Solar Panel Maker Is First to Default in China’s Domestic Bond Market

HONG KONG â€" A small producer of solar panels on Friday became the first company in recent history to default in China’s domestic bond market, a development welcomed by analysts as a sign that the nation’s huge but protected corporate debt market may be growing up.

The Shanghai Chaori Solar Energy Science and Technology Company, which makes solar cells and panels, failed to meet a Friday deadline to make an annual interest payment on a bond of 1 billion renminbi, or $163 million, that it sold to domestic investors in 2012, a company official said Friday.

The bond “is confirmed to be in default,” the official, Liu Tielong, the secretary to the board of directors at Chaori, said Friday in a telephone interview.

Mr. Liu said the situation had not changed from Tuesday, when Chaori said in a stock exchange announcement that it had come up with only about 4 million renminbi out of the 89.8 million renminbi payment due Friday. The company did not plan to make a further announcement, he added.

Other recent cases in which Chinese companies came close to defaulting on debt or other payments were averted at the last minute, usually with government intervention. That no 11th-hour bailout emerged for Chaori or its investors was viewed by analysts as a signal that the Chinese leadership is serious in its commitment to carrying out a market-oriented financial overhaul.

Chaori’s default represents “a wake-up call for China’s bond market,” analysts at Moody’s Investors Service wrote Friday in a research note. They said the development would help China “introduce greater market discipline and advance the development of a risk-based bond market, in which pricing reflects the underlying credit risk.”

China’s domestic bond market has grown from nearly nothing a decade ago into the world’s third-biggest corporate debt market, after those in the United States and Japan. Total corporate bonds outstanding have risen to 8.5 trillion renminbi at the end of last year, from about 500 billion renminbi at the end of 2005, according to the official figures compiled by the Asian Development Bank.

Analysts and investors have grown concerned in recent years about the rising level of debt in China’s economy, especially as growth slows. Over all, 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., the ratio for government debt was 57 percent of the economy, and corporate debt â€" both loans and bonds â€" was 119 percent.

Japan Won’t Impose Banking Laws on Bitcoins

TOKYO â€" Bitcoin trading platforms like the now-defunct Mt. Gox exchange can, for now, operate freely under Japanese law, the government said Friday in a note that signaled a hands-off approach to the virtual currency.

In fact, Bitcoins are not a currency at all and are not subject to Japan’s stringent banking laws, officials said in a six-page paper that highlighted uncertainties more than clarifying the issues surrounding the digital payment system.

The paper did confirm that transactions using Bitcoins are not considered banking and that an exchange trading them does not need to obtain a banking license or meet compliance standards that such a license would require.

But Bitcoins’ status also makes them off-limits for Japanese banks, seemingly leaving the handling of them up to unregulated operators like Mt. Gox, the Tokyo-based exchange that filed for bankruptcy protection last week after losing half a billion dollars’ worth of its customers’ Bitcoins.

Like any other commodity, however, Bitcoins are subject to taxes in Japan, the paper said. It left unclear whether the simple purchase of Bitcoins would be subject to Japan’s 5 percent sales tax, which is set to rise to 8 percent in April.

Toshinori Matsushio, an official at the National Tax Agency, said that Bitcoin purchases were likely to be slapped with the sales tax unless they were singled out for exemption, much like postages stamps are in Japan. It would also be virtually impossible for the government to levy taxes on peer-to-peer sales.

In this regard, Japan’s regulatory approach seemed to differ from that taken by other countries. According to a statement this week by the UK Digital Currency Asociation, British revenue and customs officials are set to announce that virtual currencies should be treated almost identically to other currencies in terms of taxation. That would mean no sales tax on on Bitcoin sales.

Still, the paper stressed that discussions would continue on the details of how Bitcoins would be taxed, as well as the need for more regulation to better protect Bitcoin users. Japan “has not yet grasped a complete picture” of Bitcoins, the paper said, and various government agencies are still “collecting information.”

Now that Bitcoin has been deemed beyond the limits of Japan’s financial regulator, basic oversight and the drafting of more detailed guidelines could be left to the Ministry of Economy, Trade and Industry or the consumer protection agency.

In a news conference, the top government spokesman, Yoshihide Suga, said investigations of the Mt. Gox collapse could make it necessary for the government to review or revise its response.

When asked to clarify how Bitcoins might be taxed, Mr. Suga chuckled but gave no details.

“Of course, the Finance Ministry would be thinking of various ways to tax it,” he said.

The government prepared its note in response to questions submitted to Parliament by an opposition lawmaker, Tsutomu Okubo, a former managing director for Morgan Stanley. The cabinet approved the paper Friday morning.

Colin Moreshead contributed reporting from Tokyo.

