Basel Committee on Bank Supervision, hinted in an interview this week that the panel could place further restrictions on the amount of borrowed money that banks are allowed to use to do business.

The Basel Committee has no binding authority to set national banking rules, but it serves as a forum for nations to discuss banking issues and try to harmonize oversight of the financial system.

All of the world’s largest economies are represented on the Basel Committee, including the United States, China, India, Japan, Germany, France and developing countries like Indonesia and Brazil.

Tougher capital requirements would be in line with the thinking by American regulators as well as many economists and academic experts, who say that banks remain precariously dependent on credit that can easily dry up in a crisis.

The debate revolves around the so-called leverage ratio, which is considered one of the most important indicators of a bank’s strength. The ratio is a measure of how much capital banks have in relation to the total value of their assets.

Banks want a low leverage ratio, which would allow them to squeeze more profit from every dollar of their own capital but also exposes them to greater risk. In the past, it has often been taxpayers who had to pick up the pieces.

Mr. Ingves, who is also governor of the central bank of Sweden, said in a phone interview that members of the Basel Committee were still debating how high the leverage ratio should be. But, he said, “I don’t think the leverage ratio is going to move down.”

The Basel Committee’s work can seem mind-numbingly specialized, but it is constructing the main defense against financial crises of the kind that nearly plunged the world into depression after the collapse of the investment bank Lehman Brothers in 2008.

Mr. Ingves oversees the committee’s work and brings to bear his own experience dealing with a severe banking crisis in Sweden in the early 1990s, when he was the head of a government bank rescue authority.

There are differences between that crisis and the one now affecting the euro zone, he said, but both revolved around capital and whether banks had enough of it.

The current proposal would set the leverage ratio at 3 percent, meaning banks must have at least $3 of capital for every $100 they hold in outstanding loans, derivatives or other assets. The new rules would not take full effect until 2018. Many economists consider that ratio to be much too low, and there is a growing sentiment that it should be higher.

United States regulators, who take part in the deliberations of the Basel Committee, have said they will require the largest American bank holding companies to maintain a higher ratio of 5 percent.

The decision on whether the Basel Committee will recommend a higher leverage ratio will made by an assembly of central bankers and bank regulators that oversees the committee’s work.

Mario Draghi, president of the European Central Bank, is chairman of the oversight panel. But as chairman of the Basel Committee, Mr. Ingves is an influential voice who is also familiar with the thinking of regulators around the world.

Mr. Ingves disputed the view of some critics that changes in the rules â€" agreed to this month by the central bankers and national regulators who oversee the Basel Committee â€" were a gift to big investment banks, especially European institutions like Deutsche Bank. At most, the changes will allow banks to adjust their ratios by a few decimal points, Mr. Ingves said.

“The end result is something a little bit tighter than what we started out with in 2010,” Mr. Ingves said. “It’s a sensible measure of leverage when you struggle through all the details.”

The change in the rules that got the most attention when it was announced on Jan. 12 was an adjustment in the way banks add up the value of the derivatives they hold in their portfolios. In some circumstances, banks will be allowed to use one derivative to cancel out another. The practice, known as netting, reduces the amount of capital banks must have. It also makes their leverage ratios look better.

For example, a bank that held a derivative bet on a rise in the price of oil would be allowed to offset it with a bet on a fall in the price. Netting is controversial because it assumes that all the people involved in the transaction would be able to deliver on their side of the bargain. One lesson of the financial crisis that began in 2008 was that, with the world on the verge of an economic meltdown, many of these so-called counterparties would not be able to honor their promises.

The decision to allow some netting was seen as a concession to Deutsche Bank as well as French banks like Crédit Agricole that have especially large portfolios of derivatives. In the past, German and French officials have been outspoken in their opposition to a strict leverage ratio, in what was regarded as an attempt to protect their own large banks.

Indeed, Deutsche Bank shares surged after announcement of the revised rules on Jan. 12. Stefan Krause, chief financial officer of Deutsche Bank, said this week that the share rise reflected investor relief that the rule was not more onerous.

“There was some fear in the market it would be even more difficult,” Mr. Krause said at a news conference on Wednesday. But he also said that the new rules on leverage “still require adjustment.”

Mr. Ingves is scheduled to outline the committee’s agenda during a speech in Cape Town, South Africa, on Friday.

Mr. Ingves said he was looking forward to the results of a rigorous review of bank books by the European Central Bank, which will be completed by the end of the year. The so-called asset quality review is intended to expose bad loans or sour investments that banks may have been keeping hidden.

