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@GSElevator Tattletale Exposed (He Was Never in the Goldman Elevator)

A three-year parlor game has been taking place on Wall Street to identify the Goldman Sachs employee behind a Twitter account that purports to reveal the uncensored comments overheard in the firm’s elevators.

The Twitter account, @GSElevator, reports overheard remarks like, “I never give money to homeless people. I can’t reward failure in good conscience,” and “Groupon…Food stamps for the middle class.”

The Twitter account, which has an audience of more than 600,000 followers, has been the subject of an internal inquiry at Goldman to find the rogue employee. The tweets, often laced with insider references to deals in the news, appeal to both Wall Street bankers and outsiders who mock the industry. Late last month, the writer sold a book about Wall Street culture based on the tweets for a six-figure sum.

There is a good reason Goldman Sachs has been unable to uncover its Twitter-happy employee: He doesn’t work at the firm. And he never did.

The author is a 34-year-old former bond executive who lives in Texas. His name is John Lefevre.

He had tried to remain anonymous, scrubbing the Internet of mentions of his name and pictures of himself on all but a handful of sites. Some had already speculated that @GSElevator was not hanging around the halls of Goldman.

The ability of people like Mr. Lefevre to create anonymous Twitter accounts underscores concerns about the veracity of what is published and the identity of authors. It also raises questions about whether publishers are blurring the line between real life and the made-up kind.

Upon being contacted late last week after several weeks of reporting uncovered his identity, he confirmed his alter ego. “Frankly, I’m surprised it has taken this long,” he said by phone. “I knew this day would come.”

Mr. Lefevre, who worked for Citigroup for seven years, said the Twitter account started as “a joke to entertain myself.”

He quickly interrupted the inevitable line of questioning about how he had never worked at Goldman and appeared to be an impostor. “To pre-empt what you’re about to say, legally speaking,” he said, “I was never explicitly an employee of the firm.”

Mr. Lefevre was offered a job as head of debt syndicate in Asia at Goldman’s Hong Kong office in August 2010, but the offer was later revoked, according to people at the firm who spoke on the condition of anonymity because they were not authorized to discuss the matter. Mr. Lefevre said his previous employer contended that he was bound by a noncompete agreement and “things turned nasty with my old boss and he threatened a lawsuit against me and Goldman.”

By Mr. Lefevre’s own account of his experience with Goldman: “My contract was never rescinded. We cordially agreed to part ways to avoid a public mess. I don’t know how much I can talk about it. It wasn’t acrimonious.”

When pressed about whether he had implicitly misrepresented himself as a Goldman employee, he said he deliberately never said in any of his tweets that he worked for the firm. “This was never about me as a person,” he said. “It wasn’t about a firm. The stories aren’t Goldman Sachs in particular. It was about the culture in general.”

A Goldman spokesman, after being told that @GSElevator had been unmasked, said in a statement, “We are pleased to report that the official ban on talking in elevators will be lifted effective immediately.”

The fact that Mr. Lefevre was not a Goldman employee did not appear to dissuade his publisher, Touchstone, an imprint of Simon & Schuster, which said it had not been misled.

“He’s been pretty straight with us the entire time, so this is not a surprise,” said the book’s editor, Matthew Benjamin, who bought the book without ever meeting Mr. Lefevre. “That you’re writing about him speaks to the interest he’s generated. We always expected his identity to be revealed at some point.”

Mr. Lefevre’s agent, Byrd Leavell, said: “What matters is that every story in the book is true. John’s material he delivered is hilarious. The book isn’t going to live or die on whether he worked at Goldman Sachs for two months or not.”

Mr. Lefevre, who started at Citigroup in New York in 2001 after graduating from Babson College before moving with the firm to London and then Hong Kong, said that he was inspired to start the Twitter account in the fall of 2011. “I was sitting around with a friend at a bar,” he said.

At the time, an account called @CondeElevator had sprung up, supposedly chronicling the goings-on in the elevator of the media company Condé Nast. “I thought, ‘This is ridiculous that people are infatuated with Condé Nast. If they only saw the elitist, sexist and out-of-touch things bankers say.’ People had no idea what it is really like.”

He said he chose to name his account after Goldman Sachs because “it was commercial.” In an email, Mr. Lefevre added, Goldman “has more love/hate Main Street appeal.” At the time, the Occupy Wall Street movement was in full swing. He said he was also struck by some of the lines, comical to him, he heard from people at Goldman when he first received a job offer. “Even socializing with them â€" going to bars and having guys buy girls drinks and then throw out a line like, ‘Don’t worry ladies, these drinks are on Goldman Sachs.’ ”

Mr. Lefevre, who left Citigroup in 2008 and began to work at a start-up boutique firm in 2009 in Hong Kong, insisted that many of the exchanges he published on Twitter were true: “I’ve been collecting these stories for years.”

He said his intent was neither to mock nor glamorize Wall Street. “I do not have an agenda to paint the people or this culture one way or the other,” he said, adding that he was “always a cynical banker” when he worked on Wall Street but “I loved it. We did a lot of crazy stuff. It’s not like I had a great epiphany along the way.”

Still, he said that working on Wall Street was an eye-opener. “I went into investment banking and I saw a group of people that aren’t as impressive as I thought they were â€" or as impressive as they thought they were. They defined themselves as human beings by their jobs.”

His Twitter feed has become red meat for industry critics, something Mr. Lefevre said was initially unintentional but later something he tried to stoke. “A lot of times I pander, I’ll be honest with you. I pander for retweets,” he said, referring to users blasting copies of a tweet to their own followers, multiplying its reach.

He said his Twitter account had evolved over the last few years: “Early on, I tweeted more about specific people or deals, inside jokes/commentary, and even a few ad hominem attacks. That gave me a certain validation and credibility. But over time, the tweets have been increasingly styled to have a bit more commercial appeal.

“I don’t consider it selling out or pandering to a lower common denominator; I think of it more as adapting to what the widest possible audience of people responds favorably to.”

Mr. Lefevre, who refused to disclose his location in Texas, started worrying several months ago that his identity would be revealed. He received some emails from friends who had guessed it was him. He also noticed that some Goldman Sachs employees had viewed his LinkedIn profile page; he later removed it.

Now that he has been outed, he said, “it’s something that can be embraced. And I certainly don’t have anything to hide.”

A sampling of musings from GSElevator’s Twitter account:

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin



U.S. and Britain Join Forces in Bank Misbehavior Cases

It seemed to be a thumb in the eye of the Justice Department. Britain last week criminally charged a former Barclays employee suspected of trying to manipulate global interest rates, even though the authorities in London were aware that the employee had been assisting American prosecutors in a related investigation for more than a year.

Some prosecutors in the United States were annoyed by the move, but it did not ignite another trans-Atlantic dispute over how to crack down on bad behavior by global banks with large operations in New York and London. Instead, the charges against the Barclays employee, Jonathan Mathew, reflected a tentative truce that has emerged between British and American authorities, according to people briefed on the matter.

The Justice Department in Washington and the Serious Fraud Office in London, these people said, have agreed to divide up cases against employees at the center of an investigation into the manipulation of the global interest rate benchmark used for mortgages, credit cards and corporate loans known as the London interbank offered rate, or Libor. The agencies are splitting the caseload, which involves traders in both New York and London, depending on which jurisdiction will have an easier burden of proof or possesses stronger evidence against a particular bank employee.