Japan Won’t Impose Banking Laws on Bitcoins

TOKYO â€" Bitcoin trading platforms like the now-defunct Mt. Gox exchange can, for now, operate freely under Japanese law, the government said Friday in a note that signaled a hands-off approach to the virtual currency.

In fact, Bitcoins are not a currency at all and are not subject to Japan’s stringent banking laws, officials said in a six-page paper that highlighted uncertainties more than clarifying the issues surrounding the digital payment system.

The paper did confirm that transactions using Bitcoins are not considered banking and that an exchange trading them does not need to obtain a banking license or meet compliance standards that such a license would require.

But Bitcoins’ status also makes them off-limits for Japanese banks, seemingly leaving the handling of them up to unregulated operators like Mt. Gox, the Tokyo-based exchange that filed for bankruptcy protection last week after losing half a billion dollars’ worth of its customers’ Bitcoins.

Like any other commodity, however, Bitcoins are subject to taxes in Japan, the paper said. It left unclear whether the simple purchase of Bitcoins would be subject to Japan’s 5 percent sales tax, which is set to rise to 8 percent in April.

Toshinori Matsushio, an official at the National Tax Agency, said that Bitcoin purchases were likely to be slapped with the sales tax unless they were singled out for exemption, much like postages stamps are in Japan. It would also be virtually impossible for the government to levy taxes on peer-to-peer sales.

In this regard, Japan’s regulatory approach seemed to differ from that taken by other countries. According to a statement this week by the UK Digital Currency Asociation, British revenue and customs officials are set to announce that virtual currencies should be treated almost identically to other currencies in terms of taxation. That would mean no sales tax on on Bitcoin sales.

Still, the paper stressed that discussions would continue on the details of how Bitcoins would be taxed, as well as the need for more regulation to better protect Bitcoin users. Japan “has not yet grasped a complete picture” of Bitcoins, the paper said, and various government agencies are still “collecting information.”

Now that Bitcoin has been deemed beyond the limits of Japan’s financial regulator, basic oversight and the drafting of more detailed guidelines could be left to the Ministry of Economy, Trade and Industry or the consumer protection agency.

In a news conference, the top government spokesman, Yoshihide Suga, said investigations of the Mt. Gox collapse could make it necessary for the government to review or revise its response.

When asked to clarify how Bitcoins might be taxed, Mr. Suga chuckled but gave no details.

“Of course, the Finance Ministry would be thinking of various ways to tax it,” he said.

The government prepared its note in response to questions submitted to Parliament by an opposition lawmaker, Tsutomu Okubo, a former managing director for Morgan Stanley. The cabinet approved the paper Friday morning.

Colin Moreshead contributed reporting from Tokyo.

Okapi Partners, a Proxy Solicitor, Adds a Senior Executive

Okapi Partners, one of the younger players in the business of advising companies and hedge funds in proxy contests, plans to announce on Friday that it has hired Michael Fein as a senior managing director.

The addition of Mr. Fein comes as Okapi continues to expand and compete against more established rivals in the proxy solicitation industry. Founded in 2009 by three former executives at Georgeson, the firm now counts a number of prominent activist investors as clients, including Elliott Management and Jana Partners.

Bolstering the business of proxy solicitors has been the rise of activist investing, where hedge funds seek to shake up companies to lift their stock prices. The practice has become more prominent in recent years, according to Bruce H. Goldfarb, the firm’s chief executive, and will likely remain in some form for the foreseeable future.

“There has been a significant amount of capital invested in the activism share class, and there will always be situations where value can be unlocked through taking a more active strategy with an investment,” he said in a telephone interview.

Okapi has also worked for the likes of Smithfield Foods, which was sold to Shuanghui International last year. And it has carved out an unusual business in advising mutual funds in their own internal corporate governance affairs, an operation that the firm says gives it additional insight into how institutional investors will act in shareholder votes.

Mr. Fein, who will join as a senior managing director, was a founder of Midway Management Partners, an investment firm.

“I’ve known Michael for a long time,” Mr. Goldfarb said. “He will help our clients better understand the nuance of what’s going in on a transaction.”

Casablanca Names 6 Candidates for Cliffs Natural Resources’ Board

The activist hedge fund pressing for change at Cliffs Natural Resources started a proxy fight at the mining concern on Thursday, naming six candidates for the company’s board.

The hedge fund, Casablanca Capital, also continued its attack on Cliffs’ management, arguing that the existing directors are circling the wagons and ignoring suggestions that could improve value for shareholders. (It even set up a website for its campaign.)