Among bankers and European politicians, there is profound nervousness about what the review might uncover, but Mr. Ingves said the reckoning was overdue.

“Europe will be better off dealing with the problems than hiding them,” he said. “There is not much of an upside to not wanting to know.”

Libyan Investment Fund Files Suit Against Goldman

LONDON â€" Libya’s sovereign investment fund has filed a suit against Goldman Sachs in London’s High Court, claiming that the bank made more than $1 billion in derivatives trades that became worthless in value but left Goldman with a profit of $350 million.

The suit, filed by the Libyan Investment Authority last week but detailed on Thursday, says that Goldman Sachs abused its relationship “of trust and confidence” in entering into the trades, adding that the bank failed to keep adequate records about the trades. Throughout the suit, the sovereign fund describes an imbalance between its young and inexperienced staff and Goldman’s savvy bankers, an imbalance, the fund says, the firm abused.

In a news release on Thursday accompanying the suit, Abdul Magid Breish, chairman of the Libyan Investment Authority since June 2013, said: “While Goldman Sachs was orchestrating these unjustly exploitative transactions, it repeatedly told the L.I.A. that it sought a long-term relationship with the L.I.A. as a strategic partner. This was untrue.”

The Libyan authority is seeking the losses from the trades.

“We think the claims are without merit, and will defend them vigorously,” said a spokesman for Goldman Sachs. The bank has 14 days to respond to the suit.

Goldman is not the only firm that lost money for the sovereign fund, but it is the only one that the fund is suing, a spokesman for the fund confirmed.

The United Nations lifted sanctions against Libya in 2003, and the United States and British governments encouraged banks and corporations to do business with the country, then headed by Col. Muammar el-Qaddafi. In 2011, as the country sank into civil war, sanctions were reinstated and Goldman Sachs cut all ties (though, according to the Libyan fund, all the money in the investments was already lost).

In the fall of 2007, Goldman Sachs gave a presentation to the Libyan Investment Authority explaining that it wanted to establish a “partnership” with the sovereign fund. The bank offered to train authority employees and senior management about the financial markets and products, offering it both strategic long-term advice and opportunistic investment options. The bankers said, according to the suit, that they were interested in a long-term relationship, not short-term profits.

But a series of equity option trades worth more than $1 billion did not live up to that billing, the suit alleges. The trades were inadequately documented by the bank and when the sovereign fund asked for the records, it took weeks or months for the firm to provide them, according to the suit.

According to the suit, Goldman agreed in 2008 to hire as an intern the brother of the sovereign fund’s deputy executive director, Mustafa Mohamed Zarti, at both its London and Dubai offices. The suit does not say whether he actually did the internship.

The suit also says the fund made the investments “without a clear understanding of the nature of the trade or the risks involved.”

The allegations are likely to hit a few nerves. Goldman likes to make money, for itself and its clients. And it has been described by competitors and sometimes by customers as putting its interests above those of its clients. The accusation stood in stark contrast to the firm’s No. 1 business principle: “Our clients’ interests always come first.”

Goldman formed a business standards committee in 2010 to look at how the bank interacted with clients, including conflicts of interest, disclosure and suitability of investments. The committee, which continues to meet, came up with 39 recommendations, which, the bank says on its website it has carried out.

Lenovo’s Merger Spree Challenges Investors’ Faith

Lenovo prides itself on being a modern multinational, but its approach to divulging information remains frustratingly old school.

Lenovo, based in China, is buying Google’s Motorola phone business just a week after it announced a deal for IBM’s low-end server unit. Adding the two unprofitable businesses to its portfolio will cost up to $5.2 billion in cash and stock. Though there is some strategic logic, shareholders have little way of working out whether the deals stack up.

The Motorola deal is the most recent case in point. The largest-ever technology acquisition by a Chinese company involves Lenovo making an upfront payment of $660 million in cash and shares worth $750 million. The remaining $1.5 billion is in the form of a promissory note to be paid out three years from the closing date - as long as undisclosed terms are fulfilled. In return, Lenovo gets an orphan mobile phone maker with a shrinking market share that has accumulated pretax losses of more than $2 billion over the last two years.

Little wonder that investors, who wiped 8 percent off Lenovo’s market value on the news, are nervous. It is only a week since the company bought IBM’s low-end server unit with equally scant detail about how it might restore the business to profitability. Lenovo is effectively asking its shareholders to rely on its track record in turning around ailing companies - a reputation it established by buying IBM’s personal computer business in 2005.

