Japan Said to Be Ready to Impose Bitcoin Rules

TOKYO â€" Japan is drawing up a plan to regulate Bitcoins, officials said Wednesday, including clauses the Nikkei business daily said would tax Bitcoin transactions and ban banks and securities firms from handling the digital currency.

The guidelines, which clarify how Bitcoins should be dealt with under Japanese law, come after the collapse of a prominent Bitcoin exchange last week.

An opposition lawmaker had petitioned the government to clear up, among other issues, whether or not Bitcoins should be treated as a currency. Treating them as a currency could mean regulation under more stringent banking laws.

The Japanese government seems to be leaning toward treating Bitcoins as a general commodity, the Nikkei said. Any gains from trading Bitcoins in Japan are to be subject to local taxes, together with any purchases made with Bitcoins, the paper said. For companies, revenue from Bitcoin transactions will also be taxed.

The guidelines being drafted would also bar banks and securities firms from handling Bitcoins, the Nikkei said.

Japan’s top government spokesman, Yoshihide Suga, said that talks on Bitcoin guidelines were in progress but that details had not been set. A spokesman at Japan’s Financial Services Agency also said guidelines were being drawn up.

“Various government agencies are doing their best to put the guidelines together,” Mr. Suga said.

The government is required to address the petition lodged by Tsutomu Okubo, a lawmaker in the opposition Democratic Party and a former managing director at Morgan Stanley, by Sunday. Mr. Okuba filed an open letter last week in Parliament, urging officials to clarify their stance on Bitcoin regulation.

Nations have been grappling with how to regulate Bitcoins, the popular virtual currency traded on the Web, free of central control. United States regulators have shown interest in setting ground rules for it.

The regulatory scrutiny has come amid hacking attacks and scandals that have cast doubt on Bitcoin’s potential to become an alternative to fiat money. Flexcoin, an online bank specializing in Bitcoins, said Tuesday that it was folding after  hackers plundered its digital currency reserves. That heist totaled about $600,000 at the current average market price.

In Japan, action has in part been prompted by the collapse of Mt. Gox, based in Tokyo and long a dominant trading platform for Bitcoins. Mt. Gox abruptly halted all trading and filed for bankruptcy protection, saying it had lost half a billion dollars’ worth of the virtual currency, leaving hundreds of thousands of users in the lurch.

Tsutomu Okubo, a lawmaker in the opposition Democratic Party and a former managing director at Morgan Stanley, had sent an open letter to the government urging officials to clarify their stance on Bitcoin regulation.

The proposed guidelines, however, ease fears that had risen among some technology start-ups that the Mt. Gox debacle, together with a string of other hacking attacks and scandals, might bring heavy regulations that would force small operators out. But by banning banks and brokerages from handling Bitcoins, Japan’s proposed regulations appear to swing in the opposite direction.

Karl Friedrich Lenz, a law professor at Aoyama Gakuin University in Tokyo, said that although the proposed guidelines would bring some welcome clarification, they could also leave Bitcoin trading to untested upstarts, with little additional protections for users.

“If banks and securities firms can’t handle Bitcoins, Japanese consumers will be stuck with illegal shadow banks like Mt. Gox, and their risk will be much higher as a result,” he said in a note.

China’s Domestic Bond Market May See First Default

HONG KONG â€" A small solar company in Shanghai appears set to become the first company to default in China’s huge but protected domestic bond market.

Late on Tuesday, the company, Shanghai Chaori Solar Energy Science and Technology Company, issued a stock exchange announcement saying that, “due to various uncontrollable factors,” the company is unlikely to be able to meet an annual interest payment that is due on Friday.

Chaori, a struggling solar panel maker, owes interest of 89.8 million renminbi, or about $15 million, on a 1 billion renminbi bond it sold to domestic investor in 2011.

According to its stock exchange filings, however, Chaori has been able to come up with only about 4 million renminbi to fund the interest payments â€" meaning that unless it receives a bailout or somehow generates new funds, the company would become the first to default in China’s huge and fast growing domestic bond market.

While Chinese companies, including solar panel makers, have previously defaulted on American dollar debt that they sold to international investors in the offshore bond markets, analysts said a default in the nation’s much larger and closely cosseted domestic debt market would be a significantâ€"and arguably long overdueâ€"development.

“We think it’s a good thing as a normal economy needs defaults to better price bonds and other debt products,” Ting Lu, a China economist, and other analysts at Bank of America’s Merrill Lynch unit wrote Wednesday in a research note. “Defaults of some debt products are not on a similar scale to a collapse of a major financial institution.”

China’s onshore corporate bond market has grown rapidly in recent years, outpacing overall credit growth across the economy. Total corporate bonds outstanding rose to 8.7 trillion renminbi as of January, or around $1.4 trillion at current exchange rates, more than ten times the 800 billion renminbi outstanding at the end of 2007, according to Bank of America’s Merrill Lynch.

Overall, despite the relative immaturity of the country’s bond markets, China’s corporate sector has loaded up on debt more aggressively than households or local governments.
Total debt in China stood around 210 percent of the country’s gross domestic product at the end of last year, a figure that is relatively high for China’s level of development, Louis Kuijs of the Royal Bank of Scotland wrote Monday in a research report.

Of that total, household debt was equal to 34 percent of G.D.P., while the ratio for government debt was 57 percent of the economy and corporate debt was 119 percent.

China’s Domestic Bond Market May See First Default

HONG KONG â€" A small solar company in Shanghai appears set to become the first company to default in China’s huge but protected domestic bond market.

Late on Tuesday, the company, Shanghai Chaori Solar Energy Science and Technology Company, issued a stock exchange announcement saying that, “due to various uncontrollable factors,” the company is unlikely to be able to meet an annual interest payment that is due on Friday.

Chaori, a struggling solar panel maker, owes interest of 89.8 million renminbi, or about $15 million, on a 1 billion renminbi bond it sold to domestic investor in 2011.

According to its stock exchange filings, however, Chaori has been able to come up with only about 4 million renminbi to fund the interest payments â€" meaning that unless it receives a bailout or somehow generates new funds, the company would become the first to default in China’s huge and fast growing domestic bond market.

While Chinese companies, including solar panel makers, have previously defaulted on American dollar debt that they sold to international investors in the offshore bond markets, analysts said a default in the nation’s much larger and closely cosseted domestic debt market would be a significantâ€"and arguably long overdueâ€"development.

“We think it’s a good thing as a normal economy needs defaults to better price bonds and other debt products,” Ting Lu, a China economist, and other analysts at Bank of America’s Merrill Lynch unit wrote Wednesday in a research note. “Defaults of some debt products are not on a similar scale to a collapse of a major financial institution.”

China’s onshore corporate bond market has grown rapidly in recent years, outpacing overall credit growth across the economy. Total corporate bonds outstanding rose to 8.7 trillion renminbi as of January, or around $1.4 trillion at current exchange rates, more than ten times the 800 billion renminbi outstanding at the end of 2007, according to Bank of America’s Merrill Lynch.

Overall, despite the relative immaturity of the country’s bond markets, China’s corporate sector has loaded up on debt more aggressively than households or local governments.
Total debt in China stood around 210 percent of the country’s gross domestic product at the end of last year, a figure that is relatively high for China’s level of development, Louis Kuijs of the Royal Bank of Scotland wrote Monday in a research report.

Of that total, household debt was equal to 34 percent of G.D.P., while the ratio for government debt was 57 percent of the economy and corporate debt was 119 percent.

A Standoff of Lawyers Veils Madoff’s Ties to JPMorgan Chase

It remains one of Wall Street’s most puzzling mysteries: What exactly did JPMorgan Chase bankers know about Bernard L. Madoff’s Ponzi scheme?

A newly obtained government document explains why â€" five years after Mr. Madoff’s arrest spotlighted his ties to JPMorgan and later led the bank to pay $2 billion for turning a blind eye to his fraud â€" the picture is still so clouded.

The document, obtained through a Freedom of Information Act request, reveals a behind-the-scenes dispute that tested the limits of JPMorgan’s legal rights and raised alarming yet unsubstantiated accusations of perjury at the bank. More broadly, the document highlights the legal hurdles federal authorities can face when investigating a Wall Street giant.

That dispute, which positioned JPMorgan against the government and ultimately one government agency against another, traced to the point after Mr. Madoff’s arrest in December 2008. Around that time, JPMorgan’s lawyers interviewed dozens of bank employees who potentially crossed paths with Mr. Madoff’s company.

Federal regulators at the Office of the Comptroller of the Currency sought copies of the lawyers’ interview notes, the government document and other records show, hoping they would open a window into the bank’s actions. The issue gained urgency in 2012, according to the records, when the comptroller’s office conducted its own interviews with JPMorgan employees and discovered a “pattern of forgetfulness.”

Suspicious that the memory lapses were feigned, the regulators renewed their request for the interview notes held by JPMorgan’s lawyers.

But JPMorgan, which produced other materials and made witnesses available to the comptroller’s office, declined to share those notes. In its denial, the bank cited confidentiality requirements like the attorney-client privilege, a sacrosanct legal protection that essentially prevents an outsider from gaining access to private communications between a lawyer and a client.