The announcement on Thursday came as little surprise, as Casablanca had already signaled that it planned to escalate its campaign against the company. The hedge fund wants the firm, which mines iron ore and coal, to spin off its Bloom Lake property in Canada with its Asian operations, and then put its remaining businesses into a master limited partnership to cut taxes.

So far, Cliffs has announced plans to trim up to $425 million in capital spending and lay off 500 employees. It also named Gary Halverson, its chief financial officer, as its new chief executive.

None of that has impressed the activist investor thus far.

“As a significant shareholder, we are troubled by the value destruction that has occurred under the current board’s watch and firmly believe the status quo is unacceptable â€" shareholders have suffered enough,” Casablanca wrote in a letter to Cliffs’ board on Thursday. “Cliffs desperately needs a new strategy and leadership with a fresh perspective.”

Casablanca’s six candidates are:

• Lourenco Goncalves, the former chief executive of Metals USA and the hedge fund’s choice to become Cliffs’ next chief
• Rip Fisher, a former banker at Goldman Sachs
• Patrice Merrin, the former chief executive of Luscar, another mining company
• Joseph Rutkowski, a former senior executive of Nucor
• Gabriel Stollar, a former chief financial officer of Vale, the Brazilian mining firm
• Douglas Taylor, the chief executive of Casablanca

The Hurdles in Getting Past a Wall of Silence

Log in to manage your products and services from The New York Times and the International New York Times.

Don't have an account yet?
Create an account »

Subscribed through iTunes and need an NYTimes.com account?
Learn more »

Cerberus Is Near Deal for Safeway

Cerberus Capital Management is close to announcing a deal to acquire Safeway, the supermarket chain, for about $9 billion, according to a person briefed on the matter.

A deal, with a price of about $40 per share, is expected to be announced on Thursday afternoon.

Buying Safeway would add to Cerberus’s portfolio of supermarkets. Last year, the private equity firm acquired some brands of Supervalu, another supermarket chain, for $3.3 billion.

The Wall Street Journal reported earlier that a deal was imminent.

2 Senior Citigroup Executives Retiring

Two senior executives are retiring from Citigroup, the company said Thursday, leading to changes at the top of the bank’s international and consumer banking operations.

Gene McQuade will retire next month as chief executive of Citibank, the entity that holds 70 percent of the company’s assets and runs its vast international businesses. Mr. McQuade, who took over the helm of Citibank during the financial crisis, was a crucial link to regulators, the bank said.

Citibank’s chief operating officer, Barbara Desoer, will succeed Mr. McQuade. Ms. Desoer joined Citigroup last year, after retiring as head of Bank of America’s home loans division.

In a memo to employees on Thursday, Citigroup’s chief executive, Michael L. Corbat, said Mr. McQuade had been working with the bank over the last year to come up with a successor. Mr. McQuade has also been nominated to Citigroup’s board.

The other big departure is Cece Stewart, who runs Citigroup’s consumer and commercial banking operations in the United States. Ms. Stewart, who came to Citigroup from Morgan Stanley in 2011, is retiring at the end of next month “to focus her energy on her personal passions and service on several boards,’’ Mr. Corbat said in the memo.

Ms. Stewart will be replaced Jane Fraser, the head of the bank’s mortgage unit. Ms. Fraser will have responsibility for retail banking, small business, wealth management and commercial banking.

The Reality Behind the Stock-Picking Prowess of S.E.C. Staff Members

Is the Securities and Exchange Commission a warren for insider trading? If you’ve read recent headlines like “The Incredible Stock-Picking Ability of SEC Employees,” you’d think so.

The likely truth, however, is that not only is no insider trading going on, but that the S.E.C. staff members are just as bad as the rest of us at picking stocks.

The suggestion that the staff committed insider trading stems from a draft paper by Professor Shivaram Rajgopal of Emory University and a doctoral student at Georgia State, Roger M. White, banally titled “Stock Picking Skills of SEC Employees.” The paper is an early draft, and according to Professor Rajgopal, it was not meant to be publicly circulated. It was posted internally at the University of Virginia for a talk and was picked up by the news media, unintentionally as far as the authors were concered.

It’s a really clever paper, though, even in its early form. The authors made a Freedom of Information Act request to the S.E.C. for all trading data by the agency’s employees from late 2009 through 2011. The authors then analyzed the data for abnormal trading by S.E.C. staff.

The authors conclude that “S.E.C. employees continue to take advantage of nonpublic information to trade profitably in stocks under their regulatory purview.” And from that line came the suggestions that S.E.C. staff members may have been committing insider trading.

When you read the paper, you find that the authors’ conclusions are much more limited. In response, the S.E.C. explained that any abnormal trading was because employees were forced to sell certain stocks if they were about to begin an investigation related to those companies. So the title of the paper could have perhaps been “S.E.C. Staff Profits Handsomely Through Dumb Luck.”