The cooperation should enable prosecutors on both sides of the Atlantic â€" whose political mandates and personalities have at times clashed, stalling the investigation â€" to file several new criminal cases stemming from the more than five-year-old inquiry. The Justice Department, the people briefed on the matter said, is expected to charge a handful of other Wall Street employees over the next year as it continues to investigate banks, including Citigroup and Deutsche Bank.

The agreement over Libor could also provide a template for the Justice Department and Serious Fraud Office as they pursue other investigations into global banking giants. In one prominent case focused on the manipulation of foreign currencies, authorities have privately described the misconduct as far worse than in the Libor case. Citigroup and UBS, among other banks, already have fired or suspended more than 20 currency traders as the international investigations gain steam.

Still, in ceding some ground to the Serious Fraud Office, the Justice Department has loosened its grip on the Barclays case, a signature effort that sought to demonstrate that American prosecutors were getting tough with banks’ misdeeds. After charging Mr. Mathew, the Serious Fraud Office is expected to seek his cooperation against former New York colleagues, including at least four New York-based traders who are suspected of manipulating Libor to bolster their profits.

For the Justice Department, any new Libor cases would come on top of charges it has already filed against eight foreign individuals and five financial institutions. For the cases against individual bank employees, four of whom are based in Britain, the recent cooperation with the Serious Fraud Office is expected to help pave the way for extraditions to the United States, where the former employees might stand trial.

The developments illustrate the fragile and ever-evolving relationship between Washington and London enforcement officials. Given the interconnected nature of the global financial markets, legal observers say, the agencies must maintain a level of cooperation.

Tensions peaked in late 2012, when Justice Department prosecutors notified the Serious Fraud Office that they were filing charges under seal against Tom Hayes, a former UBS and Citigroup employee seen as an architect of Libor manipulation. In turn, British authorities promptly arrested Mr. Hayes, setting off a series of fuming phone calls and angry letters on both sides of the Atlantic.

In recent months, the agencies sought to repair the relationship, and ultimately reached a rapprochement of sorts. Denis J. McInerney, deputy assistant attorney general for the Justice Department’s criminal division, made several trips to London last year and his counterparts visited Washington.

Mr. McInerney, however, is expected to leave the Justice Department next month, the people briefed on the matter said. And the Serious Fraud Office’s decision to charge Mr. Mathew stirred some bad blood, given that he began cooperating with the Justice Department in exchange for a promise that he not be criminally charged in the United States. The decision to bring criminal charges against a cooperating witness â€" while not unheard-of for the Serious Fraud Office, which in 2012 charged a cooperating witness in the Justice Department’s bribery investigation of Alcoa, the people said â€" is considered poor form.

This time, the damage was contained. Before charging Mr. Mathew, the Serious Fraud Office alerted Mr. McInerney and Mythili Raman, the acting head of the Justice Department’s criminal division. And after the charges, the alliance between the two agencies appears intact.

Peter Carr, a Justice Department spokesman, said, “Without commenting on any specific case, the U.S. Justice Department and the U.K. Serious Fraud Office have a good, productive relationship that has proved beneficial in the ongoing probes of benchmark interest rate and market manipulation by global financial institutions.” He added, “We remain two separate law enforcement organizations, however, and each has the responsibility to determine how best to proceed in any given case.”

Nilima Fox, a spokeswoman for the Serious Fraud Office, declined to comment.

After the financial crisis, with the public criticizing the dearth of prosecutions, the Justice Department and Serious Fraud Office were scrambling to flex some regulatory muscle. Libor seemed to provide that opportunity.

The cases began with Barclays, which paid a $450 million penalty in June 2012 to settle accusations that its employees in New York and London conspired to manipulate the process for setting Libor and other benchmark interest rates. On the heels of that deal, UBS, the Royal Bank of Scotland, Icap and Rabobank struck their own settlements. In some of the cases, the Justice Department also took the rare step of extracting criminal guilty pleas from subsidiaries of the banks.

In its deals with Barclays, the Justice Department contends that traders in New York would make requests to a Libor “submitter” in London seeking to have Libor priced at a rate that would benefit the trading positions in their portfolios. Mr. Mathew was seen as an important witness for United States prosecutors because he reported to Peter Johnson, the banker in London responsible for submitting weekly pricing requests for Libor, said people briefed on the matter. Like Mr. Mathew, Mr. Johnson was also charged by the Serious Fraud Office last week.

Barry Berke, a lawyer for Mr. Johnson, declined to comment. A spokesman for Herbert Smith Freehills in London, which represents Mr. Mathew, did not return a request for comment.

One reason American prosecutors might resist criminal charges in the Barclays case is that it would be hard to show that traders were successful in moving Libor prices in the direction they wanted, even if they tried to influence the rate. Lawyers for some of the traders also have argued that the practice of manipulating Libor had been going on for so long â€" and so blatantly â€" that it was unfair to single out traders who were following instructions at the bank.

The Serious Fraud Office, however, has a somewhat lower burden to prove that the employees intended to break the law. So, as the Justice Department pursues charges against other bank employees, the Barclays case is an important opportunity for the British agency to show its mettle.

Kathleen Hamann, a partner with White & Case, who recently joined the firm’s Washington office after handling foreign bribery cases for the Justice Department, said the Serious Fraud Office recently had a prominent corporate bribery case fall apart. As such, she said, the British agency is eager to show its aggressive streak.

“The S.F.O. desperately needs a win,” Ms. Hamann said.

Chad Bray contributed reporting.



Pension Funds Sue on a Deal Gone Cold

Sitting around a table in Baton Rouge, La., in February 2008, a handful of board members of the Firefighters’ Retirement System of Louisiana heard an investment pitch that would later come back to haunt them.

Their consultant, Joe Meals, said that others had already jumped at the chance to invest with Alphonse Fletcher Jr., a flashy Wall Street financier whom Mr. Meals described as a long-established hedge fund manager, according to video recordings. The fund was offering essentially a 12 percent guaranteed return, according to Mr. Meals, secured by a third-party investor, and the opportunity was so hot the board would have to make a decision that day.

“I can tell you, it won’t be on the table this time next month,” Mr. Meals told the group, according to the video recordings. “It won’t take 30 days for somebody else to want it.”

The firefighters’ system eventually said yes, and along with two other pension funds â€" the Municipal Employees’ Retirement System and the New Orleans Firefighters’ Pension and Relief Fund â€" invested a combined $100 million in one of Mr. Fletcher’s funds, FIA Leveraged. As they understood it, the fund would invest in liquid securities that could be sold in a matter of weeks.

The details sounded, as one board member put it, “too good to be true.”

In fact, they were.

Mr. Fletcher’s hedge fund has since been described by a court-appointed bankruptcy trustee as having elements of a Ponzi scheme, and four retirement systems are fighting to recover their money. A federal judge is scheduled to rule in March on a plan to liquidate the fund’s assets, which the trustee deemed “virtually worthless” in a report last November.

The pension funds, which handle the retirement benefits for thousands of public employees in Louisiana, can only hope to get their money back through various civil lawsuits, the most recent of which was filed in the middle of January.

The mere mention of the word Ponzi these days summons the specter of Bernard L. Madoff, but Mr. Fletcher insists that is not the case here. “I have never supervised anything even remotely resembling a Ponzi. I am not the black Madoff,” Mr. Fletcher, who is African-American, said in a related bankruptcy proceeding last year.