The Motorola deal appears to be driven mainly by the desire to diversify. Though Lenovo is the world’s No. 3 smartphone vendor by units sold, after Samsung and Apple, it sells 97 percent of its phones in China, according to Gartner. Motorola’s relationships with carriers - and its brand - could give Lenovo a boost in the United States.

Yet Lenovo’s history is no guarantee of success. Fixing Motorola requires it to appeal to fickle Western consumers rather than selling to business customers.

Both recent purchases require approval from the Committee on Foreign Investment in the United States. Two prominent deals could make Lenovo a target for politicians eager to stir up fears about Chinese acquisitions. But if Lenovo gets the green light, it will take more than vague promises to persuade investors that its M.&A. spree makes sense.

Ethan Bilby is a columnist for Reuters Breakingviews and Peter Thal Larsen is Asia Editor. For more independent commentary and analysis, visit breakingviews.com.

Activists Solicit Shareholders to Replace Board at CommonWealth REIT

CommonWealth REIT, the embattled real estate trust, recently extended an olive branch to the activist shareholders pressing the company for change.

Those shareholders, Corvex Management and Related Fund Management, turned down CommonWealth’s offer to join the board, and are now taking their case to the company’s shareholders.

On Thursday, Corvex and Related began a consent solicitation process aimed at replacing the CommonWealth board. Corvex is led by Keith Meister, a former deputy of Carl C. Icahn, while Related Fund Management is an investing arm of the Related Companies, the huge New York real estate company run by Jeff T. Blau. The investors are frustrated with the Portnoy family, which controls CommonWealth, and has been drawing substantial fees from the company even as performance has lagged.

In a presentation to shareholders, Corvex and Related reiterated their argument against the Portnoys’ management. They contend that while CommonWealth stock fell 68 percent from 2007 to 2013, the fees paid to the Portnoys increased 40 percent. The Portnoys, meanwhile, own very little stock in the company.

They also contend that recent governance changes put forth by the Portnoys, aimed at appeasing shareholders, are irredeemably flawed. With new management, Corvex and Related argue, CommonWealth stock could be worth about $35 a share, about 50 percent higher than the current value.

To achieve their goals, Corvex and Related are proposing the election of a new independent board of directors, the amendment of CommonWealth’s bylaws to adopt corporate governance changes recommended by proxy advisory firms, and a stipulation that no poison pill could be adopted without the approval of shareholders.

“Until CommonWealth’s long-suffering shareholders have the unambiguous ability to choose who should manage their company, history will repeat itself as the Portnoys delay their day of judgment through an illusory game of governance restructuring and legal maneuvering, all the while paying themselves large fees for underperformance,” Mr. Meister and Mr. Blau wrote in a letter to shareholders.

Corvex and Related believe they have the momentum to receive enough votes to oust the board. In November, an arbitration panel cleared the path toward a consent solicitation process. The presentation and voting instructions were sent to shareholders on Thursday.

A Real-Life ‘Wolf of Wall Street’ Reunion, Minus the Wolf

Moviegoers cringed at the many scenes of debauchery and dishonesty in “The Wolf of Wall Street,” a film based on the real-life shenanigans of the boiler room kingpin Jordan Belfort.

But that fictionalized account left out some of the intriguing details of Mr. Belfort’s crimes, according to a group of men who had front-row seats to the real thing.

“Was the movie accurate? It played down the sex and drugs,” Ira L. Sorkin, a partner at Lowenstein Sandler who once represented Mr. Belfort’s Long Island brokerage firm, Stratton Oakmont, said at a law school event on Wednesday.

Getting more serious, Mr. Sorkin, a well-known lawyer who more recently defended Bernard L. Madoff, said: “The movie did not discuss two things: One, how they went about doing it, and, of course, the suffering of the victims.”

Mr. Sorkin joined two other players from that true financial drama at the Benjamin N. Cardozo School of Law in Manhattan on Wednesday evening, for a panel discussion on the facts behind Martin Scorsese’s film. The discussion, before an audience of lawyers and scholars, was moderated by Robert S. Khuzami, a partner at Kirkland & Ellis who until last year ran the enforcement unit of the Securities and Exchange Commission.

While Mr. Sorkin offered insight into the inner workings of Stratton Oakmont, his interlocutors - Joel M. Cohen, a partner at Gibson, Dunn & Crutcher who once prosecuted Mr. Belfort, and Gregory A. Coleman, a special agent at the F.B.I. â€" told what it was like bringing the stock manipulators to justice in the 1990s.

Notably absent from Wednesday’s reunion? Mr. Belfort himself.