In reality, the paper found that the S.E.C. employees did not earn any abnormal return when purchasing stocks (abnormal returns here is a term of art and simply means that the S.E.C. staff made more than what would be expected for an investor without inside information or stock-picking skill - a so-called “uninformed investor”). It found that the S.E.C. staff members buy stocks just like any “uninformed investor,” meaning they earn what anyone else would - the market return. So far, so good.

However, the authors also found that the S.E.C. staff is abnormally good at selling stocks at the right time. When the agency staff members sold during the period analyzed, the authors found, they made gains of approximately 8 percent above the “uninformed investor.” In other words, the agency’s staff members were dumping their shares before bad news, such as - not coincidentally â€" an S.E.C. investigation.

This finding of the gains is based on analyzing what an uninformed stock portfolio would make over a 12-month period and comparing it to what the S.E.C. staff members actually made. Yet, time horizons this long are likely to be affected by other events. The authors didn’t use shorter time frames, which might have helped make their case stronger.

The second finding of the authors is that of 56 S.E.C. investigations examined, it appears there was trading by agency employees in six cases in advance of the public announcement of the investigation.

The authors’ third finding concerns the sale of stocks around the filing of 144 notices, which are mostly paper filings by insiders recording a sale of stock. Because they are filed via paper rather than electronically, they have a longer period before the made widely available to the public. The authors find that in this period, the S.E.C. staff members sold stocks with 144 notices at a greater level than buying such stocks.

The first finding - that S.E.C. staff members appear to sell shares with abnormally good timing - is an important one, even though it may be just a function of their job requirements.

The other two findings are interesting, but hard to draw conclusions from other than they provide some support for the main finding. The authors’ discovery that there was trading around six investigations is simply not a sample meaningful enough to make any conclusions. As for the larger number of sales around the filing of 144 notices, the authors do not look at the returns around these sales. Finding more selling than buying, but without knowing the returns, may be simply be a timing issue.

Once the paper was publicized, the S.E.C. responded with its own explanation. John Nester, an S.E.C. spokesman, said that “each of the transactions was individually reviewed and approved in advance by the ethics office.” He continued that “most of the sales were required by S.E.C. policy. Staff had no choice. They were required to sell.”

The explanation appears to jibe with the fact that the authors found abnormal returns for sales and not purchases. Assuming that it is indeed correct, this is not insider trading. There is no intent here to give ill-gotten gains to S.E.C. staff, and indeed none has been alleged.

The gains, if they are there, are simply because of a staff rule, and likely gains that no one was aware of before. This is probably why there is more S.E.C. staff selling rather than buying, based on the 144 notices that were analyzed. The S.E.C. staff must also sell when they take employment with the agency to come into compliance with the ethics requirements, and so this likely also creates more biases toward sales.

Given the agency’s response, I suspect that the authors will tone down the parts about insider trading and add some more analysis that affirms the S.E.C.’s story. If nothing else, the authors now have another explanation for their findings.

In the meantime, the kerfuffle about the “insider trading” has also obscured another finding in the paper. The authors found only 7,200 trades amounting to about $66 million worth of stock over a three-year period. That is two trades per employee over that time. That is hardly the stuff of market-timers and day traders.

The paper also found that the S.E.C. staff is composed of bad stock pickers. Staff members earned abnormal returns when investing in common stocks (because of the selling), but they lose money buying and selling foreign stocks and exchange-traded funds, and appear to be following the pattern of other investors when trading everything but common stock.

Like everyone else, S.E.C. staff members rode the technology wave heavily (making 1,181 trades in these stocks). Pharmaceutical stocks were the second-favorite choice with 390 trades. Here’s a shocker: During the period, Apple (a stock with one of the highest market values) was the most popular stock for S.E.C. employees. Does this sound like a sophisticated bunch of traders trying to gain an edge that no one else has?

If the S.E.C.’s sale rule had not existed, the paper would almost have certainly been about how bad even the agency’s own employees are at buying and selling stocks. But the rule exists, as do the paper’s findings on sales.

If the paper’s empirical findings hold up, this will be its value and it will be quite a good paper. It will show that the S.E.C. might want to rethink its sale rules for when investigations are initiated. The agency may also want to revisit its stock holding rules generally. But under no circumstance is there any evidence in this paper that the policy is promoting insider trading. Dumb luck maybe, but not insider trading.

Newsweek Unmasks Bitcoin Founder, Stirring Ire

An article in Newsweek that says it has found the real Satoshi Nakamoto, the alias used by the creator of the virtual currency Bitcoin, has prompted many enthusiasts to question whether the right person had been identified.