The trustee, Richard Davis, who was appointed in 2012 after Mr. Fletcher’s main fund, Fletcher International, filed for bankruptcy protection, concurs in part. “In Madoff, it was an easy lesson,” he said in an interview. “It’s a little more complex here.”

Millions of dollars have been lost, that much is certain. The explanation of how that happened and who is responsible is still emerging, but the cast, in addition to Mr. Fletcher, includes “those we normally think of as creating a line of protection against such fraud,” as Mr. Davis put it in his report. Named in various lawsuits are the consultant, Mr. Meals; the administrator of the hedge fund, Citco; and its auditor, Grant Thornton, which resigned as auditor after overstating a related fund’s value by $80 million, according to court documents.

Mr. Fletcher, who did not respond to requests for comment for this article, recently described the bankruptcy estate’s assets as “valuable,” according to court filings, and he has disputed many of the accusations made by the retirement systems and the trustee. Warren J. Martin Jr. of the law firm Porzio, Bromberg & Newman, who is representing one of Mr. Fletcher’s entities in a related bankruptcy, declined to comment.

Mr. Fletcher, who is known as Buddy, is no stranger to litigation, and the action by the Louisiana pension funds is just the latest twist in a dramatic personal narrative.

A former Wall Street whiz kid, Mr. Fletcher once produced larger-than-life profits that earned him national media attention. Magazine profiles trumpeted the reported 350 percent returns of his firm, Fletcher Asset Management. A representative from the firm told the Firefighters’ Retirement System that one Fletcher fund had not had a losing month in over a decade.

A graduate of Harvard, Mr. Fletcher worked at Bear Stearns and then Kidder, Peabody & Company before starting his own fund in the early 1990s. While at Kidder, Mr. Fletcher, then in his 20s, managed a portfolio that reported $25 million in profit. When the firm did not pay him his expected bonus, he sued, claiming discrimination.

An arbitration panel eventually awarded Mr. Fletcher $1.3 million but ruled that Kidder had not discriminated against him.

In 2012, Granville Bowie, Kidder’s human resources manager during the time Mr. Fletcher was there, told Boston Magazine that the firm declined to pay the bonus because Mr. Fletcher had refused to tell anyone how he was generating his profits.

After he left Kidder, Mr. Fletcher returned to Bear Stearns, and later started Fletcher Asset Management. Things appeared to take off, and he became known as much for how he displayed his wealth as how he made it.

He bought four units in the Dakota, the Manhattan apartment building known for housing artistic icons including John Lennon, Lauren Bacall and Judy Garland. He pledged millions to charity.

But things at the Dakota turned sour in 2011, when Mr. Fletcher sued the building and accused it of discrimination, contending that the board declined to sell him a fifth apartment because he is black. The case attracted national media attention, and in some ways signaled the beginning of his firm’s downfall.

News reports widely quoted the board’s response, that it was his fund’s “apparent lack of profitability” that swayed its decision. The board denied it was discriminatory, and the case is still pending.

Weeks later, the Firefighters’ Retirement System tried to withdraw $17 million of its investment. Another pension fund made a similar request, according to a joint announcement all three pension systems that invested in FIA Leveraged made in July 2011 after a report in The Wall Street Journal raised questions about the investment.

Believing they were entitled to cash redemptions within a matter of weeks, the pension funds were dismayed to receive i.o.u.s due in two years. Over the next few months, more reports began to surface that questioned the soundness of Mr. Fletcher’s investments.

The Louisiana pension systems hired auditors to look over the books, and the S.E.C., the F.B.I. and the Louisiana inspector general’s office opened investigations. The S.E.C. and the F.B.I. declined to comment, but people briefed on the cases say they are continuing. Greg Phares, the administrative program director at the inspector general’s office, confirmed that the agency is continuing to work with other groups that are investigating the Fletcher case, but declined to comment further.

The pension funds now say that FIA Leveraged brought in no new investors after them, an allegation that the trustee’s report appears to back up.

“In many ways, the fraud here has many of the characteristics of a Ponzi scheme, where, absent new investor money coming in, the overall structure would collapse due to an inability to meet existing redemption and other obligations,” the report says.

When the pension money ran out, the trustee said, “the scheme was sustained for a time by continued use of inflated valuations,” resulting in a “serious loss” for the pension funds and other creditors.

“There’s a lot of things I wasn’t aware of until I read the trustee’s report,” said Robert L. Rust, the executive director of the municipal pension fund. “Like where the money went.”

According to the trustee’s report, $8 million went toward “Violet and Daisy,” a film produced by Mr. Fletcher’s brother, the screenwriter Geoffrey Fletcher. Money from FIA Leveraged was used to buy a $27 million fund-of-funds business from Citco, the fund’s administrator, which the retirement systems contend was an inappropriate use of their investment.

In his report, Mr. Davis said that Mr. Fletcher’s main fund was most likely insolvent as of 2008 and that it had not made a single profitable trade since before the Louisiana pension funds even decided to invest.

Further, Mr. Davis revealed that Mr. Meals’s advisory firm, the Consulting Services Group, received a fee from Citco for pitching the Fletcher investment, something the pension funds say they did not know at the time. Mr. Meals, who no longer works for the firm and said he was self-employed, said the payment was returned to the retirement systems, something that Steven Stockstill, the director and legal counsel for the firefighters fund, disputes.

In the recordings, Mr. Meals is heard telling the firefighters fund that its money would be secured by $50 million from a third-party investor. If the cash returns dipped below 12 percent, that $50 million would make up the difference. As a trade-off, the pension funds agreed to forgo any return above 18 percent.

Mr. Davis highlighted the promise of guaranteed returns and the claim that one of Mr. Fletcher’s funds had no down months from June 1997 through December 2007, a period that included market-shaking events like the collapse of Long-Term Capital Management, the Russian debt crisis and the Sept. 11 terrorist attacks in 2001.

“These red flags should have caused the administrators and auditors to have investigated, disclosed and stopped,” the trustee stated in his report. “None did.”

Citco declined to comment.

In January, the Massachusetts Bay Transportation Authority Retirement Fund, which invested $25 million with another fund of Mr. Fletcher’s that is also in bankruptcy, filed its own suit against Grant Thornton in Massachusetts Superior Court, contending that the company “failed to properly audit and value the holdings of a reportedly corrupt hedge fund manager.”

Representatives for the Massachusetts fund declined to comment. In an email, a spokeswoman for Grant Thornton said: “We are confident that our work complied with all professional standards and we intend to vigorously defend ourselves.”

The Louisiana retirement funds say that the Fletcher investment stung but was not catastrophic. “The system is financially strong and none of our retirees or our members are in any jeopardy because of the diversification of the portfolio,” Mr. Rust said. “But we have a responsibility to go after the people who took the money.”



Wall Street: Working for the Weekend or Through It?

Last month, Bank of America Merrill Lynch told its junior bankers to take four days off a month, on the weekends. Credit Suisse discouraged its analysts and associates from working on Saturdays. Last year, Goldman Sachs recommended that its analysts take weekends off whenever possible.

Wall Street’s move to rethink the workload of interns and junior bankers, known as analysts and associates, comes after the death of an intern at Bank of America Merrill Lynch in London last summer. But old habits are hard to change, particularly in an industry where an intense work schedule can be a badge of honor.