“At the end of the day, it was all about pretty much blatant fraud,” Mr. Cohen said. “It was about pushing stock to unsuspecting investors with all kinds of hard-sell tactics to get people to buy stuff that wasn’t suitable for them.”

“I viewed the people at Stratton Oakmont as being inside a suit of armor,” Mr. Coleman said. “I’m a parasite that wants to get inside that suit of armor and infect them.”

Mr. Belfort and his employees ran a classic pump-and-dump scheme, Mr. Sorkin said. This might involve, for example, selling stock in an offering at $5 a share, before buying it all back at $6, allowing the brokers to control the supply of shares.

Then, Mr. Sorkin said, the sales force would pitch customers on the stock, helping drive up the price and creating an economic gain for the company insiders. After the price rose to a certain level, the brokers would dump their holdings on the market, causing the stock to collapse.

“I think the movie is wrong, also. The young brokers knew what was going on,” Mr. Sorkin said. “They surely did know what was going on. There were scripts.”

“Jordan was exceptional at that point,” he added. “He was able to gather in the sales force and promise them riches beyond belief.”

Later on, however, Mr. Belfort began using drugs more frequently. Around late 1994, Mr. Sorkin said, “they were so drugged up, I’m not sure they understood anything.”

Mr. Coleman, the F.B.I. agent, said the big break in the case came when Mr. Belfort set up offshore corporations and bank accounts to smuggle cash out of the United States. That allowed the government to go after him for money laundering, gaining leverage in the longer-running investigation into the pump-and-dump scheme.

“What made it easier for us was the mere issuance of the stock to the offshore corporation was the fraud,” Mr. Coleman said. “Every single transaction that occurred from that point forward was a money-laundering violation.”

Getting the important players to cooperate, though, was a challenge. After Mr. Belfort and his associate, Daniel Porush, were arrested, prosecutors threatened to indict Mr. Belfort’s wife, Nadine, Mr. Cohen recalled.

In hindsight, that move seems a tad unorthodox, Mr. Cohen said.

“I think that’s outrageous behavior, and no prosecutor should ever do that now,” said Mr. Cohen, who now defends clients of his own. “But it did tend to lubricate his decision to cooperate rather quickly.”

Mr. Belfort’s cooperation helped him avoid a lengthy prison sentence. Another factor that reduced his jail time was that he was considered a drug addict, Mr. Sorkin said. A judge sentenced Mr. Belfort to four years in prison, though he ended up serving only 22 months.

After writing a memoir and signing a movie deal, Mr. Belfort now has the distinction of being portrayed on the big screen by Leonardo DiCaprio.

That is “an interesting way to end your career,” Preet Bharara, the United States attorney in Manhattan, said in a speech to close Wednesday’s event. “Do the bad guys always win?”

Alibaba Rival Plans Its Own I.P.O. This Year

SHANGHAI â€" JD.com, one of China’s biggest e-commerce companies, said in a regulatory filing on Thursday that it plans to raise $1.5 billion this year in an initial public offering in the United States.

JD.com, formerly known as 360buy.com, is the second biggest e-commerce company in China and a rival to the country’s e-commerce powerhouse, the Alibaba Group, which operates the Taobao.com and Tmall.com shopping sites. JD.com’s offering is expected to be one of the biggest Chinese listings of the year in the United States.

This year, Alibaba is expected to raise multiples of that in its own listing, which is expected to value the Chinese company at about $130 billion, which would eclipse the Facebook I.P.O.

Online commerce has grown spectacularly in China over the last few years, undermining brick-and-mortar operations, fueled by easy payment options and low-cost, same-day delivery.

Far behind Alibaba and JD.com are other e-commerce upstarts, like dangdang.com and Yihaodian, which is partly owned by Walmart. United States, Japanese and Middle Eastern investors have helped Chinese investors and entrepreneurs finance the growth.

JD.com was started 10 years ago by Richard Liu, a 40-year-old entrepreneur who got his start selling electronics. Mr. Liu is now chairman and chief executive. His JD.com shopping site now has 35 million active users and reported selling $14 billion worth of goods in the first three quarters of 2013.

Still, the company is a distant second to Alibaba, whose e-commerce sites handle more transactions each day than Amazon.com and eBay combined.

But while Alibaba’s sites â€" Taobao and Tmall â€" act as an e-commerce platform, connecting buyers, sellers and third parties, JD.com is operating as a business-to-consumer player, more closely mirroring Amazon. The Chinese company has 82 warehouses in 34 Chinese cities.