Even after the comptroller’s office referred the issue to the Treasury Department’s inspector general, which sided with the regulator, the fight dragged on for months. Invoking a rare exception to attorney-client privilege, the inspector general argued that the lawyers’ interviews were essentially “made for the purpose of getting advice for the commission of a fraud or crime.”

In other words, if the accusations were true, JPMorgan employees either duped lawyers into covering up wrongdoing, or, worse, the lawyers themselves helped obstruct the investigation.

The accusation, the government document showed, led to a debate in Washington over how far to press JPMorgan when the bank was sure to fight and a judge would be free to set a harmful precedent for future cases.

Those concerns, and skepticism about the Treasury inspector general’s accusations, drove the Justice Department to reject the move to revoke attorney-client privilege. In the government document â€" a letter to the Treasury inspector general, or O.I.G., dated Sept. 12, 2013 â€" the civil division ruled that “unfortunately, O.I.G. has provided no basis â€" and we have not independently uncovered any basis â€" for suggesting that” the interview notes were “made for the purpose of facilitating a crime or a fraud.”

While the ruling applied to the Madoff case alone, it could have broader implications as regulators weigh the costs of future fights and the likelihood of passing muster with the Justice Department. And despite being an exceptional case â€" banks and their regulators typically settle disputes over attorney-client privilege without the Justice Department getting involved â€" the ruling illustrated a persistent tension over the privilege that continues to shape the government’s pursuit of financial fraud.

Even though the Justice Department is loath to undermine the privilege between a bank and its lawyers, a move that could prompt a reprimand from Congress and the courts, it also wants to appear tough on crime after the financial crisis. In the letter to the Treasury Department’s inspector general, the civil division’s leader declared that “I share your commitment to using all available tools to combat financial fraud,” noting that the division had sued Standard & Poor’s and Bank of America over their roles in the crisis.

And federal authorities worry that Wall Street might take the privilege too far â€" particularly in an era when banks facing a torrent of federal scrutiny are hiring dozens of law firms to conduct internal investigations alongside the government. As those investigations proceed, banks have invoked a number of protective firewalls, including attorney-client privilege and the work product doctrine, which shields interview notes and other documents that bank lawyers drafted in anticipation of litigation.

“Why hire a lawyer to do an internal investigation? It’s because you get the privileges,” said Bruce A. Green, a former federal prosecutor who is now a professor at Fordham Law School, where he directs the Louis Stein Center for Law and Ethics. “Otherwise, you’d save a little money and hire a consultant or accountant.”

In a statement, a spokesman for the Treasury Department’s inspector general said the office was “still considering if additional steps are warranted.”

The Justice Department’s civil division, which last year helped reach a record $13 billion settlement over JPMorgan’s sale of questionable mortgage securities, said in the Madoff letter that it stood “ready to work with you to develop an alternative that might better address the relevant regulatory concerns.”

JPMorgan, which served as the primary bank for Mr. Madoff’s company, declined to comment for this article.

In the past, a JPMorgan spokesman, Joe Evangelisti, has noted that the bank poured significant resources into bolstering its controls since Mr. Madoff’s arrest. He also remarked that “we do not believe that any JPMorgan Chase employee knowingly assisted Madoff’s Ponzi scheme,” which was an “unprecedented and widespread fraud that deceived thousands, including us, and caused many people to suffer substantial losses.”

The Madoff case is not the only one on Wall Street to raise questions about attorney-client privilege. Bank of America and Citigroup have had their own run-ins with authorities over whether to waive the privilege in a limited way during litigation, though those matters were resolved without the Justice Department intervening. And in an investigation into JPMorgan’s potential manipulation of energy markets, the Federal Energy Regulatory Commission challenged the bank’s assertion that attorney-client privilege protected certain emails.

Regulators also have pushed for access to handwritten interview notes and other findings that arose from an internal investigation conducted by a bank’s lawyers. While that push raises concerns about undermining the work product doctrine â€" and some bank lawyers have already reported a growing reluctance to be candid in private correspondence with bank employees â€" regulators say they are often unsatisfied with only a summary of the lawyers’ findings.

“We remind the banks that we’re your supervisor, you’re not our supervisor,” Thomas C. Baxter Jr., general counsel of the Federal Reserve Bank of New York, said at a recent panel discussion on attorney-client privilege held by Fordham Law School and the Cardozo School of Law.

Mr. Baxter added, however, that “we’re reasonable people.”

There are limits on what regulators can do if a bank balks at a demand for documents. If a fight ensues, the decision to challenge the privilege rests with the Justice Department.

In organized crime and terrorism cases, legal experts say, the Justice Department often exercises the so-called crime-fraud exception to the privilege. To do so, the Justice Department must show facts at the outset “to support a good faith belief by a reasonable person” that a judge’s review of the communications in question might establish that the crime-fraud exception would apply.

The JPMorgan case was not so clear cut. When the inspector general argued for the crime-fraud exception to invalidate the privilege, the Justice Department concluded that the evidence did “not suffice to justify” pursuing that claim.

In the letter outlining its decision, the Justice Department noted that memory lapses among JPMorgan employees “occurred in only a handful of the dozens of interviews conducted” by the comptroller’s office. The interviews, according to the letter, were conducted three-plus years after the events in question occurred. It is unclear why it took the comptroller’s office so long to interview bank employees.

The letter further says that the inspector general “has not identified any evidence affirmatively suggesting that the lapses in memory resulted from perjury,” adding that the “accusation of criminal collaboration depends entirely on speculation.” If the Justice Department were to pursue the subpoena, the letter said, the action would “risk developing negative precedent that could result in harm to the long-term institutional interests of the United States.”

Although the decision limited the view inside JPMorgan, the comptroller’s office and federal prosecutors in Manhattan still penalized the bank for its failure to sound the alarms about Mr. Madoff. The settlements, announced in January, amounted to roughly $2 billion.

Peter J. Henning contributed reporting.

Market and Rates Helped Private Equity Chiefs Thrive Last Year

Payouts for the top executives in private equity have rocketed into the stratosphere, thanks to a soaring stock market and shrewd maneuvers by their firms in the aftermath of the financial crisis.

But the millions upon millions in earnings disclosed in recent days were so great that the same executives may not be able to reap quite so much in the future. Some of the dynamics that enabled these princely payouts are now posing a daunting challenge for private equity’s deal makers, who must reload their profit machines by finding cheap deals when stock indexes are soaring.

Fred Prouser/Reuters Leon Black of Apollo Management made $546.3 million in 2013.

Molly Riley/Associated Press The three co-founders of the Carlyle Group, including David Rubenstein, together earned $749 million last year.

The founders of the top four publicly traded private equity firms took home $2.6 billion in 2013, according to recent filings. Leon D. Black, the chief executive of Apollo Global Management, personally made $546.3 million, more than twice his take a year earlier. Stephen A. Schwarzman, the head of the Blackstone Group, took home $452.7 million, also more than double what he made in the previous year.

The three founders of the Carlyle Group, a private equity giant based in Washington, together earned $749 million, while the two cousins who co-founded Kohlberg Kravis Roberts, Henry R. Kravis and George R. Roberts, each made more than $160 million. These payouts are largely dividends and they include any profits from the executives’ personal investments in their firms’ funds.

The compensation for the top executives at many of the industry’s other large firms, like Bain Capital and TPG Capital, remain unknown since those firms have stayed private and thus are not required to disclose executive compensation.

Fairly or not, private equity’s rewards have also become a political lightning rod, and probably will continue to be, as the midterm elections draw near. President Obama on Tuesday once again proposed to end a tax benefit for some of these private equity executives, and last month, the chairman of the House Ways and Means Committee proposed a similar measure, though the bill is seen as having virtually no chance of success.

The enormous sums for private equity executives vastly exceed the already-rich pay packages at Wall Street banks, booming technology companies and Fortune 500 corporations. For instance, Wall Street’s top banker, Jamie Dimon, the chief executive of JPMorgan Chase, made $28.5 million in 2013, including dividends, about one-nineteenth of Mr. Black’s haul.

But for all the wealth that has been generated, last year’s handsome payouts are in large part a product of the particular financial environment â€" one of low interest rates and high stock prices â€" that was ideal for selling investments.

“Those payouts can’t last,” said Charles M. Elson, a finance professor at the University of Delaware. “The question is: Will you continue to have that kind of frothy market that will enable them to take companies public at such significant premiums?”

A booming market creates challenges of its own for the industry. Private equity firms are collectively sitting on nearly $1.1 trillion of capital they must invest for clients â€" “dry powder” in Wall Street parlance â€" more even than they had before the crisis, according to the data provider Preqin. But if the buyout firms overpay, investment returns, and executive payouts, will fall, a conundrum weighing on the minds of the industry’s leaders.

“We can still survive and make clever investments in the environment we’re in now. However, you have to be careful,” Joseph Baratta, the head of private equity at Blackstone, said in an interview on Tuesday. “With the available credit at high levels, and the cost of it at historic lows, you can talk yourself into doing things that may not be prudent in terms of values you have to pay.”

Private equity firms, which buy companies and typically hold them for several years, ran into this problem in the years leading up to the 2008 crisis. But a number of investments that seemed doomed when the crash hit have been sold or taken public at rich valuations, thanks in part to clever management and financial engineering â€" and thanks as well to the soaring market.