Do you work on Wall Street as an analyst? Are you taking work-free weekends out of town? Or toiling as hard as ever? I would like to hear from you about how this transition is going, and how you are spending your new-found free time (if you have it). Please leave your comment below. I may follow up with select commenters for interviews.

You may also email me at swarns@nytimes.com. Thank you, I look forward to hearing your stories.



From Buffett, Lessons From His Farm

Warren Buffett with shareholders at the Berkshire Hathaway annual meeting last year.Nati Harnik/Associated Press Warren Buffett with shareholders at the Berkshire Hathaway annual meeting last year.


Investors around the world hang on Warren Buffett’s every word, hoping for a scrap of advice from one of the world’s most legendary businessmen. Mr. Buffett often dishes out a few morsels of that advice in a letter that coincides with the annual report from his firm, Berkshire Hathaway.

On Monday, Mr. Buffett offered an unusually long preview of that advice in an excerpt from his letter, posted on Fortune’s website. The full text of Mr. Buffett’s letter and Berkshire Hathaway’s annual report will be released Saturday morning.

In the excerpt, the chief executive used two small deals to illustrate several of his core investment principles. In 1986, Mr. Buffett bought a 400-acre farm in Nebraska, and in 1993, he invested in a retail property near the New York University campus. Both deals, as he tells it, came after farming and real estate bubbles had burst, and in both cases, he knew very little about the day-to-day operations of what he was buying.

But Mr. Buffett saw the potential. And while he may not have known about farming or building management, he knew people who did.

Mr. Buffett says he son loved farming and gave him a rough idea of the costs and returns. A fellow investor in the New York building was a seasoned buyer of real estate who could help to manage it.

Years later, Mr. Buffett says, the farm is worth five times what he paid for it, and the building now throws off annual distributions that exceed 35 percent of the initial equity investment.

“You don’t need to be an expert in order to achieve satisfactory investment returns,” Mr. Buffett writes. “But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well.”

Mr. Buffett has built a reputation for zigging when others zag. Last year, his annual letter extolled the virtues of print newspapers, a business other investors can’t seem to get away from fast enough (Mr. Buffett had bought 28 daily papers in a 15-month period).

He has also long advocated keeping a cool head in a chaotic environment, and he used the farm and real estate purchases to illustrate the importance of a long-term view.

“With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations,” Mr. Buffett wrote. “Games are won by players who focus on the playing field â€" not by those whose eyes are glued to the scoreboard.

At least one financial observer, however, took issue with what he saw as an inconsistency in Mr. Buffett’s advice.

Cullen Roche, the founder of the financial services firm Orcam Financial Group, which says it specializes in macro investment research, wrote in a blog post that while Mr. Buffett’s annual letters can provide some of the best investing education, they should also be taken with a grain of salt because of their penchant for “vague generalizations.”

Mr. Roche pointed to a section of the letter that eschews macro forecasting, an outlook that evaluates global economic trends. But later on, Mr. Buffett says that “American business has done wonderfully over time and will continue to do so,” which Mr. Roche identifies as macro forecasting.

On its website, Orcam describes itself as a “fee only financial services firm specializing in macro investment research and quantitative portfolio construction.”

While investors will be looking for nuggets of investment advice when the full letter is released, analysts will be keeping a close eye out for any clues about who will succeed Mr. Buffett, 83, as chief executive of one of the country’s largest companies.

Mr. Buffett has previously disclosed that he had chosen a successor but did not name the candidate.



From Buffett, Lessons From His Farm

Warren Buffett with shareholders at the Berkshire Hathaway annual meeting last year.Nati Harnik/Associated Press Warren Buffett with shareholders at the Berkshire Hathaway annual meeting last year.


Investors around the world hang on Warren Buffett’s every word, hoping for a scrap of advice from one of the world’s most legendary businessmen. Mr. Buffett often dishes out a few morsels of that advice in a letter that coincides with the annual report from his firm, Berkshire Hathaway.

On Monday, Mr. Buffett offered an unusually long preview of that advice in an excerpt from his letter, posted on Fortune’s website. The full text of Mr. Buffett’s letter and Berkshire Hathaway’s annual report will be released Saturday morning.

In the excerpt, the chief executive used two small deals to illustrate several of his core investment principles. In 1986, Mr. Buffett bought a 400-acre farm in Nebraska, and in 1993, he invested in a retail property near the New York University campus. Both deals, as he tells it, came after farming and real estate bubbles had burst, and in both cases, he knew very little about the day-to-day operations of what he was buying.

But Mr. Buffett saw the potential. And while he may not have known about farming or building management, he knew people who did.

Mr. Buffett says he son loved farming and gave him a rough idea of the costs and returns. A fellow investor in the New York building was a seasoned buyer of real estate who could help to manage it.

Years later, Mr. Buffett says, the farm is worth five times what he paid for it, and the building now throws off annual distributions that exceed 35 percent of the initial equity investment.

“You don’t need to be an expert in order to achieve satisfactory investment returns,” Mr. Buffett writes. “But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well.”

Mr. Buffett has built a reputation for zigging when others zag. Last year, his annual letter extolled the virtues of print newspapers, a business other investors can’t seem to get away from fast enough (Mr. Buffett had bought 28 daily papers in a 15-month period).

He has also long advocated keeping a cool head in a chaotic environment, and he used the farm and real estate purchases to illustrate the importance of a long-term view.

“With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations,” Mr. Buffett wrote. “Games are won by players who focus on the playing field â€" not by those whose eyes are glued to the scoreboard.

At least one financial observer, however, took issue with what he saw as an inconsistency in Mr. Buffett’s advice.

Cullen Roche, the founder of the financial services firm Orcam Financial Group, which says it specializes in macro investment research, wrote in a blog post that while Mr. Buffett’s annual letters can provide some of the best investing education, they should also be taken with a grain of salt because of their penchant for “vague generalizations.”

Mr. Roche pointed to a section of the letter that eschews macro forecasting, an outlook that evaluates global economic trends. But later on, Mr. Buffett says that “American business has done wonderfully over time and will continue to do so,” which Mr. Roche identifies as macro forecasting.

On its website, Orcam describes itself as a “fee only financial services firm specializing in macro investment research and quantitative portfolio construction.”

While investors will be looking for nuggets of investment advice when the full letter is released, analysts will be keeping a close eye out for any clues about who will succeed Mr. Buffett, 83, as chief executive of one of the country’s largest companies.

Mr. Buffett has previously disclosed that he had chosen a successor but did not name the candidate.



Paying the Price for Insider Trading Profits

Can a criminal be held responsible for what others gained from his violation? An appeals court answered “yes” when the crime was insider trading and the profits went to a hedge fund rather than directly to the defendant.

Because so many insider trading cases are filed in the Federal District Court in Manhattan, the United States Court of Appeals for the Second Circuit has become the focal point for shaping the law in this area. An opinion it issued last week empowers the Securities and Exchange Commission to seek money from defendants even when they did not personally receive proceeds from insider trading activity.

The law requires a defendant who is convicted to forfeit all gains realized from the violation. That includes the actual proceeds of the crime, plus any other assets needed to repay the profits derived from the crime. Forfeiture is a type of punishment, like a prison term and fine, that is intended to ensure that crime does not pay.