Over the last several years, though, JD.com has lost billions of dollars on marketing and financing its build-out. Among its investors are Digital Sky Technologies and Yuri Milner, the Russian investor who took an early stake in Facebook, and Prince Alwaleed bin Talal of Saudi Arabia, as well as Tiger Global Management and Sequoia Capital.

In 2010, the company said that Walmart had joined with several other investors to make a $500 million investment in the company. Walmart later said it did not make the investment and instead took a large stake in a Chinese rival, Yihaodian.

In its filing with the Securities and Exchange Commission on Thursday, JD.com said it planned to list American Depositary Receipts but did not identify which United States exchange it plans to list them on. The company’s underwriters are Bank of America Merrill Lynch and UBS.

Men’s Wearhouse Willing to Raise Offer for Jos. A. Bank

Men’s Wearhouse may be willing to increase its bid for Jos. A. Bank in the ongoing takeover battle between the two men’s suit retailers.

In a letter to Jos. A. Bank’s board released on Thursday, Men’s Wearhouse reiterated its previous offer to buy its rival at $57.50 a share, but added that “we are prepared to increase our offer price if you can demonstrate or we can discover additional value through discussions or limited due diligence.”

Jos. A. Bank had rejected the offer of $57.50 earlier this month, calling the price “inadequate and opportunistic.” Shares of Jos A. Bank closed at $54.86 on Wednesday.

The two companies have been trying to take each other over for months. Jos. A. Bank tried to buy Men’s Wearhouse in October, but Men’s Wearhouse soon turned the tables and tried to buy Jos. A. Bank just weeks later.

Both companies have lowered their poison pill thresholds as a defensive maneuver. Poison pills are triggered when an investor purchases a certain amount of stock, flooding the market with more shares to dilute investors’ interest.

In its letter, Men’s Wearhouse even tried to use some of the arguments of Jos. A. Bank’s chairman, Robert N. Wildrick, against the company.

When Jos. A. Bank proposed to acquire Men’s Wearhouse, the letter said, “Mr. Wildrick articulated a compelling rationale for combining our two companies: ‘We believe that Men’s Wearhouse and Jos. A. Bank are ideal partners…. By combining our two companies, we can together create the best men’s apparel and sportswear designer, manufacturer and retailer in the U.S.’”

Jos. A. Bank declined to comment.

Blackstone Earnings Double in Fourth Quarter

The Blackstone Group said on Thursday that its profit more than doubled in the fourth quarter as it reaped big gains on its investments in private equity and real estate.

Blackstone said its quarterly profit â€" reported as economic net income, which includes unrealized gains from investments â€" was $1.5 billion, compared with $670 million in the period a year earlier. The earnings amounted to $1.35 a share, handily beating the average analyst estimate of 83 cents as compiled by Standard & Poor’s Capital IQ. For the full year, it earned $3.5 billion, an increase of 76 percent from 2012.

A chief driver of Blackstone’s earnings was a big increase in performance fees, as it harvested some of its investments. Blackstone, the first of the publicly traded private equity giants to report its fourth-quarter results, said its performance fees were $1.7 billion in the fourth quarter, 259 percent higher than those in the period a year earlier.

Over all, the firm’s distributable earnings, a metric that reflects the fees it earns, amounted to $820.6 million in the fourth quarter, a 46 percent gain from results in the period a year earlier.

Blackstone’s shares were up nearly 10 percent in pre-market trading.

“I am very pleased with our fourth-quarter results, which capped a record year for Blackstone,” Stephen A. Schwarzman, the chairman and chief executive of Blackstone, said in a statement. “These investments provide a good illustration of how our long-term fund structures benefit our investors, and how our patient approach toward improving assets can ultimately drive better earnings growth and fund performance.”

Last year was a strong one for private equity over all. With stock markets buoyant, many firms were big sellers of their holdings, returning piles of cash to investors. Buyout funds also raised the most capital since 2008, with half of that money going to the biggest funds.

Blackstone completed four successful initial public offerings in the fourth quarter, including those of Hilton and Merlin Entertainments, which operates the Madame Tussauds wax museums. In the Hilton deal, Blackstone increased the value of its investment by nearly $10 billion.

The firm’s private equity segment reported economic net income of $360 million in the fourth quarter, 82 percent higher than a year earlier. Its performance fees quadrupled, Blackstone said.

In real estate, Blackstone earned $932 million in the quarter, compared with $246 million in the period a year earlier. Its revenue in that segment was $1.4 billion, compared with $403.9 million a year earlier.