Blackstone, the biggest of the firms, realized a $9.5 billion profit in December when it held an initial public stock offering for Hilton Worldwide Holdings, a hotel chain that struggled in the downturn. That gain was outpaced only by Apollo, which achieved a profit of roughly $10 billion from its investment in the chemical maker LyondellBasell Industries.

Mr. Black of Apollo captured the mood last spring when he said at a conference in Los Angeles that his firm was “selling everything that’s not nailed down in our portfolio.”

Certainly, private equity’s clients â€" pension funds and other institutions that provide the capital â€" are also benefiting handsomely from the firms’ successes. The industry returned an estimated $124.1 billion to investors last year, 8 percent more than in 2012 and more than five times the level in 2009, according to the consulting firm Cambridge Associates.

Now these investors are demanding more. Buyout funds raised $169 billion in capital last year, 77 percent more than in 2012, according to Preqin. Apollo, for its part, raised a fresh $18.4 billion fund.

Market forces also played a role in fund-raising. Pension funds, which often aim to invest a certain percentage of their assets in private equity, must increase those investments when their total assets grow on the back of rising stocks.

One private equity chief went so far as to publicly thank Ben S. Bernanke, the Federal Reserve chairman until last month, whose program of extraordinary economic stimulus has helped push stocks higher, feeding the private equity machine.

“Thank you, Ben Bernanke. I saw him last Thursday, and I thanked him,” Mr. Schwarzman of Blackstone said during a conference in December. “The opportunity for us to be able to attract funds is very, very high.”

But some private equity chiefs recognize that these returns may not last. David M. Rubenstein, a co-founder and co-chief executive of Carlyle, told students at Harvard Business School last month: “The days of getting fabulously rich in private equity may be a little bit behind us.”

Mr. Black, too, sounded a note of caution at a Columbia University conference last week. He quoted the Kipling poem “If,” which encourages the reader to “meet with Triumph and Disaster” and “treat those two impostors just the same.”

“We had a very good year,” Mr. Black said. “It’s important that it doesn’t go to our head.”

In Change, Tourre Won’t Be Teaching University of Chicago Course

The University of Chicago may have had a change of heart about Fabrice Tourre, the former Goldman Sachs trader who was found liable of securities fraud last year.

Mr. Tourre had been scheduled to teach an undergraduate course on economic analysis beginning March 31. But on Tuesday, a spokesman for the school, Jeremy Manier, confirmed that he would no longer be an instructor.

Mr. Tourre, an economics doctoral student at the university, has asked a federal judge to give him a new trial or dismiss the charges against him. Mr. Tourre was accused of misleading a small group of investors in 2007 on a mortgage investment that later soured.

As part of its case, the Securities and Exchange Commission pulled up numerous internal emails that painted a damning portrayal of Wall Street excess, and were at times a bit embarrassing. In one email, Mr. Tourre makes reference to a friend’s nickname for him, the Fabulous Fab.

News that Mr. Tourre would no longer serve as an instructor comes after a week of intense media coverage of Mr. Tourre’s role at the university, much of it focusing on the case against him.

Mr. Manier did not give a reason for the change, but said that Mr. Tourre would now “be able to fulfill the teaching requirements for his Ph.D. program through opportunities in his department’s graduate-level curriculum.”

News of the shift was reported on Monday by the university’s newspaper, the Chicago Maroon.

A New Form of Shareholder Activism Gains Momentum

The aftermath of the Dole Food management buyout is showing that the new, new thing on Wall Street is appraisal rights. The battle being waged by hedge funds over appraisal rights in the Dole buyout just may be the tipping point, as hundreds of millions of dollars flow to the funds to pursue these actions.

Appraisal rights actions, according to a new paper by two law professors, Minor Myers of Brooklyn Law School and Charles Korsmo of Case Western Reserve Law School, are already skyrocketing in value. Last year, the value of appraisal claims was $1.5 billion, a tenfold increase from 2004. More than 15 percent of takeover transactions in 2013, the paper said, were subject to claims over appraisal rights.

So what are appraisal rights, you ask?

Shareholders sometimes have appraisal rights when the company they own stock in is acquired and they think the price is too low. Shareholders can ask a court to assess the fair value of their shares, with the hope that the court will agree that the price is not high enough and require that the shareholders be paid more.

Appraisal rights are protection for shareholders. If they think the takeover is a poor deal, they can seek a better price in court. Appraisal rights also serve to remind the buyer not to try to underpay. This is a particular problem in management buyouts, which have an air of “inside deal.”

If you followed the $24.9 billion management buyout of Dell, you may have read about the campaign by the activist investor Carl C. Icahn to get other shareholders to exercise their appraisal rights. The campaign fizzled for most shareholders, and even Mr. Icahn decided not to pursue his appraisal rights. This is because appraisal rights are not typically seen as a great remedy for the average shareholder. Shareholders have to pay their own legal fees and, depending on the state where the company is organized, the court can actually award less than the amount in the takeover.

In the Dell case, given that the company looked for other buyers and none came along, appraisal rights did not turn out to be a good option for most shareholders. It appeared that management’s price was probably as much as Dell could get in a sale, given its declining personal computer business. Still, about 2.7 percent of shareholders exercised appraisal rights, including T. Rowe Price.

It turns out, though, that the Dell campaign was a small step in a much larger fight, the one involving Dole Food.

Dole was involved in a management buyout last fall. The company was controlled by its buyer, David H. Murdock, its 90-year-old chief executive and chairman. The offer price of $13.50 a share was viewed by analysts and even some shareholders as underwhelming. At least one analyst put Dole’s fair value at $17.50 a share, and shareholder litigation disclosed that Dole had valued itself for lenders at more than $20 a share.

The Dole shareholder vote was a nail-biter, and the deal passed with only 50.9 percent of the public shareholders supporting it.

A few years back, this would have been the end of it. There is litigation pending, but its outcome is uncertain. And let’s face it, investors raised similar questions about the J. Crew sale to two private equityowners, and J. Crew and its new owners eventually settled a shareholder suit for $16 million. Now, the owners of the preppy clothing company are reported to be in preliminary talks with the Japanese retailer Uniqlo to sell the company at double the price they paid only a few years earlier.

In the wake of the Dole buyout announcement, four hedge funds â€" Fortress Investment Group, Hudson Bay Capital Management, Magnetar Capital and Merion Capital Group â€" bought about 14 million shares. They have now exercised their appraisal rights.

The hedge funds are all players in the appraisal game. Magnetar is still dissenting in the Dell case. Merion has filed at least 10 appraisal actions in Delaware, including two challenging the acquisitions of Ancestry.com and BMC Software. Merion is run by a former plaintiffs’ lawyer, Andrew Barroway, who used to be with Kessler Topaz Meltzer & Check, which won a $2 billion judgment against Southern Peru Copper, the largest award of all time in Delaware.

In all, about 25 percent of Dole’s public shareholders have exercised their appraisal rights.

Appraisal rights are risky and expensive, but they also have benefits for a hedge fund with a lot of money. One of the big benefits is that shareholders are generally entitled to statutory interest on the appraisal award at the Fed discount rate plus 5 percent from the time the deal is closed until the award is paid. The Fed discount rate is at 0.75 percent, meaning that the interest rate is 5.7 percent. In this market, that is a good return if you expect to at least get the merger price.

Buying shares and then filing for its appraisal right is also a good place for a hedge fund to park cash it may want to spend elsewhere. This has all been spurred by an earlier paper on the subject by Professors Korsmo and Myers, who found that there were significant returns to appraisal rights in recent years.

As a result, new hedge funds are specializing in appraisal rights. Merion has reportedly raised $1 billion. Another hedge fund, Patchin Value Master Onshore, specializes in filing small appraisal claims for $1.5 million of stock and had filed 16 such actions as of the end of 2013. Conferences are being held that focus solely on encouraging appraisal rights. All of this is driven by the fact that hedge funds are looking for new business outside the mainstream activist sphere.

The Dole appraisal rights battle is also a huge development in takeovers. Buyers can underprice their takeovers, but they are left with the “Dole problem” â€" the fruit and vegetable producer now has a potential liability that starts at about $190 million, the value of the stock exercising appraisal rights. Its opponents are hedge funds that will not go away lightly. They are going to litigate hard and will need to earn a return.

As a result, the battle over Dole will no doubt make others pursuing management buyouts hesitate before they act.

For now, though, appraisal rights are primarily benefiting the hedge funds. Institutions and individual shareholders are unlikely to plunge in full force, even if T. Rowe Price did so in the Dell campaign.

The question is whether there will be any pushback by companies. We are about to see many more actively litigated appraisal cases in the coming years. There will be complaints by corporations that the hedge funds are simply out to make easy money. Companies may lobby to make appraisal rights even harder to exercise to discourage the hedge funds.

Still, in fights over appraisal rights, you have real players putting their own money on the line. Not all shareholders are going to exercise their appraisal rights, but this is the way to make sure that the future management buyouts are not the Doles of the world, paying an underwhelming price. In other words, this may be the way that shareholders finally assert their power. You can thank the hedge funds for that.

The Writer Behind @GSElevator Speaks Out

Remaining anonymous as he posted on Twitter under the handle @GSElevator was simply a “device,” John Lefevre said on Tuesday, that allowed him to paint a broader picture of life on Wall Street.