According to the Newsweek piece published online on Thursday, the real Satoshi Nakamoto is a 64-year-old model train buff living in Southern California with his mom. His birth name was, in fact, Satoshi Nakamoto, which had previously been thought to be a pseudonym for the creator, or group of creators, behind Bitcoin.

When approached by a reporter, Mr. Nakamoto said that he was “no longer involved in that and I cannot discuss it.”

“It’s been turned over to other people. They are in charge of it now. I no longer have any connection,” he is quoted as saying.

The origins of Bitcoin, a computer-driven form of money that only exists online, have been a mystery since it appeared in 2009. Other publications have tried, and failed, to identify the real Satoshi Nakamoto. Newsweek says it found Mr. Nakamoto by going through a database of naturalized American citizens.

According to the article, Mr. Nakamoto was originally born in Japan, the spiritual birthplace of Bitcoin, and now goes by “Dorian Prentice Satoshi Nakamoto.”

Mr. Nakamoto appeared to have called the police when the reporter came to his home, so great was his desire not to speak about the virtual currency. Various relatives quoted in the story also did not know, or did not say, whether he created Bitcoin.

People have generally thought that Bitcoin was created by a group of programmers rather than an individual because of its complex mathematics and structure. The Newsweek article links Mr. Nakamoto to Bitcoin through various work experiences, but offers no hard evidence.

While many in the Bitcoin community said that Newsweek had made compelling arguments, others were swift to wonder whether the right person had been identified.

“Computer security researchers, we’re trained to be skeptical,” said Tyler Moore, an assistant professor at Southern Methodist University who led a discussion of anonymity and Bitcoin at a cryptography conference on Thursday. “Most of the people I’ve talked to have taken a ‘wait and see’ approach.”

The article also caused a stir for offering various personal details about Mr. Nakamoto, including where he lives, his age and birthplace. Those details elicited a number of angry comments on Newsweek’s website and elsewhere, and “Satoshi Nakamoto” was trending for part of the day on Thursday.

The author of the Newsweek story, Leah McGrath Goodman, even took to her Twitter to answer some often heated questions from readers.

“This man invented something that shaped our world. Should all inventors now fear murder?” Ms. Goodman wrote in response to a comment about posting Mr. Nakamoto’s personal details.

Users access Bitcoins by solving math riddles with software programs, or buying the coins on online “exchanges.” Only about 12.4 million coins are currently in circulation, and the original creator ensured that only 21 million coins would ever exist.

But Bitcoins have failed to catch on with mainstream financial institutions. They are backed by no central bank and fluctuate wildly in price.

While some users like the fact that Bitcoins circumvent the traditional banking system, they are also left with few options when things go south. Last week, the virtual currency world was shaken by the collapse of Mt. Gox, which at one point handled about 80 percent of all Bitcoin transactions.

Former Top Leaders of Dewey & LeBoeuf Are Indicted

The former top leaders of Dewey & LeBoeuf have been indicted by a New York grand jury on charges that they used accounting gimmicks for nearly four years to deceive banks and investors as they sought tens of millions of dollars in financing to keep the law firm afloat.

In announcing the charges on Thursday, the Manhattan district attorney, Cyrus R. Vance Jr., painted a picture of a law firm that operated in a way that was reminiscent of the kind of accounting shenanigans that took place in scandals at Enron, WorldCom and Tyco.

The 106-count indictment against Steven Davis, the firm’s former chairman; Stephen DiCarmine, the executive director; Joel Sanders, the chief financial officer; and Zachary Warren, a client relations manager, comes roughly two years after Dewey collapsed in the largest law firm bankruptcy ever, resulting in claims from creditors totaling $550 million.

It is not uncommon for lawyers to be indicted on charges of bilking clients out of money or being involved in fraudulent schemes. But it is nearly unheard of for prosecutors to contend that the top brass of a law firm, especially a once-storied firm like Dewey, was effectively running a corrupt organization.

The specific counts in the 60-page indictment include grand larceny, conspiracy, scheme to defraud, falsifying business records and securities fraud.

Mr. Vance said the indictment of the four men came after his office had already secured guilty pleas from seven other people who once worked for Dewey and participated in a scheme to “cook the books.” Some of those who pleaded guilty are cooperating with the investigation, a person briefed on the matter said.

“Fraud is not an acceptable accounting practice,” Mr. Vance said at a news conference announcing the indictment, which the grand jury handed up on Wednesday. “Those at the top of the firm directed employees to hide the firm’s true financial condition from creditors, investors, auditors and even partners of the firm.”

The indictment, which contains excerpts from a number of incriminating emails, is a stunning coda to the collapse of a once-mighty firm that was created by the 2007 merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, two of New York’s most prestigious law firms. The firm once had 26 offices around the globe and employed 1,300 people in New York.