Still, Blackstone said it earned less profit in its credit business, with economic income of $104.7 million, 2 percent lower than a year earlier.

Its assets under management grew to $265.8 billion, an increase of 26 percent.

Blackstone believes that economic net income is a better reflection of its performance. According to generally accepted accounting principles, the firm earned $621.3 million in the fourth quarter, compared with $106.4 million in the period a year earlier.

Blackstone said it would pay a quarterly dividend of 58 cents a share on Feb. 18.

Morning Agenda: Google Sells Motorola Unit to Lenovo

Lenovo seems to be on a buying binge, and not even Google can escape. In its second deal in a week, the Chinese company, once best known for making personal computers, announced that it was buying Google’s Motorola Mobility smartphone unit for $2.91 billion. Last week, Lenovo acquired IBM’s low-end server business for $2.3 billion.

Though not a total financial loss for Google, the sale of the unit less than two years after Google paid $12.5 billion for it is a sign of fits and starts at the company in the mobile age, Claire Cain Miller and David Gelles report in DealBook.

Since 2005, Lenovo has overtaken Hewlett-Packard and Dell to become the world’s biggest maker of PCs. But now, Lenovo appears to be building a comprehensive business in simple computers, perhaps shying away from the PC market as more people buy smartphones and tablets instead. “While phones use different kinds of chips than PCs or servers, many parts and much of the contract manufacturing is done by the same companies. With more products, Lenovo can squeeze its suppliers harder,” Ms. Miller and Mr. Gelles write.

But don’t the numbers indicate that Google lost nearly $10 billion on the Motorola Mobility sale? Not quite, Michael J. de la Merced writes in DealBook. Considering factors like the original deal’s effective price, Google’s sale in 2012 of Motorola’s set-top box business and Motorola’s patents, Google may not be doing so bad.

WALL STREET’S LATEST HOUSING BET  |  Mention bonds tied to housing debt, and many investors will squirm, remembering the disastrous mortgage-backed securities that led to the financial crisis. But Wall Street’s latest trillion-dollar idea, which involves slicing and dicing debt tied to single-family homes, is instead attracting investors in droves, Michael Corkery reports in DealBook. The bonds are backed by foreclosed homes, which have been turned into rentals.

Mr. Corkery writes: “While this securitization market is still in its infancy, a recent Wall Street estimate put potential financing opportunities for the single-family rental industry as high as $1.5 trillion. Already some members of Congress and economists are worried about another credit bubble.” Bankers are estimating that single family-rental bond deals could total as much as $7 billion this year and grow to about $20 billion a year.

SOTHEBY’S TO PAY DIVIDEND AND BUY BACK SHARES  |  Under pressure from activist hedge funds like Daniel S. Loeb’s Third Point and Mick McGuire’s Marcato Capital Management, the auction house Sotheby’s announced on Wednesday that it would return $450 million to shareholders through a dividend and share buyback, Alexandra Stevenson and Michael J. de la Merced write in DealBook.

But Mr. Loeb and Mr. McGuire, who together hold more than 15 percent of Sotheby’s shares, were not completely satisfied after the announcement, and Mr. McGuire urged shareholders to continue demanding more from Sotheby’s management.

While Sotheby’s plan addresses some aspects of the critique from activist investors, questions remain about the auction house’s governance and broader strategy, Richard Beales writes for Reuters Breakingviews.

ON THE AGENDA  |  Fourth-quarter G.D.P. figures are released at 8:30 a.m. Weekly jobless claims are out at 8:30 a.m. The pending home sales index is out at 10 a.m. Time Warner Cable, Viacom and Visa release earnings before the bell. Amazon and Google release earnings after the market closes. Senator Ted Cruz, Republican of Texas, is on Bloomberg TV at 10 a.m. Robert D. Marcus, chairman and chief executive of Time Warner Cable, is on Bloomberg TV at 11:45 a.m.

SAC LEADER’S COLLEAGUE UNAWARE OF TRADES  |  Chandler Bocklage, one of Steven A. Cohen’s closest associates at SAC Capital Advisors, was kept in the dark about the firm’s trades that are at the focal point of the insider trading trial against Mathew Martoma, a former SAC portfolio manager. In his testimony at the trial on Wednesday, Mr. Bocklage said he learned about the trade of shares in two drug companies, which later reported disappointing results of a clinical trial for an Alzheimer’s drug, only after the fact, Matthew Goldstein writes in DealBook.