In a first-person post on the blog Business Insider, Mr. Lefevre said that the Twitter handle wasn’t even a single person, but an “embodiment or aggregation of ‘every banker,’ a concentrated reflection of a Wall Street culture and mentality.”

Mr. Lefevre was identified last month as the author of the Twitter posts that purported to reveal the uncensored comments overheard in Goldman Sachs’ elevators. Mr. Lefevre, it turned out, was not a Goldman Sachs employee. Instead, he was a 34-year-old former bond executive in Texas â€" albeit one who had been offered a position at the fabled Wall Street firm.

Now, Mr. Lefevre, whose Twitter handle has already yielded a book deal, has decided to shed some light on his pretend life inside the Goldman elevator.

According to the former trader, his pseudonymous writings were clearly poking fun at the world of bankers and traders and weren’t meant to be taken literally. “For the avoidance of any doubt, any person who actually thought my Twitter feed was literally about verbatim conversations overhead in the elevators of Goldman Sachs is an idiot,” he wrote.

Here is a highlight from Mr. Lefevre’s piece:

Many months ago, I tweeted about totaling a new Maserati, which is something that actually happened to me. I should have seen it coming; I was so intoxicated when I bought the car (just 5 days previously) that the dealership had to drive me home in it.

Right after that tweet, I had a few friends email me and say that I must be the person behind GSElevator.

And another:

Being anonymous had this enigmatic mystery and intrigue; it protected my privacy, but also prevented me as a person from getting in the way of the message. But to be clear, it was never about hiding.

And a third:

Being called a “fake” or a “hoax” by the same people who embraced me as “satire” is simply laughable - and it really speaks to the silly and opportunistic attempts at cheap headlines.

Financial Regulator Calls Obama Budget ‘Woefully Insufficient’

The country’s top derivatives regulator is making clear that it is unhappy with President Obama’s 2015 budget proposal.

On Tuesday, Mr. Obama unveiled his spending outline for the coming fiscal year, which begins Oct. 1 and includes a request for $280 million for the Commodity Futures Trading Commission.

That figure might seem an improvement on its face, since the agency is currently operating on a budget of $215 million for the 2014 fiscal year. But last year, Mr. Obama requested $315 million for the agency before receiving approval for about two-thirds of that amount.

A C.F.T.C. commissioner, Bart Chilton, called the president’s proposal “woefully insufficient” in a statement on Tuesday.

“Our staff is on its knees, some reaching for the exit doors and others already having bailed,” Mr. Chilton said.

The C.F.T.C., one of the nation’s top financial regulators, has been adjusting to its increased oversight role in the wake of the financial crisis. The Dodd-Frank Act gave the commission authority over the $300 trillion swaps market, in addition to the $40 trillion futures market it already oversaw.

“But we have not received a commensurate increase in funding to bring needed light to these markets, despite being assigned the authority to do so by Congress,” Mr. Chilton said. “We have the mandate, but not the money, to do the job.”

The size of the commission has only grown by about 10 percent since the 1990s, and now has about 640 staff members. In his statement, Mr. Chilton said that the new budget would fund “100 less employees than we need.”

Even though the president’s proposal includes about $50 million just for information technology, Mr. Chilton warned that the agency would still not be able to keep up with as much data as it needs to collect.

“I am fearful to say where, so as not to tip off market participants, but our coverage will not be as robust or comprehensive as required,” he said.

Mr. Chilton announced last year that he planned to leave the commission after nearly three decades of public service. His term as commissioner will formally conclude in December.

Mr. Obama’s budget proposal still needs to clear Congress, where he is sure to face stiff opposition from House Republicans. Representative Paul D. Ryan, the Wisconsin Republican who is chairman of the House Budget Committee, issued a withering missive about the president’s proposal before it came out on Tuesday.

As part of his proposal, Mr. Obama also said he planned to ask for $1.7 billion for another top regulator, the Securities and Exchange Commission. The S.E.C. currently operates with a budget of about $1.35 billion, though it sought $1.67 billion last spring.

Silk Road Had Digital Outpost in Pennsylvania

A staff member in the electrical engineering department of a liberal arts college in eastern Pennsylvania played a small role in the investigation that resulted last fall in the shutdown of Silk Road, the online marketplace where drugs and weapons could be bought with Bitcoins.

Christopher Nadovich, director of laboratories in Lafayette College’s electrical and computer engineering department, owned a company that provided Silk Road with a backup server for its website, according to a previously undisclosed court filing in the two-year investigation.

On Sept. 9, three weeks before the United States authorities shut down Silk Road and arrested Ross William Ulbricht, the man they say founded it, an F.B.I. agent served a search warrant on Mr. Nadovich’s company, JTAN.com, seeking to preserve records of any transactions involving Silk Road’s customers and any private communications between sellers and buyers of drugs on the website.

The search warrant on JTAN and the company’s involvement in the Silk Road case had remained a secret until a few weeks ago. On Feb. 18, federal prosecutors asked a United States magistrate in federal court in Philadelphia to unseal the matter so authorities could begin providing Mr. Ulbricht’s lawyer with information to begin planning a legal defense.

Silk Road’s website ran on an encrypted Internet network called Tor, which allowed it to remain hidden from general viewing. The website, which authorities have called an eBay for illegal drugs, ran off a server in a foreign country and a backup server provided by JTAN.

The search warrant illustrates the appeal a company like JTAN has for any online business that desires anonymity and uses a digital currency like Bitcoin to preserve the privacy of its customers’ activities. In the search warrant, the federal authorities said that JTAN specialized in allowing “customers to lease servers through its service with complete anonymity.” The filing also said that JTAN never asked customers to verify their identities and permitted them “to pay anonymously through the use of Bitcoins.”

Mr. Nadovich is not named in the search warrant, but other public records identify him as the owner of JTAN, which lists an address in Easton, Pa., the hometown of Lafayette College. In the search warrant, the company is listed having an address in Sellersville, Pa., about 33 miles from Easton.

Mr. Nadovich has not been charged with any wrongdoing. In an emailed response, he said, “I’m afraid that I don’t feel inclined to comment about Silk Road or any business decisions made by JTAN.”

Just days after the F.B.I. served the search warrant on JTAN, Mr. Nadovich began taking steps to close parts of his business. In a Sept. 14 online notice to JTAN customers that still appears on the company’s website, Mr. Nadovich said he was terminating the firm’s “dedicated server” business. Mr. Nadovich gave no explanation but said “the business situation we find ourselves in does not allow continuing this service.” On Oct. 30, he posted another notice, telling JTAN customers the company was struggling financially and could file for bankruptcy protection in 2014.

Mr. Nadovich said on Tuesday that JTAN was still in business.

James Margolin, a spokesman for Preet Bharara, the United States attorney in Manhattan, whose office is prosecuting Mr. Ulbricht, declined to comment. The name of the F.B.I. agent who signed the search warrant application was redacted by authorities to protect his identity.

The search warrant reveals that JTAN potentially provided the authorities with a wealth of information about Silk Road and Mr. Ulbricht. The authorities said that Silk Road’s primary server would purge information every 60 days or so, but data on the backup server at JTAN was not regularly deleted or destroyed.

“I believe that this backup data will reflect the details of numerous narcotics transactions conducted through the Silk Road website and the use of Bitcoins to launder the proceeds from these transactions,” the unidentified F.B.I. agency said in the search warrant application.

Federal prosecutors contend that in a little more than two years, Mr. Ulbricht, who is 29, built Silk Road into the go-to place in the dark corners of the Internet for buying drugs like cocaine, ecstasy and heroin and stolen credit card numbers. Authorities contend the website handled $1.2 billion in transactions, all in Bitcoin.

Mr. Ulbricht pleaded not guilty on Feb. 7 to money-laundering and drug-trafficking charges in Federal District Court in Manhattan. Federal prosecutors said they obtained roughly 10 terabytes of data from the servers they seized in addition to the laptop Mr. Ulbricht had with him when the authorities arrested him on Oct. 1 at a public library in San Francisco.

The government’s crackdown on Silk Road and the arrest of Mr. Ulbricht began a series of embarrassing episodes for Bitcoin and digital currency enthusiasts, who see it as an alternative to traditional currencies because it is not backed by any government and not subject to political control.

Bitcoin proponents suffered another black eye last week when Mt. Gox, once the biggest exchange for converting dollars and other currencies into Bitcon, filed for bankruptcy in Japan. The company collapsed after its owner, Mark Karpeles, said it had lost more than $450 million worth of Bitcoins, possibly as the result of an attack by computer hackers. But days later, it’s still not clear what happened to the roughly 750,000 of its customers’ Bitcoins.

In late January, another Bitcoin proponent, Charlie Shrem, was arrested by federal authorities and charged with helping a Florida man sell Bitcoin to people looking to buy drugs on Silk Road.

Guggenheim Poaches Tech Banker from Evercore

Eric Mandl, one of Evercore’s most productive technology bankers, jumped to Guggenheim Securities on Tuesday.

Mr. Mandl specializes in cloud computing and big data deals. At Evercore, he advised on deals including the sale of Whiptail to Cisco, the sale of Tier3 to Century Link and Dell’s acquisition of Force 10 Networks.