The defendants were so brazen that in emails they made comments about “fake income” and “accounting tricks” in talking about the scheme.

The allegations may reverberate across the legal community, where working at a top tier firm like Dewey was once considered the pinnacle of success in the legal profession. It’s also not lost on some that the lawyers at Dewey were done in by things they advise clients not to do such as put anything incriminating into an email.

“It is surprising that a top firm would engage in fraud and more surprising that its attorneys produced a trail of evidence that will make them look like con men to jurors,” said Richard M. Gordon, a professor of law at the University of Michigan. “Attorneys counsel clients against doing exactly what Dewey’s attorneys seem to have done.”

The charges also support the whispers of misconduct that had come from some lawyers at Dewey when the firm filed for bankruptcy, with several pointing a finger of blame at Mr. Davis, 60, an energy attorney who was of the architects of the 2007 merger.

Much of the case against the four men centers around a 2010 private debt offering in which Dewey raised $150 million from 13 insurance companies that invested in the deal and an additional $100 million it obtained from a line of credit placed with several large banks. The law firm used the offering to refinance its existing credit lines and to mask the dire financial situation the law firm was in during the financial crisis.

By the end of 2009, Dewey owed its bank lenders about $206 million was on the hook to make payments totaling $240 million its partners yet had just $119 million in cash. When the financial crisis hit in 2008, Dewey found itself missing revenue targets by a wide margin as its staple legal work in mergers and acquisitions had dried up and it had trouble containing costs because of big contracts it awarded top lawyers.

The Securities and Exchange Commission also filed a civil complaint against Mr. Davis, Mr. DiCarmine and Mr. Sanders charging the made material misrepresentations about the firm’s finances in the debt offering. The S.E.C. also charged two other former top executives at Dewey â€" Frank Canellas, the firm’s director of finance, and Thomas Mullikin, the controller. Mr. Warren wasn’t named as a defendant in the S.E.C. lawsuit.

The Federal Bureau of Investigation assisted in the investigation, deploying a team of agents on the case.

“I can’t say whether this is the Enron” of the legal world, Mr. Vance said at a news conference. “Clearly this is the largest law firm bankruptcy that we know of in history.”

Prosecutors contend that the accounting games at Dewey actually began in November 2008, not long after the merger was completed and ran until March 7, 2012, a little before Dewey filed for bankruptcy two months later. The firm’s financial problems began when it found itself in violation of provisions in bank loans that required it to meet certain cash-flow provisions. Dewey couldn’t meet those provisions because its revenue had taken a hit from the financial crisis.

To make it appear as though Dewey was meeting those loan conditions, the  top executives schemed to make a series of fraudulent accounting entries,  the authorities said. The fraudulent accounting adjustments were made to make it appear that Dewey had either increased its revenue, decreased its expenses or reined in distribution payments to partners, including some all-star lawyers it had signed to lucrative multiyear contracts.

Some of the activities listed in the indictment involved backdating checks received from clients in January to make it appear that the previous year’s revenue was higher. The defendants also made expenses look artificially low, prosecutors said. In one instance, a $2.4 million American Express bill for charges incurred by Mr. Sanders was improperly carried as an “unbilled client disbursement receivable.”

The accounting scheme was laid out in a document that authorities said the former Dewey executives called the “Master Plan.”

The S.E.C. said that while Mr. Sanders, Mr. Canellas and Mr. Mullikin were the “day-to-day architects” of the accounting fraud, Mr. Davis and Mr. DiCarmine supported their efforts and approved of them. Authorities said Mr. Davis encouraged partners to have clients with outstanding bills at year-end to backdate their checks to bolster the firm’s prior year revenues.

Lawyers for Mr. Davis and Mr. DiCarmine issued statements in response to the charges against their clients. Elkan Abramowitz, the lawyer for Mr. Davis, said that his client acted in “good faith in an effort to make the firm a success” and that the charges from Mr. Vance and the S.E.C. are “simply wrong.” Austin Campriello, the lawyer for Mr. DiCarmine, said his client “did not commit any crimes” and that the district attorney’s office “spins some inartful emails into crimes.”

Edward Little, the lawyer for Mr. Sanders, said his client broke no laws and that “despite what the district attorney’s office apparently believes, the public does not need a scapegoat every time a financial disaster is reported in the media.” He added that the charges revealed “a basic lack of understanding of financial accounting.”

Michael Armstrong, a lawyer for Mr. Warren, could not be immediately reached for comment

Both the criminal indictment and S.E.C. complaint rely on emails to detail how the leaders of Dewey orchestrated and carried out the suspected accounting fraud. In the criminal complaint, some of the people cited in emails are unidentified â€" presumably some of the seven people who have already pleaded guilty and may be cooperating with the investigation.