Federal prosecutors have charged Mr. Martoma with using inside information about the clinical trial to help Mr. Cohen’s firm avoid losses and generate profits totaling $276 million in shares of Elan and Wyeth.

On Tuesday, another witness, SAC’s head of trading execution, testified that Mr. Cohen instructed him to sell shares of Elan from accounts that did not have “as many eyes” watching them only a day after Mr. Martoma called Mr. Cohen at his home in Greenwich, Conn.

TWITTER FOOD FOR THOUGHT  |  Every time you refresh your tweets, Twitter collects 10 cents.

THE POLAR EFFECT  |  The arctic chill that has been battering the East Coast and the South is driving up prices of natural gas and heating oil, The Wall Street Journal reports. Points for the clever headline: “Icy Chill Sets Energy Prices on Fire.”

 

Mergers & Acquisitions »

Dassault Systèmes to Buy San Diego Software Firm  |  Dassault Systèmes of France, which makes 3-D modeling software, is to buy Accelrys for about $750 million, expanding its offerings in the chemistry, biology and materials sectors. DealBook »

China’s Biggest Bank Gains Entree Into Trading in London  |  Industrial and Commercial Bank of China is buying a controlling interest in Standard Bank’s global markets business in London. DealBook »

Itaú Unibanco Buys Controlling Stake in CorpBanca of Chile  |  Itaú Unibanco plans to combine CorpBanca of Colombia with its Chilean unit, Itaú Chile, in one of the largest financial transactions in Latin America in years. DealBook »

Fiat Makes Changes as It Absorbs Chrysler  |  The Italian car company Fiat, which took full control of Chrysler, unveiled its plans to rename the combined entity and have its primary listing on the New York Stock Exchange. DealBook »

AT&T Still Interested in Vodafone  |  Despite denying its pursuit of Vodafone earlier this week and giving up the option to bid for the European telecommunications giant for six months, AT&T is still said to be interested in acquiring the company, Bloomberg News reports, citing unidentified people familiar with the situation. BLOOMBERG NEWS

Wireless Mergers Will Draw Scrutiny, Antitrust Chief Says  |  William J. Baer, assistant attorney general for the Justice Department’s antitrust division, said consumers have enjoyed “much more favorable competitive conditions” since the division blocked a proposed merger between AT&T and T-Mobile in 2011. DealBook »

INVESTMENT BANKING »

Citigroup Joins Rivals in Permitting Junior Bankers to Take Saturdays Off  |  Citigroup says that junior bankers are now encouraged to stay out of the office from 10 p.m. on Friday through 10 a.m. on Sunday. It is also telling them to take all of their annual vacation days. DealBook »

Santander’s Profit Doubles but Misses Expectations  |  The Spanish lender benefited from lower charges for bad loans as its profit hit rose to 1.06 billion euros in the fourth quarter, but earnings declined in Spain and Latin America. DealBook »

Senator Asks Veterans Agency to Review How Financial Advisers Are Accredited  |  A lax accreditation process is effectively giving “unscrupulous or unqualified individuals” an opportunity to waste taxpayer money and harm veterans, Senator Claire McCaskill said. DealBook »

Foundations Band Together to Get Rid of Fossil-Fuel Investments  |  Taking cues from old fights to end apartheid and oppose tobacco, several foundations are addressing the warming of the planet. DealBook »

Citigroup to Move Headquarters  |  Citigroup announced on Wednesday that it was planning to leave its headquarters at 399 Park Avenue in Manhattan when its lease expires in 2017, Bloomberg News reports. It is not yet known where the bank will move. BLOOMBERG NEWS

Barclays to Cut Up to 400 Jobs in Its Investment Bank  |  Barclays is preparing to eliminate up to 400 jobs in its investment bank as part of its restructuring effort, according to a person familiar with the matter. The bank is trying to reduce its annual costs by 1.7 billion pounds by 2015. DealBook »

PRIVATE EQUITY »

Strong Fourth-Quarter Earnings Expected for Private Equity  |  Publicly listed private equity firms like the Blackstone Group and Apollo Global Management are expected to report strong fourth-quarter earnings resulting from favorable market conditions and dividend payments from portfolio companies, The Wall Street Journal writes. WALL STREET JOURNAL

TPG Capital Raising $2 Billion Bridge Fund  |  The private equity firm TPG Capital announced on Wednesday that was raising a $2 billion bridge fund until it raises a $10 billion flagship fund, Reuters reports. REUTERS