At Guggenheim, Mr. Mandl will be a senior managing director and continue to focus on enterprise technology companies. It is the latest hire for Guggenheim in the technology, media and telecom sectors, where the investment bank and asset manager has developed a niche.

“We are pleased to welcome Eric to the team,” said Mark Van Lith, head of investment banking at Guggenheim. “His breadth of relationships across the converging technology, media and telecom landscape and reputation for thoughtful advice fits well with our platform.”

Moelis & Company Files for an I.P.O.

Kenneth D. Moelis is taking a big step toward becoming the chief of the next publicly traded investment bank.

His firm, Moelis & Company, filed for an initial public offering on Tuesday. It listed its fund-raising target as $100 million, a preliminary figure meant to calculate registration fees.

The firm will be joining a handful of independent investment banks that already reside on the stock markets. And it would come at a time when these firms â€" smaller than the likes of Goldman Sachs or JPMorgan Chase â€" have been collecting more deal fees.

The firm plans to trade on the New York Stock Exchange under the stock symbol “MC.”

The offering is being led by Goldman Sachs and Morgan Stanley, with Moelis itself serving as an additional underwriter.

Where There’s Smoke, There’s Scrutiny

The tobacco giant Reynolds American may be considering a bid for its smaller rival Lorillard, apparently to investors’ pleasure. Shares of the possible target, which specializes in trendy menthol cigarettes, leaped more than 9 percent after The Financial Times indicated that Lorillard might attract an offer of more than $20 billion.

An analysis of similar tobacco deals suggests Reynolds could be justified in paying that much, and maybe a bit more. But while a combination may make strategic and financial sense, antitrust and other watchdogs could still act as spoilers.

Lorillard accounts for about 15 percent of the United States cigarette market, a bit more than half of Reynolds’s roughly 27 percent market share. Combining the two would create a heftier No. 2 player as a counterweight to Altria, whose Philip Morris unit holds half of all United States cigarette sales.

Lorillard would also bring growth opportunities to the table. Brisk sales of Newport menthols have helped the company shake off a steady decline in the $90 billion United States cigarette business. Lorillard is also the United States market leader in e-cigarettes, a hot and so far lightly regulated category.

Similar tobacco deals suggest Reynolds could see synergies of up to 14 percent of its potential target’s sales. That’s within the range of past transactions like Imperial Tobacco’s 2002 purchase of Reemtsma of Germany, Japan Tobacco’s 2007 acquisition of Gallaher and Imperial’s 2008 deal for the maker of Gauloises, Altadis.

The figure would amount to just less than $750 million in annual pretax synergies, based on Wall Street’s consensus forecast of $5.3 billion in sales for Lorillard this year. Taxed and capitalized, the savings could justify Reynolds paying a 26 percent premium to Friday’s undisturbed closing price, or a bit more than $22 billion. Throw in cross-selling synergies, and a 30 percent premium is plausible.

Reynolds’s 42 percent shareholder, British American Tobacco, would obviously have to approve any deal. Regulators, however, could present a bigger obstacle. Antitrust watchdogs may balk at the prospect of the United States tobacco sector becoming an effective duopoly. And e-cigarettes and menthols are under scrutiny by health regulators. A setback on any one of those fronts could send the financial logic up in smoke.

Kevin Allison is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Apple’s Departing Finance Chief Is Goldman’s Newest Director

The newest member of Goldman Sachs’s board will soon have some free time on his hands, after he leaves his job as the chief financial officer of Apple.

Peter Oppenheimer, an 18-year veteran of the technology giant, plans to retire as Apple’s finance chief in September, the company said on Tuesday. Just a day earlier, Goldman announced that Mr. Oppenheimer had joined the investment bank’s board, expanding the number of directors to 13.

“Peter’s 25 years of broad experience across important industries will add a valuable perspective,” Lloyd C. Blankfein, Goldman’s chief executive and chairman, said in a statement on Monday.

Mr. Oppenheimer, who said on Tuesday that he plans to spend more time with his family and finish getting his pilot’s license, deepens the longstanding ties between Goldman and Apple. Those include the following:

- The technology company is a prized client of Goldman, which advised it in its tussle with the hedge fund manager David Einhorn last year.

- A prominent Goldman banker, Gene T. Sykes, is a longtime adviser to Apple.

- Apple’s head of mergers and acquisitions, Adrian Perica, formerly worked at Goldman.

To succeed Mr. Oppenheimer, Apple has promoted from within, turning to Luca Maestri, the vice president of finance and its corporate controller. But a few years ago, Apple approached a Wall Street candidate for the job.

In 2011, while Mr. Oppenheimer held the chief financial officer job, Apple approached Laurence Tosi, the chief financial officer of the Blackstone Group, about assuming that position, DealBook reported at the time. Mr. Tosi turned down the offer.

Cevian Capital Increases Its Stake in ThyssenKrupp

LONDON - Cevian Capital, an activist investment firm, said on Tuesday that it had increased its stake in the German conglomerate ThyssenKrupp to more than 15 percent from 11 percent last year.

The investment firm has been gradually increasing its position in the troubled German company, and its stake is now worth about 1.6 billion euros, or $2.2 billion.

Like American activist investors, Cevian Capital pushes for changes in companies in which it has invested, but it generally prefers a low-key European-style approach and has supported ThyssenKrupp’s management so far.

Since being hired from Siemens and becoming ThyssenKrupp’s chief executive in 2011, Heinrich Hiesinger has made it clear that he wants to change the mind-set and business mix of the company, which has posted big losses in recent years and had to raise about €880 million in fresh capital from the financial markets last year.

Mr. Hiesinger, who has replaced a large proportion of senior managers and sold several businesses, has said he wants to focus on the company’s more valuable industrial businesses. Last year, he agreed to sell a steel rolling mill in Calvert, Ala., to a joint venture of ArcelorMittal, the world’s largest steel company, and Nippon Steel and Sumitomo Metal for about $1.5 billion.

The company’s stock price, which rose about 2.5 percent in trading in Frankfurt on Tuesday, has increased about 18 percent in the last year.

“Cevian underlines its long-term commitment in ThyssenKrupp,” the firm said in a statement on Tuesday.

Cevian Capital was founded in 2002 by Christer Gardell and Lars Förberg, who both worked at the private equity firm Nordic Capital. It has offices in London, Zurich and Stockholm, and says it manages €10 billion in investments.

In its statement, Cevian listed 12 companies in which it has stakes of 5 percent or more; it holds more than 10 percent of the Volvo Group, the Swedish truck maker, and 9.3 percent of Danske Bank, the largest Danish bank.

Final Rules, and a Warning, on Banker Bonuses in Europe

LONDON â€" The European Commission on Tuesday adopted rules that finalize the details for limits on banker bonuses, and a top official cautioned against efforts that have cropped up to circumvent the new restrictions.

Michel Barnier, the commissioner responsible for overseeing financial services, warned banks against pushing too far with new payments, called “allowances,” that they have devised to skirt the limits and increase fixed pay. The 2013 European law limits the bonuses of certain bankers to 100 percent of an employee’s fixed salary, or two times salary if shareholders approve it.

“Some banks are doing their utmost to circumvent remuneration rules,” Mr. Barnier said. He said that the new rules would be enforced by the European Banking Authority and local regulators. “The commission will remain vigilant to ensure that new rules are applied in full.”

The European Commission adopted the so-called Regulatory Technical Standards, a 61-page document that identifies the employees to whom the rules will apply, including anyone earning more than 500,000 euros, heads of divisions including human resources, and those who trade certain amounts of capital.

Britain is suing to block the law, saying that the European Commission overstepped its authority. A similar suit challenging rules on bans of short-selling in extreme circumstances failed earlier this year.

Separately, Mark Carney, head of the Bank of England, indicated that the Prudential Regulatory Authority, which is part of the bank, would consider expanding the amount of pay that can be clawed back by banks in cases of misconduct, poor performance and failures of risk management.

British pay rules, the so-called remuneration code, allow banks to claw back pay that has been deferred. The Parliamentary Commission on Banking Standards recommended that banks also be able to claw back vested pay, or bonuses that have already been paid. Mr. Carney, in a letter to the chairman of the Treasury Select Committee, Andrew Tyrie, said the authority would start a two-month consultation period to examine expanding clawbacks. If necessary, the authority would put in place rules for the 2014-2015 financial year.

The Treasury Select Committee also asked Mr. Carney to report back about the banking sector’s exposure to China. Mr. Carney wrote that the claims of British banks on China stood at $184 billion in the second quarter of 2013. That figure has increased about 2.5 times since the end of 2009, compared with an increase of 1.5 times for all banks that report their exposures to the Bank for International Settlements.

“Despite this growth, claims on China are still only the fifth-largest component of U.K. banks’ external exposures,” Mr. Carney wrote. He noted that Chinese exposure remains much smaller than the exposure to the United States.

Immelt Spends His Cash Bonus on G.E. Stock

Jeffrey R. Immelt, the chief executive of General Electric, says he spent his whole 2013 cash bonus on G.E. stock.

Mr. Immelt bought about 105,000 shares on Monday for a little more than $2.6 million, according to a company filing.

“I am investing right alongside of you,” Mr. Immelt said in his annual letter, which is to be released later this month. A quote from the letter was provided by Seth Martin, a G.E. spokesman. “I have invested my entire bonus in G.E. stock. Like the rest of our leaders, I believe in G.E.”