In one email exchange in December 2008 between Mr. Davis, Mr. Sanders and Mr. DiCarmine, the men are discussing the need to come up with $50 million to meet a loan covenant provision. Mr. Davis responds “ugh” in one of the emails. The answer to problems, the indictment suggests, was to come up with the “Master Plan” for fudging the firm’s accounting entries.

After the “Master Plan” is created, Mr. Canellas emails Mr. Warren to congratulate him on a job well done. In the email cited in the complaint, the employee says: “Great job dude. We kicked ass! Time to get paid.”

In another email exchange in June 2009, Mr. Sanders and Mr. Canellas joke about the law firm’s outside auditor, who was fired from his firm for reasons unrelated to his auditing assignments. Mr. Sanders remarks to Mr. Canellas, “Can you find another clueless auditor for next year?” Mr. Canellas responded: “That’s the plan. Worked perfect this year.”

Before the merger, Dewey’s long-time audit firm was Ernst & Young, and after the two law firms combined, Ernst continued to audit the firm’s financial statements. A filing by the liquidation trustee in the bankruptcy said Ernst audited the firm’s “financial statements and related statements of fees and expense, changes in partners’ accounts and cash flows.”

The defendants are expected to argue that because Ernst reviewed and blessed the firm’s financial records, the accusations that they doctored the books are erroneous. A spokeswoman for Ernst declined to comment.

Mr. Davis, Mr. DiCarmine and Mr. Sanders, charged with the most serious offenses, could be sentenced to a maximum penalty of 25 years in jail if convicted.

William Alden and Floyd Norris contributed reporting

New York v. Davis, et al

S.E.C. v. Davis, et al

Why This Isn’t China’s ‘Bear Stearns Moment’

Once again, investors are facing warnings about China’s “Bear Stearns moment.”

The country’s possible first domestic bond default has prompted comparisons with the sequence of events that led to the bailout of the Wall Street firm. The parallels between China’s predicament and the crisis of 2008 may be tempting, but are flawed. If the analogy has any use, it is as a reminder of which mistakes to avoid.

The first problem with identifying a Bear Stearns moment is that there are actually multiple moments. Strategists at Bank of America Merrill Lynch have compared the possible default of Chaori Solar to the episode in mid-2007, when two hedge funds managed by the Wall Street firm revealed the extent of their bad bets on subprime mortgage debt. That event, which set off a marketwide assessment of financial risk, is often viewed as the beginning of the credit crunch.

The second “moment” occurred in the spring of 2008, when Bear Stearns, on the brink of collapse, was rescued by JPMorgan Chase with the backing of the Federal Reserve Bank of New York. Confusingly, another Bank of America Merrill Lynch strategist invoked that comparison in January, after a troubled Chinese investment product was bailed out shortly before it defaulted.

Both analogies serve a broader purpose: to suggest that China faces a meltdown similar to the one in the West, which started with Bear Stearns’s problems and culminated in the failure of Lehman Brothers in September 2008. It is not surprising that investors who were scarred by that episode worry about history repeating itself. In the summer of 2010, many saw similarities with the euro zone crisis. The bailout of Greece was also described as a Bear Stearns moment, with Spain cast in the role of the too-big-to-fail Lehman.

The euro zone analogy proved false, as will the comparison with China. Though China’s financial system faces many serious challenges, the government has far greater power to prevent a disorderly collapse than its Western counterparts did. If fears of a Bear Stearns moment have any value, it is to serve as a reminder to the Chinese authorities which mistakes they must avoid at all costs.

Peter Thal Larsen is Asia Editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Senate Panel Considers 3 Futures Commission Nominees

The Senate Agriculture Committee heard testimony on Thursday from President Obama’s three nominees for the Commodity Futures Trading Commission, a market watchdog that the president has called “small but mighty.”

The appointees - Timothy G. Massad, a former lawyer who would become chairman, and Sharon Y. Bowen and J. Christopher Giancarlo, who would be commissioners - now await a vote from the panel and full confirmation by the Senate.

The confirmation process comes at an important time for the agency. The 2010 Dodd-Frank financial overhaul law expanded the agency’s supervisory powers over derivatives and complex financial instruments, many of which helped to accelerate the financial crisis.

As the commission’s new leader, Mr. Massad, a former lawyer at Cravath, Swaine & Moore, pledged to take an aggressive stance on the oversight of derivatives markets.

“Strong enforcement is vital to maintaining the public’s confidence in our markets,” he told the committee.

Mr. Massad, a former assistant secretary at the Treasury Department responsible for winding down the government’s Troubled Asset Relief Program, also highlighted how excessive risk related to derivatives helped precipitate the crisis.