That is exactly what prosecutors tried to do after Joseph Contorinis was convicted in 2010 of insider trading based on tips he received from an investment banker at UBS. As a portfolio manager at Jefferies & Company, Mr. Contorinis made trades based on confidential information on behalf of the fund he managed that generated $7.2 million in profits, from which he received about $427,000 in compensation.

After his conviction, the district court ordered Mr. Contorinis to forfeit the $7.2 million in profits obtained by his fund. But the appeals court overturned that order, finding that he could only be held responsible for what he obtained personally through the insider trading.

The appeals court said, “Because the ‘proceeds’ sought by the government here were ‘acquired’ by the fund over which appellant lacks control,” Mr. Contorinis could not be responsible to forfeit money he had never received. That analysis would appear to limit an insider trading defendant’s potential exposure to only those amounts flowing directly from the trading.

But that was not the end of the matter. The S.E.C. also filed civil charges against Mr. Contorinis over the same trading.

In some insider trading cases, the S.E.C. and the Justice Department pursue parallel civil and criminal charges for the same transactions. This is permitted because the civil case does not result in any punishment, so the constitutional protection against double jeopardy does not apply. The criminal prosecution almost always goes first because of the potential for a jail term, and a conviction means the S.E.C. can simply point to that result to prove the civil violation.

Based on the criminal conviction in the S.E.C.’s civil case, the Federal District Court for the Southern District of New York ordered him to disgorge the same $7.2 million that he could not be required to forfeit. He also appealed this order to the Court of Appeals for the Second Circuit, which summarized his argument as “one can only ‘disgorge’ what one has personally ‘swallowed.’”

In an interesting twist, however, a majority of the three-judge panel of the appeals court decided that disgorgement was different from forfeiture, even though both take money from a defendant. “Because disgorgement’s underlying purpose is to make lawbreaking unprofitable for the lawbreaker, it satisfies its design when the lawbreaker returns the fruits of his misdeeds,” the court said.

The majority opinion pointed to insider trading cases involving tipping- in which others obtain the profits from information supplied by the defendant. In that context, the tipper can be ordered to disgorge profits realized by others, even if that person never personally traded on the inside information.

The appellate judges concluded it would be inconsistent to allow the defendant who trades for another person’s account to avoid disgorging profits, while holding the tipper who gave away the information responsible when it is used for profitable trading.

One of the circuit Judges, Denny Chin, dissented, arguing that disgorgement is intended to put a defendant back in the same position he held before the violation. By ordering Mr. Contorinis to repay the $7.2 million obtained by the fund he managed, he is being punished by having to pay money he never actually received. But Judge Chin was in the minority, and as the ruling stands, Mr. Contorinis will be responsible for coming up with that sum.

With the appeals court’s decision, the S.E.C. can use its disgorgement authority in other cases. Last week, it filed insider trading charges against Frank Perkins Hixon Jr., a former investment banker at the Evercore Group, in a Federal District Court for the Western District of Texas. Mr. Hixon is accused of directing trades based on confidential information from his firm in the account of a former girlfriend as a means to pay support for a child he had with the woman. If the Texas court accepts the analysis from the Contorinis opinion, then he can be held responsible to disgorge those profits even though they never flowed directly to him.

It remains to be seen how the disgorgement policy can be applied to trading by hedge funds and other investment vehicles when the defendant did not actually make the trading decision. The recent conviction of Mathew Martoma illustrates how broadly this remedy could be used against defendants receiving confidential information that is used by their employer to make profitable trades.

Mr. Martoma obtained information about a drug trial that led SAC Capital Advisors, where he was a portfolio manager, to sell out its positions in two companies involved in developing the drug and then shorting the shares of one. The actual trading decision was made by Steven A. Cohen, SAC’s founder and primary owner, after a 20-minute conversation with Mr. Martoma. SAC netted about $275 million in gains and losses avoided.

Mr. Cohen did not testify at trial, indicating that he would assert the Fifth Amendment privilege if called as a witness, so we don’t know whether the inside information actually led to the trading decision. But it was clear at trial that Mr. Martoma did not have the authority to direct the trades, only to make a recommendation to Mr. Cohen about the two companies.

The question is whether the lack of direct involvement in the trades might insulate an analyst or portfolio manager from an order to disgorge profits obtained by the firm. The approach taken by the appellate court’s ruling in the Contorinis opinion supports extending the remedy to someone in a position like Mr. Martoma because the goal is to hold the defendant responsible for any gains traceable to the inside information.

So technical niceties about who had the actual authority to make a trade are unlikely to stand in the way of the S.E.C. seeking to deprive a defendant of any possible benefit from the misuse of confidential information. Thus, every goose and gander gets the same sauce.

A complicating factor in Mr. Martoma’s case is SAC’s settlement with the S.E.C., which resulted in the firm paying about $275 million in disgorgement as part of its $600 million settlement with the agency. Its willingness to repay its illicit gains may insulate Mr. Martoma from any liability for SAC’s trading, although he will certainly face a claim for his own compensation tied to the transactions.

The appellate court’s decision on the broad scope of disgorgement means the S.E.C. has a tool to recover money from insider trading that is not available to the Justice Department through forfeiture. Although disgorgement is not intended to operate as a punishment, defendants will have a hard time avoiding a demand to repay any benefits realized from the misuse of confidential information.



HSBC Lays Out New Pay Plan for Top Executives

LONDON â€" As it reported a profit for last year that fell short of analysts’ estimates, HSBC on Monday laid out how it was changing its compensation for senior executives, becoming the first major bank here to describe how it was circumventing a new European Union cap on bonuses.

The London-based HSBC said that it would award 665 of its senior managers â€" including its chief executive, Stuart T. Gulliver, and Iain Mackay, the chief financial officer â€" a fixed-pay allowance as part of their compensation. The allowance, which qualifies neither as a salary nor a bonus, would be exempt from recent European Union rules that limit bonuses to twice a senior employee’s salary.

Banking giants in London, including Barclays but also Goldman Sachs and Bank of America Merrill Lynch, have been seeking new ways to compensate their senior staff after efforts by the financial services industry to lobby in Brussels against the new bonus rules failed.

HSBC on Monday also reported that it had missed some of its own cost-cutting targets as revenue fell. HSBC’s shares were down 3.6 percent in London on Monday afternoon.

HSBC, one of Europe’s largest lenders, said pretax profit for 2013 rose 9 percent to $22.6 billion from $20.7 billion in the year earlier. A group of analysts surveyed by Bloomberg had expected earnings to rise to $24.6 billion. Revenue fell 5.4 percent in the year.

“The results were at the lower end of expectations, with difficulties in Latin America taking their toll,” Keith Bowman, an analyst at the stockbroker Hargreaves Lansdown in London, said. “Furthermore, some management efficiency targets were missed.”

Mr. Gulliver has closed or sold 63 businesses or investments since 2011 as he plans to focus on corporate finance products and services for faster-growing markets, including Asia and Latin America. As part of the cost-cutting measures, the bank also eliminated about 40,000 jobs.

But lowering costs is taking more time than the bank and analysts expected. Return on equity, a measure of profitability, was 9.2 percent in 2013, short of Mr. Gulliver’s own goal of more than 12 percent.