Mr. Immelt’s purchase of his company’s stock represents one of the largest by a chief executive in the last year, and comes on top of the 40,000 shares he bought in January for about $1 million.

His latest investment represents a relatively small portion of the 1.9 million shares Mr. Immelt owns directly in G.E.

“Considering he’s been the C.E.O. for about a decade and been paid a lot of money, that’s not particularly impressive,” said Alan Johnson, head of the compensation consulting firm Johnson Associates, referring to Mr. Immelt’s new investment. “It’s a nice gesture, but it’s a gesture.”

Mr. Immelt ranked 20th on a list of the highest-paid chief executives in 2012 compiled by Equilar, an executive compensation data firm. His salary and bonus in 2012 totaled nearly $8 million, and he also earned a long-term performance award of $12 million.

Mr. Martin would not disclose Mr. Immelt’s bonus for 2013.

While Mr. Immelt may have spent his whole cash bonus on G.E. stock, he could still earn a stock award for 2013. He did not receive such an award in 2012.

G.E. stock has risen about 10 percent in the last year, and was trading at about $25.60 at midday on Tuesday.

Chief executives sometimes spend their own money on company stock as a way to shore up investor confidence.

In 2011, when Morgan Stanley’s stock had fallen to $20 a share, the bank’s chief executive, James P. Gorman, bought 100,000 shares. Mr. Gorman would ride his investment all the way down to $12 a share at one point in 2012.

That bet now looks like it may have paid off. Morgan Stanley’s stock is trading around $30, yielding a gain of about $1 million on paper for Mr. Gorman.

Brit Insurance Joins I.P.O. Flurry Among Private Equity Holdings

LONDON - The specialty insurer Brit Insurance said on Tuesday that it was planning an initial public offering on the London Stock Exchange later this year.

Brit Insurance is the latest example of a company owned by private equity to announce a plan to publicly float stock in recent months.

The insurer, which is based in the Netherlands, was taken private by Apollo Global Management and CVC Capital Partners in 2010.

The company intends to offer at least 25 percent of its shares. The offering is expected to be completed by April.

Since going private, the company has sold several business lines, including its general insurance business in Britain in 2012.

It now focuses on specialty insurance and reinsurance for businesses, and it has a large presence in the Lloyd’s of London underwriting marketplace.

“We are very pleased to be bringing Brit to the market following a period of successful change for the business,” said Mark Cloutier, the company’s chief executive.

“In recent years we have transformed Brit into a global specialty insurer and reinsurer operating through our Lloyd’s of London platform,” said Mr. Cloutier. “We have sold noncore businesses, focused our underwriting on profitable specialty business lines with short tail risks, and expanded our global distribution in the U.S., Bermuda and China.”

In 2013, Brit Insurance posted a 20.1 percent increase in profit, to about 102 million pounds, or $169 million.

Private equity firms have engaged in a flurry of sales and I.P.O. announcements of their portfolio companies in the last year.

Last month, private equity owners announced plans for public offerings of Poundland, a British discount retailer that sells everything for £1 or less; ISS, a Danish outsourcing company; and Pets at Home, a British pet supply retailer.

After Brit Insurance’s I.P.O., Apollo and CVC are expected to remain its largest shareholders. They have agreed to lockup agreements regarding their shares for 180 days after the offering.

A Calming of Global Markets

GLOBAL MARKETS RISE AFTER UKRAINE TENSIONS COOL  |  Global markets calmed on Tuesday after Russia appeared to back away from further action in Ukraine, with President Vladimir V. Putin calling an end to a military exercise he ordered last week. The crisis in Ukraine had caused turmoil in the global financial markets on Monday, hitting stocks and driving up energy prices. Analysts maintained that there was little risk of damage to Western economies, but the rising tension nevertheless unsettled investors, who were already concerned about emerging markets, David Jolly writes in The New York Times.

The Euro Stoxx 50 index of euro zone blue chips rose 1.2 percent and the London benchmark FTSE 100 rose 1.1 percent on Tuesday morning. Trading in Standard & Poor’s 500-stock index futures pointed to a positive opening of the trading session in New York. Asian markets were also stronger on Tuesday, with the Tokyo benchmark Nikkei 225 gaining 0.5 percent. The price of gold, which spiked on Monday along with oil and gas, also eased.

As a prime trading partner, it could be Germany that holds the key to any long-lasting entente between Russia and Ukraine, Landon Thomas Jr. writes in The New York Times. Lately, Germany, which imports more natural gas from Russia than any other European country, has taken the upper hand in the balance of power, offering insight into the role that Germany will play in any negotiations with the Russian president.

In Politico, MJ Lee and Ben White write: “Ukraine represents a very small slice of the global economy and its default, should it occur, would probably not cause more than a temporary ripple in bond and equity markets. The United States is also much less reliant on foreign oil than in the past. And the rise in oil prices impacting European economies should be limited given the current ample global supply.”

TROUBLES MULTIPLY FOR CITI AFFILIATE  |  A headache is growing for Citigroup, which said on Friday that its Mexican unit Banamex had been defrauded of as much as $400 million. Now, a Citigroup affiliate based in Los Angeles, Banamex USA, has been served a subpoena by federal prosecutors in Massachusetts related to money-laundering compliance, Michael Corkery and Jessica Silver-Greenberg write in DealBook. Until recently, the affiliate was a large player in transferring money across the border between family members.

Mr. Corkery and Ms. Silver-Greenberg write: “People briefed on the matter say that the two issues â€" one involving fraud and the other involving money-laundering compliance â€" are unrelated. But together they show the perils of building a large banking business in and around a country that has wrestled with drug trafficking and corruption.”

BATTLING A BANK TO COLLECT A JUDGMENT  |  For the last six years, Maury Rosenberg, a small-business owner from Philadelphia, has been battling U.S. Bancorp, which he says forced him and his business into involuntary bankruptcy. Indeed, Mr. Rosenberg has won a series of rulings in federal courts, but U.S. Bancorp will not surrender, instead arguing that Mr. Rosenberg, who said he was once worth $50 million from a real estate career, is just trying to evade his obligations, Andrew Ross Sorkin writes in the DealBook column.

Mr. Rosenberg compares his situation to that of homeowners who lost their houses through foreclosure. Like many of these homeowners, Mr. Rosenberg wanted to restructure payments to the bank during the financial crisis (his payments were related to leases on radiology machines). The bank refused to negotiate new payment arrangements, he said, instead filing an involuntary bankruptcy proceeding against him and his company. “When you compare it to the mortgage business, it’s exactly the same issue,” Mr. Rosenberg said. “The little guy that owns a mortgage and has been assigned to a million different people and nobody knows who the debt is really due to, can’t afford to go fight it.”

ON THE AGENDA  |  The Senate Banking Committee’s confirmation hearing for Stanley Fischer, formerly governor of the Bank of Israel, has been postponed because of weather. Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, speaks in New York at 4:15 p.m. The White House releases President Obama’s 2015 budget plan. William I. Koch, the billionaire industrialist, is on Fox Business Network at 10:30 a.m. Ben Horowitz, co-founder of the Andreessen Horowitz venture capital firm, is on CNBC at 8 a.m. Secretary of State John Kerry is in Kiev to support the new Ukrainian government.

DEAL MAY BE NEAR FOR MEN’S WEARHOUSE AND JOS. A. BANK  |  The monthslong takeover battle between Men’s Wearhouse and Jos. A. Bank Clothiers may soon be drawing to a close, Michael J. de la Merced writes in DealBook. Men’s Wearhouse said on Monday that it had reached a nondisclosure agreement with its rival, setting up talks that could lead to a merger of the men’s retailers in a deal valued at more than $1.8 billion. Men’s Wearhouse last offered to buy Jos. A. Bank for $63.50 a share, which Jos. A. Bank called too low. But Men’s Wearhouse indicated it would be open to raising the bid to $65 a share if certain conditions were met.