Candidate Emerges for Blackstone’s Next No. 2 Executive  |  Jonathan Gray, who leads the Blackstone Group’s $69 billion property business, may be the next choice to become the firm’s No. 2 executive, The Wall Street Journal writes, citing unidentified people familiar with the situation. WALL STREET JOURNAL

Firm Raising Fund to Invest in Film and TV Royalties  |  Vine Alternative Investments is raising $300 million for a fund that will invest in television and film royalties, Fortune reports. The firm has invested in more than 400 films to date. FORTUNE

HEDGE FUNDS »

Dow Chemical Resists Spinoff Proposal and Increases Stock Buybacks  |  The company appeared to rebuff a proposal by the activist hedge fund manager Daniel S. Loeb, as it also announced measures intended to make shareholders happy. DealBook »

Dow Chief Says Buffett Supports Him in Loeb Fight  |  Dow Chemical may have expanded its stock buyback program and dividend, but it showed little inclination to make further concessions to activist investors like Daniel S. Loeb. And that suits one major shareholder â€" Warren E. Buffett â€" just fine. DealBook »

Zopa Receives Investment From Arrowgrass Capital  |  Zopa of Britain, a peer-to-peer loan platform, has secured a 15 million pound investment from the hedge fund Arrowgrass Capital Partners, The Financial Times reports. FINANCIAL TIMES

Analyst Who Worked on Herbalife Leaves Pershing Square  |  An investment analyst who played a leading role in Pershing Square Capital Management’s bet against Herbalife has decided to leave the hedge fund to pursue his own interests. DealBook »

I.P.O./OFFERINGS »

OneWest Bank Seeks a Buyer as It Prepares an I.P.O.  |  OneWest Bank, known as IndyMac Bancorp before its failure in 2008 and now backed by John A. Paulson and George Soros, is looking for a buyer as it prepares for its initial public offering, Bloomberg Businessweek reports. BLOOMBERG BUSINESSWEEK

No Plans Yet for I.P.O. of Santander’s British Unit  |  Javier Marin, the chief executive of the Spanish bank Santander, said there were no plans to take the bank’s British unit public in 2014, Reuters reports. REUTERS

Mexican Airline Sets I.P.O. Target  |  The Mexican budget airline VivaAerobus is looking to sell shares at a minimum of $1.57 in its initial public offering set for Feb. 11, Reuters reports. The company plans to sell up to 113 million shares. REUTERS

VENTURE CAPITAL »

Blue Bottle Raises Almost $26 Million, Including From High-Powered Friends  |  The chief executive of Blue Bottle, a gourmet coffee purveyor, confirmed that his company had raised $25.75 million in a new round of financing, including from co-founders of Instagram and Twitter. DealBook »

Cloud Security Company Raises $16.5 Million  |  CloudLock, a cloud security company, announced on Wednesday it had raised $16.5 million in Series C funding, bringing its total to more than $28 million, ReCode reports. The funding was led by Bessemer Venture Partners, which has shown an appetite for investing in cloud software companies. RECODE

LEGAL/REGULATORY »

A Former Regulator Returns to Private Practice  |  David Meister, who left the post of enforcement chief at the Commodity Futures Trading Commission last fall, will return to his old firm, Skadden, Arps, Slate, Meagher & Flom. DealBook »

Fed Cuts Monthly Bond Purchases  |  In a unanimous decision, the Federal Reserve said it would pull back on its stimulus program by an additional $10 billion, pointing to an improving economy that had “picked up in recent quarters,” The New York Times reports. NEW YORK TIMES

Obama’s Speech Raises Hopes of Advocates of Mortgage Finance Overhaul  |  The president’s State of the Union address on Tuesday provided a glimmer of hope for those looking for action to revamp America’s mortgage system. DealBook »

Obama Orders Creation of ‘MyRA’ Accounts  |  Making good on a State of the Union address promise, President Obama on Wednesday ordered the creation of new employer-sponsored savings accounts, which are intended for people who do not now have employer-sponsored savings plans. They will operate much like Roth I.R.A.’s, according to Treasury officials, The New York Times writes. NEW YORK TIMES

Europe’s Banking Risk Plan Is a Long Shot  |  The European Union revealed a long-awaited proposal to reduce the systemic risk posed by big banks, a measure that would bring its regulations more closely into line with those of the United States, but it may be a long time before the European Parliament considers it. DealBook »

Judge Approves Lehman Settlement  |  Judge James M. Peck, who will retire at the end of this week, approved a settlement between Lehman Brothers Holdings and Fannie Mae over $18.9 billion in mortgage claims, The Wall Street Journal reports. WALL STREET JOURNAL