The bank said it would continue with the strategy it announced in 2011 to cut costs, increase dividends and improve its risk and compliance controls to avoid any potential threat from financial misdeeds. HSBC said it planned further cost savings of $2 billion to $3 billion by improving some of its processes and procedures.

The earnings “reflected the good progress we have made in implementing the strategy that we set out in 2011,” Mr. Gulliver said in a statement.

HSBC said it paid Mr. Gulliver a bonus of 1.8 million pounds, or $3 million, for last year. That compares with £700,000 for 2012, when HSBC agreed to a fine to settle charges with United States authorities that the bank breached rules against money laundering.

HSBC, which generates most of its earnings from Asia, said the “sharp sell-off” in some emerging markets was more “a reflection of specific circumstances rather than a generalized threat.” But it predicted developing economies would experience “greater volatility in 2014 and choppy markets as adjustments are made to changing economic circumstances and sentiment.“

HSBC’s business in Latin America was hurt by slower economic growth last year. But Mr. Gulliver said he remained “optimistic about the long-term prospects of emerging markets and the opportunities for HSBC.”

“HSBC should benefit from the continuing growth in international trade as well as increasing wealth in Asia, Latin America, and the Middle East,” Shannon Stemm, an analyst at brokerage firm Edward Jones in the United States, said.



Facebook Stock Not So Different Than Bitcoin


With its extraordinary swoop on WhatsApp last week, Facebook proved its stock is not so different from the crypto-currency of the moment, Bitcoin. They can both be used for certain, specific purposes. Neither is backed by a government. Both depend on vast networks of individuals. And their worth reflects demand, which is based on murky fundamentals. The trick: monetize them while they still have value.

Unlike United States dollars, neither Facebook shares nor Bitcoins are an official form of legal tender. But some people are willing to accept them as payment. A prominent example is WhatsApp’s founders and financial backers, who happily exchanged their stakes in the text-messaging start-up for Facebook stock worth $15 billion. Yet Mark Zuckerberg, Facebook’s boss, would have struggled to purchase a coffee with his shares at the German bakery where he and WhatsApp’s chief executive, Jan Koum, appear to have hatched the deal.

Similarly, Bitcoin enjoys no universal acceptance. True, at Bandana’s Bar-B-Q in Coralville, Iowa, the currency will buy a slab of ribs. But it will not get a Big Mac at any of McDonald’s 14,000 outlets in the United States. Bitcoin is not money as most people understand it. There is no Treasury Department controlling its issuance or value. It is backed only by mathematics, and its total stock is limited at 21 million virtual coins.

In that sense, Bitcoin is only as useful as the network of people and businesses that are willing to accept it in exchange for goods and services. It goes without saying that a similar “network effect” underpins Facebook’s entire existence.

There is one big difference. Unlike Bitcoin, Facebook’s share count can expand. Last week, it issued 182 million new shares and 46 million restricted stock units to WhatsApp’s owners, adding some 9 percent to the total of shares outstanding. Such share-printing could undermine the share’s value, just as governments debase their currencies by printing too much money. Of course, Facebook does something - it’s not merely a putative store of value like Bitcoin. So it can grow into its larger equity base.

The risk for Facebook and Bitcoin, respectively, is that someone creates a better social network or decentralized digital currency. History suggests both will happen - innovators almost never retain their dominant positions ad infinitum. Indeed, there are signs this may already be occurring.

So far, Facebook shareholders are happy with their dilution. The stock price rose on the purchase of an upstart with no financial track record on which to judge its future success within Facebook. However, the acquisition makes Mr. Zuckerberg look fearful. Although Facebook’s business is robust today, it seems that it must make big, near-blind wagers on the next big thing, lest it lose its edge.

The fundamental value of Bitcoin is incredibly tricky to pin down. According to The MIT Technology Review, Bitcoin was four times more volatile in 2013 than the average stock, and the dollar-Bitcoin exchange rate was 10 times more volatile than the dollar rate with major currencies like the euro or yen.

What’s not hard to recognize: Bitcoin’s worth has nearly halved since the beginning of December. Whatever the similarities, or differences, between the pseudo-currencies of Facebook shares and Bitcoins are, their values are clearly not fixed. Next to selling them, the wisest course of action would be to capitalize on their value. Mr. Zuckerberg just did that with Facebook stock in the WhatsApp deal.

Rob Cox is editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.



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

Jos. A. Bank’s plan to fend off its unwanted suitor does not appear to have worked.

Jos. A. Bank has until March 12 to consider the new proposal.

The offering comes less than two weeks after Jos. A. Bank announced a plan to buy the clothing company Eddie Bauer in what appeared to be an attempt to discourage any more advances from Men’s Wearhouse.

In its announcement, Men’s Wearhouse said it could “potentially” increase its offer to $65 per share if it could conduct limited due dilligence and if the Eddie Bauer deal falls through and costs less than $48 million to terminate.

“We urge the Jos. A. Bank Board of Directors to immediately engage in negotiations with Men’s Wearhouse so we can capitalize on the opportunity we have to enter into a transaction that creates significant value for shareholders of both companies,” Doug Ewert, Men’s Wearhouse’s president and chief executive, said in a statement. “Our increased cash offer would provide Jos. A. Bank shareholders with a substantial premium and immediate and certain value, and we are prepared to further increase our offer price on the basis of limited due diligence.”

A representative for Jos. A. Bank could not be immediately reached for comment.

Monday’s development is the latest in the ongoing takeover battle between the two men’s apparel companies that began last October, when Men’s Wearhouse resisted an unsolicited bid from its smaller rival. Instead, the company turned the tables on Jos. A Bank and began its aggressive pursuit of an acquisition.

Both companies have since lowered their poison pill thresholds, or what percentage an investor must own to trigger a mechanism that dilutes the overall shares.

In January, Men’s Wearhouse announced it would be willing to raise its offer of $57.50, which Jos. A. Bank had rejected earlier in the month.



Radio Frequency Chip Makers to Merge

RF Micro Devices and TriQuint Semiconductor, which make radio frequency chips, announced a merger of equals on Monday, creating a chip maker with more than $2 billion in annual revenue.

Under the all-stock deal, TriQuint shareholders will receive 1.675 shares of the combined company for each of their shares while RF Micro shareholders will receive one share. That represents an implied price of $9.73 for each TrinQuint share, or about $1.6 billion, a 5.4 percent premium over the closing price on Friday, the companies said in a statement.

The deal is expected to save at least $150 million in costs, the companies said.

The chief executive of RF Micro, Bob Bruggeworth, will be chief executive of the combined company, which will have a new name. TriQuint’s chief executive, Ralph Quinsey, will be non executive chairman.

“The world’s demand for mobile data is growing exponentially,” Mr. Bruggeworth said in the statement. “With this merger of equals, we will bring under one roof all of the critical R.F. building blocks necessary to innovate at the heart of what makes mobile mobile - the crucial back-and-forth data flow between the mobile device and the network.”

Mr. Quinsey added: “I believe this is an industry shaping event. Through this combination of RFMD and TriQuint we form a diversified market leader with a highly compatible combination of products and technologies and a world class team focused on innovation and superior financial results.”

Bank of America Merrill Lynch was the financial adviser to RF Micro, while Goldman Sachs advised TriQuint.