 

Mergers & Acquisitions »

French Cable Operator May Make $20 Billion Bid for Vivendi Mobile Unit  |  The French cable operator Numericable and its largest shareholder, Altice, are said to be preparing a bid of up to $20 billion for SFR, the mobile unit of the conglomerate Vivendi, though it is unclear when an offer may be formally made. DealBook »

Philadelphia to Sell Its Gas Works Utility for $1.9 Billion  |  Philadelphia agreed on Monday to sell its natural gas utility to UIL Holdings, a publicly traded power company, for about $1.9 billion, in a deal that would put the country’s biggest city-owned gas works in private hands. DealBook »

Carlyle Agrees to Buy Tyco’s South Korean Security Business  |  The $1.9 billion deal to acquire the Tyco Fire and Security Services Korea Company and its subsidiaries, including ADT Korea, is the largest private equity buyout deal in South Korea since 2008, the Carlyle Group said. DealBook »

Caesars Entertainment Sells Casinos to Affiliate  |  Caesars Growth Partners is buying four casinos for $2.2 billion, in a deal intended to help the Caesars Entertainment Corporation gain access to cash it needs to service its huge debt load. DealBook »

Facebook Said to Be in Talks to Buy Drone Maker  |  Facebook is said to be in acquisition discussions with Titan Aerospace, which makes solar powered drones that can fly for five years without needing to land, TechCrunch reports, citing an unidentified person familiar with the situation. TECHCRUNCH

Unilever Prepares for $2 Billion Sale of Ragu  |  Unilever has hired Morgan Stanley to help with a potential $2 billion sale of Ragu, its pasta sauce brand, The Wall Street Journal reports, citing unidentified people familiar with the situation. Unilever is in the process of paring down its food brands. WALL STREET JOURNAL

INVESTMENT BANKING »

Citigroup Expects Drop in Trading Revenue  |  John C. Gerspach, the chief financial officer of Citigroup, said at a conference on Monday that he expected the bank’s trading revenue for the first quarter to decline by a percentage in the “high mid teens” compared with a year ago, Bloomberg News reports. BLOOMBERG NEWS

Cantor Acquires Hedge Fund Fintan  |  The investment bank Cantor Fitzgerald said on Monday that it had acquired the hedge fund Fintan Partners to bolster its money management business, Bloomberg News writes. The deal will bring Cantor’s assets under management and advisory to about $3 billion. BLOOMBERG NEWS

Detroit Agrees to Pay $77 Million to End Swaps  |  Detroit agreed to pay $77.6 million to UBS and Bank of America to end interest rate swaps that have cost taxpayers more than $200 million since 2009, Bloomberg News writes. BLOOMBERG NEWS

PRIVATE EQUITY »

Apollo Global Chief Earned $546 Million in 2013  |  Amid flush times for Apollo Global Management, Leon D. Black, the co-founder and chief executive, received the highest compensation by a single executive of a publicly traded private equity firm last year. DealBook »

Carlyle Insiders to Sell Some of Their Stock  |  Two of the Carlyle Group’s three founders plan to sell 7.5 million common units of Carlyle, according to a filing on Monday. Carlyle itself is selling 4.5 million common units. The offering of 12 million shares would raise about $435 million. DealBook »

A Discussion with K.K.R. on Private Equity in Europe  |  Johannes P. Huth, the head of Europe, the Middle East and Africa at the private equity firm Kohlberg Kravis Roberts, considers the current outlook for private equity in Europe in an interview with Privcap. PRIVCAP

HEDGE FUNDS »

Andreessen Defends His Behavior on eBay’s Board  |  In a post on the blog of his venture capital firm, the technology investor Marc Andreessen defended his conduct as an eBay director in the face of repeated criticism from Carl C. Icahn. DealBook »

Buffett and Icahn: Birds of a Feather?  |  The styles of Warren E. Buffett and Carl C. Icahn could not be more different. But Jeffrey Goldfarb of Reuters Breakingviews notes that both men beat the market by betting on America, playing hardball and trading on personal brands. DealBook »

Red Lobster Spinoff On Track  |  Darden Restaurants on Monday said the sales process for its Red Lobster restaurant chain was “well underway,” despite the hedge fund Starboard Value’s efforts to pause the spinoff, The Wall Street Journal writes. Darden also said that it had considered a spinoff of its real estate holdings, but decided against the move because it would not create meaningful shareholder value and would separate Darden from a strategic asset. WALL STREET JOURNAL

I.P.O./OFFERINGS »

Danish Outsourcing Firm Aims to Raise $1.4 Billion in Float  |  The Danish outsourcing firm ISS said on Monday that it was hoping to raise about $1.4 billion through its initial public offering, planned for March 17, Reuters reports. REUTERS

Opower Plans $100 Million I.P.O.  |  Opower, which provides software to utilities to help homeowners reduce their energy use, said on Monday that it would raise $100 million in its initial public offering, making its plans public after filing confidentially for an I.P.O. last month, Reuters writes. REUTERS

Turmoil in Ukraine Casts Doubt on Metro’s Russia I.P.O.  |  The future of the German retailer Metro’s 1.75 billion euro partial listing is now uncertain as the value of the ruble continues to fall and markets remain volatile, The Financial Times writes. FINANCIAL TIMES

Brit Insurance Plans I.P.O.  |  Brit Insurance, which is owned by the private equity firms Apollo Global Management and CVC Capital Partners, is planning an initial public offering in London next month, Bloomberg News reports. A minimum of 25 percent of the company will be sold to investors, with Apollo and CVC remaining the largest shareholders. BLOOMBERG NEWS

VENTURE CAPITAL »

Messaging App Wickr Closes $9 Million Funding Round  |  Wickr, a mobile messaging application that allows its messages to self-destruct, has secured $9 million in Series A funding from the venture capital firms Alsop Louie Partners, Juniper Networks and the Knight Foundation, ReCode reports. RECODE

Start-Up Zumper Raises $6.5 Million  |  Zumper, an apartment rental search and tools website, announced on Monday that it had raised $6.5 million in a funding round led by the venture capital firms Kleiner Perkins Caufield & Byers, NEA and Dawn Capital, ReCode writes. RECODE

Speek Collects $5.1 Million  |  The conference calling start-up Speek announced on Monday that it had raised $5.1 million in Series A funding, including $2.7 million in previously raised convertible notes, TechCrunch writes. One of the investors is the actor Edward Norton. TECHCRUNCH

No Gender Gap in Tech Salaries  |  New research shows that there is no statistically significant difference in earnings between male and female engineers who have the same credentials and have made the same career choices, Quartz writes. QUARTZ

LEGAL/REGULATORY »

Bitcoin Loss Highlights Elusive Paths of Regulation  |  The collapse of Mt. Gox and the loss of $450 million in Bitcoins is pushing governments to enhance regulation of virtual currencies, Peter J. Henning writes in the White Collar Watch column. DEALBOOK

Britain Drops Plan to Tax Trading of Bitcoins  |  Britain’s tax agency said on Monday that it would not charge a 20 percent tax, known as a value added tax, or VAT, on trades of the virtual currency. DealBook »

Tax Reform’s Hard-to-Find Payoff  |  Much ballyhooed tax reform legislation generally makes little difference to the economy, and the most recent proposal is unlikely to change that, an economist writes in the Economix blog. NEW YORK TIMES ECONOMIX

Why Puerto Rico’s Bonds Are Moving to New York  |  If Puerto Rico, whose debt is already rated junk, wants to borrow new money, it will have to make concessions to lenders and change the governing law of the bonds from Puerto Rico to New York, Felix Salmon writes in Reuters. REUTERS

A Calming of Global Markets

GLOBAL MARKETS RISE AFTER UKRAINE TENSIONS COOL  |  Global markets calmed on Tuesday after Russia appeared to back away from further action in Ukraine, with President Vladimir V. Putin calling an end to a military exercise he ordered last week. The crisis in Ukraine had caused turmoil in the global financial markets on Monday, hitting stocks and driving up energy prices. Analysts maintained that there was little risk of damage to Western economies, but the rising tension nevertheless unsettled investors, who were already concerned about emerging markets, David Jolly writes in The New York Times.

The Euro Stoxx 50 index of euro zone blue chips rose 1.2 percent and the London benchmark FTSE 100 rose 1.1 percent on Tuesday morning. Trading in Standard & Poor’s 500-stock index futures pointed to a positive opening of the trading session in New York. Asian markets were also stronger on Tuesday, with the Tokyo benchmark Nikkei 225 gaining 0.5 percent. The price of gold, which spiked on Monday along with oil and gas, also eased.

As a prime trading partner, it could be Germany that holds the key to any long-lasting entente between Russia and Ukraine, Landon Thomas Jr. writes in The New York Times. Lately, Germany, which imports more natural gas from Russia than any other European country, has taken the upper hand in the balance of power, offering insight into the role that Germany will play in any negotiations with the Russian president.

In Politico, MJ Lee and Ben White write: “Ukraine represents a very small slice of the global economy and its default, should it occur, would probably not cause more than a temporary ripple in bond and equity markets. The United States is also much less reliant on foreign oil than in the past. And the rise in oil prices impacting European economies should be limited given the current ample global supply.”

TROUBLES MULTIPLY FOR CITI AFFILIATE  |  A headache is growing for Citigroup, which said on Friday that its Mexican unit Banamex had been defrauded of as much as $400 million. Now, a Citigroup affiliate based in Los Angeles, Banamex USA, has been served a subpoena by federal prosecutors in Massachusetts related to money-laundering compliance, Michael Corkery and Jessica Silver-Greenberg write in DealBook. Until recently, the affiliate was a large player in transferring money across the border between family members.

Mr. Corkery and Ms. Silver-Greenberg write: “People briefed on the matter say that the two issues â€" one involving fraud and the other involving money-laundering compliance â€" are unrelated. But together they show the perils of building a large banking business in and around a country that has wrestled with drug trafficking and corruption.”

BATTLING A BANK TO COLLECT A JUDGMENT  |  For the last six years, Maury Rosenberg, a small-business owner from Philadelphia, has been battling U.S. Bancorp, which he says forced him and his business into involuntary bankruptcy. Indeed, Mr. Rosenberg has won a series of rulings in federal courts, but U.S. Bancorp will not surrender, instead arguing that Mr. Rosenberg, who said he was once worth $50 million from a real estate career, is just trying to evade his obligations, Andrew Ross Sorkin writes in the DealBook column.

Mr. Rosenberg compares his situation to that of homeowners who lost their houses through foreclosure. Like many of these homeowners, Mr. Rosenberg wanted to restructure payments to the bank during the financial crisis (his payments were related to leases on radiology machines). The bank refused to negotiate new payment arrangements, he said, instead filing an involuntary bankruptcy proceeding against him and his company. “When you compare it to the mortgage business, it’s exactly the same issue,” Mr. Rosenberg said. “The little guy that owns a mortgage and has been assigned to a million different people and nobody knows who the debt is really due to, can’t afford to go fight it.”

ON THE AGENDA  |  The Senate Banking Committee’s confirmation hearing for Stanley Fischer, formerly governor of the Bank of Israel, has been postponed because of weather. Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, speaks in New York at 4:15 p.m. The White House releases President Obama’s 2015 budget plan. William I. Koch, the billionaire industrialist, is on Fox Business Network at 10:30 a.m. Ben Horowitz, co-founder of the Andreessen Horowitz venture capital firm, is on CNBC at 8 a.m. Secretary of State John Kerry is in Kiev to support the new Ukrainian government.

DEAL MAY BE NEAR FOR MEN’S WEARHOUSE AND JOS. A. BANK  |  The monthslong takeover battle between Men’s Wearhouse and Jos. A. Bank Clothiers may soon be drawing to a close, Michael J. de la Merced writes in DealBook. Men’s Wearhouse said on Monday that it had reached a nondisclosure agreement with its rival, setting up talks that could lead to a merger of the men’s retailers in a deal valued at more than $1.8 billion. Men’s Wearhouse last offered to buy Jos. A. Bank for $63.50 a share, which Jos. A. Bank called too low. But Men’s Wearhouse indicated it would be open to raising the bid to $65 a share if certain conditions were met.

 

Mergers & Acquisitions »

French Cable Operator May Make $20 Billion Bid for Vivendi Mobile Unit  |  The French cable operator Numericable and its largest shareholder, Altice, are said to be preparing a bid of up to $20 billion for SFR, the mobile unit of the conglomerate Vivendi, though it is unclear when an offer may be formally made. DealBook »

Philadelphia to Sell Its Gas Works Utility for $1.9 Billion  |  Philadelphia agreed on Monday to sell its natural gas utility to UIL Holdings, a publicly traded power company, for about $1.9 billion, in a deal that would put the country’s biggest city-owned gas works in private hands. DealBook »

Carlyle Agrees to Buy Tyco’s South Korean Security Business  |  The $1.9 billion deal to acquire the Tyco Fire and Security Services Korea Company and its subsidiaries, including ADT Korea, is the largest private equity buyout deal in South Korea since 2008, the Carlyle Group said. DealBook »

Caesars Entertainment Sells Casinos to Affiliate  |  Caesars Growth Partners is buying four casinos for $2.2 billion, in a deal intended to help the Caesars Entertainment Corporation gain access to cash it needs to service its huge debt load. DealBook »

Facebook Said to Be in Talks to Buy Drone Maker  |  Facebook is said to be in acquisition discussions with Titan Aerospace, which makes solar powered drones that can fly for five years without needing to land, TechCrunch reports, citing an unidentified person familiar with the situation. TECHCRUNCH

Unilever Prepares for $2 Billion Sale of Ragu  |  Unilever has hired Morgan Stanley to help with a potential $2 billion sale of Ragu, its pasta sauce brand, The Wall Street Journal reports, citing unidentified people familiar with the situation. Unilever is in the process of paring down its food brands. WALL STREET JOURNAL

INVESTMENT BANKING »

Citigroup Expects Drop in Trading Revenue  |  John C. Gerspach, the chief financial officer of Citigroup, said at a conference on Monday that he expected the bank’s trading revenue for the first quarter to decline by a percentage in the “high mid teens” compared with a year ago, Bloomberg News reports. BLOOMBERG NEWS

Cantor Acquires Hedge Fund Fintan  |  The investment bank Cantor Fitzgerald said on Monday that it had acquired the hedge fund Fintan Partners to bolster its money management business, Bloomberg News writes. The deal will bring Cantor’s assets under management and advisory to about $3 billion. BLOOMBERG NEWS

Detroit Agrees to Pay $77 Million to End Swaps  |  Detroit agreed to pay $77.6 million to UBS and Bank of America to end interest rate swaps that have cost taxpayers more than $200 million since 2009, Bloomberg News writes. BLOOMBERG NEWS

PRIVATE EQUITY »

Apollo Global Chief Earned $546 Million in 2013  |  Amid flush times for Apollo Global Management, Leon D. Black, the co-founder and chief executive, received the highest compensation by a single executive of a publicly traded private equity firm last year. DealBook »

Carlyle Insiders to Sell Some of Their Stock  |  Two of the Carlyle Group’s three founders plan to sell 7.5 million common units of Carlyle, according to a filing on Monday. Carlyle itself is selling 4.5 million common units. The offering of 12 million shares would raise about $435 million. DealBook »

A Discussion with K.K.R. on Private Equity in Europe  |  Johannes P. Huth, the head of Europe, the Middle East and Africa at the private equity firm Kohlberg Kravis Roberts, considers the current outlook for private equity in Europe in an interview with Privcap. PRIVCAP

HEDGE FUNDS »

Andreessen Defends His Behavior on eBay’s Board  |  In a post on the blog of his venture capital firm, the technology investor Marc Andreessen defended his conduct as an eBay director in the face of repeated criticism from Carl C. Icahn. DealBook »

Buffett and Icahn: Birds of a Feather?  |  The styles of Warren E. Buffett and Carl C. Icahn could not be more different. But Jeffrey Goldfarb of Reuters Breakingviews notes that both men beat the market by betting on America, playing hardball and trading on personal brands. DealBook »

Red Lobster Spinoff On Track  |  Darden Restaurants on Monday said the sales process for its Red Lobster restaurant chain was “well underway,” despite the hedge fund Starboard Value’s efforts to pause the spinoff, The Wall Street Journal writes. Darden also said that it had considered a spinoff of its real estate holdings, but decided against the move because it would not create meaningful shareholder value and would separate Darden from a strategic asset. WALL STREET JOURNAL

I.P.O./OFFERINGS »

Danish Outsourcing Firm Aims to Raise $1.4 Billion in Float  |  The Danish outsourcing firm ISS said on Monday that it was hoping to raise about $1.4 billion through its initial public offering, planned for March 17, Reuters reports. REUTERS

Opower Plans $100 Million I.P.O.  |  Opower, which provides software to utilities to help homeowners reduce their energy use, said on Monday that it would raise $100 million in its initial public offering, making its plans public after filing confidentially for an I.P.O. last month, Reuters writes. REUTERS

Turmoil in Ukraine Casts Doubt on Metro’s Russia I.P.O.  |  The future of the German retailer Metro’s 1.75 billion euro partial listing is now uncertain as the value of the ruble continues to fall and markets remain volatile, The Financial Times writes. FINANCIAL TIMES

Brit Insurance Plans I.P.O.  |  Brit Insurance, which is owned by the private equity firms Apollo Global Management and CVC Capital Partners, is planning an initial public offering in London next month, Bloomberg News reports. A minimum of 25 percent of the company will be sold to investors, with Apollo and CVC remaining the largest shareholders. BLOOMBERG NEWS

VENTURE CAPITAL »

Messaging App Wickr Closes $9 Million Funding Round  |  Wickr, a mobile messaging application that allows its messages to self-destruct, has secured $9 million in Series A funding from the venture capital firms Alsop Louie Partners, Juniper Networks and the Knight Foundation, ReCode reports. RECODE

Start-Up Zumper Raises $6.5 Million  |  Zumper, an apartment rental search and tools website, announced on Monday that it had raised $6.5 million in a funding round led by the venture capital firms Kleiner Perkins Caufield & Byers, NEA and Dawn Capital, ReCode writes. RECODE

Speek Collects $5.1 Million  |  The conference calling start-up Speek announced on Monday that it had raised $5.1 million in Series A funding, including $2.7 million in previously raised convertible notes, TechCrunch writes. One of the investors is the actor Edward Norton. TECHCRUNCH

No Gender Gap in Tech Salaries  |  New research shows that there is no statistically significant difference in earnings between male and female engineers who have the same credentials and have made the same career choices, Quartz writes. QUARTZ

LEGAL/REGULATORY »

Bitcoin Loss Highlights Elusive Paths of Regulation  |  The collapse of Mt. Gox and the loss of $450 million in Bitcoins is pushing governments to enhance regulation of virtual currencies, Peter J. Henning writes in the White Collar Watch column. DEALBOOK

Britain Drops Plan to Tax Trading of Bitcoins  |  Britain’s tax agency said on Monday that it would not charge a 20 percent tax, known as a value added tax, or VAT, on trades of the virtual currency. DealBook »

Tax Reform’s Hard-to-Find Payoff  |  Much ballyhooed tax reform legislation generally makes little difference to the economy, and the most recent proposal is unlikely to change that, an economist writes in the Economix blog. NEW YORK TIMES ECONOMIX

Why Puerto Rico’s Bonds Are Moving to New York  |  If Puerto Rico, whose debt is already rated junk, wants to borrow new money, it will have to make concessions to lenders and change the governing law of the bonds from Puerto Rico to New York, Felix Salmon writes in Reuters. REUTERS