Morning Agenda: A Clearer Picture on Lehman’s Collapse

LEHMAN REVISITED  |  The Federal Reserve let Lehman Brothers fail more than five years ago. But it wasn’t until Friday that the Fed released transcripts of the 2008 meetings of its Federal Open Market Committee that provide the fullest picture yet of the thinking of top government officials on Lehman’s collapse, Peter Eavis writes in DealBook.

According to the newly released minutes, Ben S. Bernanke, the chairman of the Federal Reserve at the time, “did not debate whether it was right to let Lehman die at the Fed meeting held on Sept. 16, the day after the investment bank filed for bankruptcy,” Mr. Eavis writes, adding, “but from the comments in the October meeting, he appeared to have been aware that the government’s decision to let Lehman fail was coming under intense scrutiny from prominent financial figures around the world who said it was a huge and unnecessary mistake that caused global financial markets to freeze up.”

On the Fed’s ignorance: The Fed transcripts reveal that officials misread the financial crisis in 2008, repeatedly fretting about “overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the crisis,” Binyamin Appelbaum writes in The New York Times. On the morning after Lehman Brothers failed, most Federal Reserve officials still believed that the American economy would continue to grow.

The Fed’s understanding of the crisis “was clouded by its reliance on indicators that tend to miss sharp changes in conditions,” Mr. Appelbaum writes, adding, “the Fed also relied on economic models that assumed the existence of smoothly functioning financial markets, limiting its ability to project the consequences of a breakdown.”

“My initial takeaway from these voluminous transcripts is that they paint a disturbing picture of a central bank that was in the dark about each looming disaster throughout 2008. That meant that the nation’s top bank regulators were unprepared to deal with the consequences of each new event,” Gretchen Morgenson writes in the Fair Game column.

On the wryness of Janet L. Yellen, the current Fed chairwoman: Ms. Yellen was not a full voting member of the Federal Reserve’s policy-making committee, but she nevertheless repeatedly admonished her colleagues for not acting faster, Nathaniel Popper writes in The New York Times. “But even as she pushed for more aggressive policies to deal with the financial crisis and the economic downturn, Ms. Yellen also displayed an ability to disarm her critics with a sort of gallows humor, even in the darkest days,” he writes.

“In the run-up to Halloween, we have had a witch’s brew of news,” Ms. Yellen said at one meeting in 2008. At another, she noted, “East Bay plastic surgeons and dentists note that patients are deferring elective procedures.”

On the Fed’s aid to other nations: “While reporters and lawmakers focused on the bailouts of American financial institutions, the Fed was quietly pumping hundreds of billions of dollars to nations stretching from Switzerland to South Korea to bolster global banks when dollars were in short supply. European banks were particularly heavy beneficiaries,” Neil Irwin writes in The New York Times.

WHY FACEBOOK BOUGHT WHATSAPP REDUX: THE ADDRESS BOOK  |  Facebook’s deal for WhatsApp, which could be worth up to $19 billion, is all about the address book, Jenna Wortham writes in The New York Times. In buying WhatsApp last week, Facebook is betting that social networking’s future will depend not just on broadcasting updates to thousands of “friends” but also on more intimate social connections.

Ms. Wortham writes: “Services like Instagram, Google Plus, Twitter and Facebook encourage users to share from the rooftop every life event and moment as material to be viewed and commented on. The Internet enabled that sort of broad outreach like never before, and the services continue to grow, as more than a billion people have signed up on Facebook alone.

“Yet the popularity of private-messaging applications like WhatsApp, which has more than 450 million users, suggests that despite all the technological advances in recent decades, people still crave to communicate in small groups and often just with one other person at a time.”

In related news, WhatsApp went dark for several hours on Saturday afternoon because of server issues, the company said. Jan Koum, WhatsApp’s co-founder and chief executive, apologized on Sunday for what was the company’s “longest and biggest outage in years.”

A CALL FOR GREATER PENSION FUND DISCLOSURE  |  Detroit might have gone bankrupt regardless, but its inability to assess the health of its pension system certainly did not help. This is the thinking behind a recommendation by a blue-ribbon panel of the Society of Actuaries for pension officials to disclose a figure they have long resisted discussing: the total cost, in today’s dollars, of workers’ pensions, assuming no credit for expected investment gains over the years, Mary Williams Walsh writes in DealBook. This number is otherwise known as the plan’s total liability, discounted at a risk-free rate.

Plan trustees currently prefer to be given traditional actuarial estimates, which can smooth over impending pension funding disasters. “Such numbers generally comply with current actuarial standards, but as Detroit shows, they can also paper over looming disasters. Detroit’s pension fund was said to be healthy just before the bankruptcy, but it turned out to be several billion dollars short,” Ms. Walsh writes. Not surprisingly, plan trustees and the unions that represent the public workers are suspicious of fuller disclosure, arguing that the risk-free approach will be used to cast public pensions in the worst possible light.

ON THE AGENDA  |  The Purchasing Managers’ Index services flash is out at 8:58 a.m. The National Association for Business Economics annual conference begins in Arlington, Va. The Mobile World Congress begins in Barcelona, Spain. Seth Meyer takes over as the host of “Late Night” on NBC at 12:35 a.m. Samuel Zell, the chairman of Equity Group Investments, is on CNBC at 7 a.m. Jon Steinberg, the president and chief operating officer of BuzzFeed, is on CNBC at 10 a.m. “Opening Bell with Maria Bartiromo” debuts on Fox Business Network at 9 a.m.

COMCAST AND NETFLIX GET COZY  |  Comcast and Netflix announced an agreement on Sunday in which Netflix will pay Comcast for faster and more reliable access to Comcast’s subscribers, Edward Wyatt and Noam Cohen write in The New York Times. “The deal is a milestone in the history of the Internet, where content providers like Netflix generally have not had to pay for access to the customers of a broadband provider,” they write.

The deal came just 10 days after Comcast announced an agreement to buy Time Warner Cable for $45 billion, which would make Comcast the cable provider to nearly one-third of American homes and the high-speed Internet company for close to 40 percent. It is not yet clear whether the Comcast-Netflix deal violates the principles of net neutrality, where content providers have equal and free access to consumers.

From The Washington Post: The deal will “transform the debate over network neutrality regulation. Officially, Comcast’s deal with Netflix is about interconnection, not traffic discrimination. But it’s hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.”

Mergers & Acquisitions »

Chesapeake May Spin Off Oil Field Services Unit  |  Chesapeake Energy Corporation, the second-largest producer of natural gas in the United States, said early Monday that it is considering a potential spinoff of its Chesapeake Oilfield Services division, The Wall Street Journal writes.
WALL STREET JOURNAL

Discovery Preparing Bid for Britain’s Channel 5  |  Discovery Communications is readying an offer for the British broadcaster Channel 5, The Wall Street Journal writes, citing unidentified people familiar with the situation.
WALL STREET JOURNAL

After WhatsApp Deal, Visions of Magic Numbers  |  Facebook’s deal for WhatsApp, which could total up to $19 billion, has raised the question of how much it would take other technology start-ups to walk away from it all, Nick Bilton writes in the Bits blog.
NEW YORK TIMES BITS

The Online Challenge for Banking  |  BBVA’s acquisition of Simple increases the possibility that banks can find a way to mastermind their own technological disruption, writes Fiona Maharg-Bravo of Reuters Breakingviews.
DealBook »

Barnes & Noble Receives Conditional OfferBarnes & Noble Receives Conditional Offer  |  G Asset Management, a little-known investment firm, offered on Thursday to acquire 51 percent of Barnes & Noble in a deal that would value the bookseller’s shares at $22 each.
DealBook »

Volkswagen Offers to Buy Rest of Swedish Truck Maker for $9.2 BillionVolkswagen Offers to Buy Rest of Swedish Truck Maker for $9.2 Billion  |  The German automaker is seeking to acquire the outstanding shares it doesn’t already own in Scania. It hopes to combine the company with its other commercial vehicle operations.
DealBook »

INVESTMENT BANKING »

University of California to Lose Millions on Interest Rate Swaps  |  The 10-campus University of California system has lost tens of millions of dollars and estimates it will lose as much as $136 million over the next 34 years on interest rate swaps, with some of its biggest losses coming from a swap sold by Lehman Brothers, The Orange County Register reports.
ORANGE COUNTY REGISTER

Deutsche Bank Plans to Cut American Assets  |  Deutsche Bank revealed plans to shift assets off of its American balance sheet to cope with new American regulations, The Financial Times writes.
FINANCIAL TIMES

Corbat Receives a 23% Pay Raise at CitigroupCorbat Receives a 23% Pay Raise at Citigroup  |  In the latest disclosure of compensation at a big bank, Michael Corbat, the chief executive of Citigroup, received about $14.1 million for 2013, compared with $11.5 million in 2012.
DealBook »

Banks Set to Gain from Energy Future Holdings Bankruptcy  |  Citigroup and Morgan Stanley were part of a group that earned about $735 million in fees in arranging the financing for the $45 billion takeover of Energy Future Holdings, previously known as TXU, in 2007. Now, the two banks are among the lenders expected to gain hundreds of millions by helping the company operate through a possible bankruptcy, The Wall Street Journal writes.
WALL STREET JOURNAL

PRIVATE EQUITY »

Cinven to Buy Clinical Research Firm  |  Cinven will pay $915 million for the Cincinnati-based Medpace, which operates in more than 45 countries. Cinven purchased the stake from CCMP Capital Advisors, which acquired Medpace in 2011.
DealBook »

Citigroup’s Consumer Finance Unit Draws Private Equity Interest  |  Private equity firms including the Fortress Investment Group have approached Citigroup about a potential deal for the bank’s consumer finance business, OneMain Financial, Reuters reports, citing unidentified people familiar with the situation. The bank has not yet made a decision about whether it will sell the business.
REUTERS

S.E.C. Weighing Exemption for Private Equity Over Broker Rules  |  The Securities and Exchange Commission is considering giving private equity firms a break after they collected billions of dollars in deal fees without being registered as broker dealers, Bloomberg News writes, citing an unidentified person familiar with the situation.
BLOOMBERG NEWS

HEDGE FUNDS »

Activist Hedge Fund Takes 2.5% Stake in Tribune  |  The activist hedge fund Blue Harbour Group has taken a 2.5 percent stake in the Tribune Company and is discussing strategic moves with the company’s management, The Wall Street Journal reports.
WALL STREET JOURNAL

Starboard Wants Red Lobster Spinoff Put to Vote  |  The activist hedge fund Starboard Value is expected to reveal a plan on Monday for shareholders to vote on a resolution telling Darden Restaurants to halt any plans to shed its Red Lobster seafood chain unless they get to vote directly on the decision, The Wall Street Journal reports.
WALL STREET JOURNAL

I.P.O./OFFERINGS »

China’s Sina Prepares Weibo for I.P.O.  |  Sina, the Chinese Internet platform, has hired Goldman Sachs and Credit Suisse to manage the New York initial public offering of Weibo, its Twitter-like microblogging service, The Financial Times reports.
FINANCIAL TIMES

Allen & Company Rises in Technology Sector  |  Marc Andreessen told The Wall Street Journal that Facebook’s hiring of Allen & Company, a boutique investment bank, as an adviser on its initial public offering, was “an opportunity to repay” the bank for previous work it had done for Facebook.
WALL STREET JOURNAL

Online Learning Company 2U Files for I.P.O.  |  The online learning company 2U filed on Friday for an initial public offering to raise up to $100 million, Reuters writes.
REUTERS

VENTURE CAPITAL »

Mt. Gox Head Resigns From the Bitcoin Foundation  |  Mark Karpeles, the chief executive of Mt. Gox, has stepped down from the board of the Bitcoin Foundation, Bloomberg News writes. The move is the latest setback for the virtual currency.
BLOOMBERG NEWS

Washington Lobbying Shop Inspired by Start-Ups  |  Inspired by how technology start-ups build their businesses, McBee Strategic Consulting, the lobbying shop founded by Steve McBee, is blurring the lines when it comes to his firm’s services, The Washington Post reports.
WASHINGTON POST

ECommera Raises $41 Million  |  The retail software company, eCommera, has collected $41 million in Series C funding led by Dawn Capital, bringing the company’s total to $50 million, TechCrunch writes.
TECHCRUNCH

LEGAL/REGULATORY »

Credit Suisse Admits Guilt in Settling With S.E.C.Credit Suisse Admits Guilt in Settling With S.E.C.  |  The bank also paid $196 million to settle charges that it advised clients in the United States without first registering with the Securities and Exchange Commission.
DealBook »

Ex-Evercore Managing Director Charged With Insider Trading  |  Federal prosecutors contend that Frank Perkins Hixon Jr. used a brokerage account under the name of a woman who had his child to commit insider trading from 2011 until last year.
DealBook »

A Surprise Guest at the S.E.C.’s Annual GatheringA Surprise Guest at the S.E.C.’s Annual Gathering  |  While its annual conference is typically an opportunity for the Securities and Exchange Commission to reflect on the past year’s triumphs, the presence of Mark Cuban, the billionaire entrepreneur, was a reminder of a case the agency lost.
DealBook »

Whistle-Blower Lawsuit Puts U.S. Ambassador in the Spotlight  |  A lawsuit filed by the plastic pipe manufacturer JM Eagle against a former employee and the law firm that represented him, which was founded by the current United States ambassador to Italy, is raising questions about what employees can do when assembling a whistle-blower lawsuit that is supposedly on behalf of the government, Forbes reports.
FORBES



Cinven to Buy Clinical Research Firm


LONDON â€" The European private equity firm Cinven said Monday that it had acquired a majority stake in Medpace, a clinical research firm, for $915 million.

Cinven purchased the stake from the private equity firm CCMP Capital Advisors, which acquired Medpace in 2011.

Medpace provides management services to the research and development departments of small to midsize pharmaceutical, biotechnology and medical device companies that are in the clinical trial process.

Consolidation in the industry “has created a gap in the market serving the mid-cap pharma and smaller biotech players - where Medpace operates and where we intend to capitalise on organic growth opportunities,” Supraj Rajagopalan, a Cinven partner, said in a statement.

Medpace, which was founded in 1992, is based in Cincinnati and operates in more than 45 countries. It employs more than 1,500 people. In 2013, the company posted adjusted earnings before taxes, depreciation and amortization of $94 million.

The company will continue to be led by August Troendle, the founder of Medpace and its president and chief executive.

The deal is subject to regulatory approval.

Cinven was advised by Barclays and Wells Fargo, while Medpace was advised by Jefferies and Fairmont Partners.



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