“Today, the C.F.T.C.’s role is even more important, because it has the responsibility to bring much-needed regulation to the markets for over-the-counter derivatives,” Mr. Massad told the committee.

Mr. Massad would succeed Gary Gensler, who turned the once toothless regulator into one that has levied record fines on large financial institutions in recent years. Under Mr. Gensler’s leadership, the watchdog sharpened its teeth by adopting tough rules on derivatives and futures trading.

But where Mr. Massad focused on the agency’s need for robust enforcement and aggressive pursuit of wrongdoers, Mr. Giancarlo sounded a note of caution about excessive regulation, signaling what could be a point of tension within the commission as it continues to enforce the more than 60 rules and orders it has issued over recent years.

“Regulatory effectiveness must be a higher priority than speed,” said Mr. Giancarlo, a senior executive of the inter-dealer broker GFI Group, who will fill the Republican seat vacated by Jill E. Sommers. He told the committee he planned to focus on how businesses like airlines used derivatives to hedge their risks.

Ms. Bowen, a former securities lawyer at Latham & Watkins, where she represented corporations and financial firms, discussed the excessive risk-taking and speculation in the swaps market and the importance of new rules to regulate them.

“The next phase of the C.F.T.C.’s mandate requires effective implementation of these rules, with the participation and coordination of regulatory bodies both inside and outside of the U.S.,” Ms. Bowen said. She will succeed Bart Chilton, the commission’s most liberal and outspoken member, who announced in December that he would step down.

Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee, reminded the nominees of their duty to “make sure that we never see another MF Global or Peregrine Financial shatter faith in either the markets or the ability of regulators to oversee those markets.”

After the collapse of the brokerage MF Global, the commission was responsible for cleaning up the mess.

More recently, the agency has levied record fines on big financial institutions like Barclays and UBS as part of a wider crackdown on the manipulation of the benchmark London interbank offered rate. It also scored a victory in a $100 million settlement and an admission of guilt from JPMorgan Chase related the bank’s multibillion-dollar loss from derivatives trades through its London office.

During the hearing, Mr. Massad and Mr. Giancarlo clashed on the issue of money for the commission. Earlier this week, Mr. Obama proposed a 2015 budget of $280 million for the agency, which is $35 million less than the agency requested.

Mr. Massad told the committee it was “critically important” for the regulator to receive more money. Disagreeing, Mr. Giancarlo told the committee “we live in a time where resources need to be stretched.”

Elsewhere on Thursday, Mark P. Wetjen, who has been acting chairman since Mr. Gensler’s departure, addressed the House Appropriations Committee about the agency’s budget.

“The unfortunate reality is that, at current funding levels, the commission is unable to adequately fulfill the mission given to it by Congress,” Mr. Wetjen said.

This post has been revised to reflect the following correction:

Correction: March 6, 2014

An earlier version of this article and headline misstated the action taken by the Senate Agriculture Committee. While it heard testimony from the three nominees for the Commodity Futures Trading Commission, it did not vote on the nominations.

Senate Panel Considers 3 Futures Commission Nominees

The Senate Agriculture Committee heard testimony on Thursday from President Obama’s three nominees for the Commodity Futures Trading Commission, a market watchdog that the president has called “small but mighty.”

The appointees - Timothy G. Massad, a former lawyer who would become chairman, and Sharon Y. Bowen and J. Christopher Giancarlo, who would be commissioners - now await a vote from the panel and full confirmation by the Senate.

The confirmation process comes at an important time for the agency. The 2010 Dodd-Frank financial overhaul law expanded the agency’s supervisory powers over derivatives and complex financial instruments, many of which helped to accelerate the financial crisis.

As the commission’s new leader, Mr. Massad, a former lawyer at Cravath, Swaine & Moore, pledged to take an aggressive stance on the oversight of derivatives markets.

“Strong enforcement is vital to maintaining the public’s confidence in our markets,” he told the committee.

Mr. Massad, a former assistant secretary at the Treasury Department responsible for winding down the government’s Troubled Asset Relief Program, also highlighted how excessive risk related to derivatives helped precipitate the crisis.

“Today, the C.F.T.C.’s role is even more important, because it has the responsibility to bring much-needed regulation to the markets for over-the-counter derivatives,” Mr. Massad told the committee.

Mr. Massad would succeed Gary Gensler, who turned the once toothless regulator into one that has levied record fines on large financial institutions in recent years. Under Mr. Gensler’s leadership, the watchdog sharpened its teeth by adopting tough rules on derivatives and futures trading.

But where Mr. Massad focused on the agency’s need for robust enforcement and aggressive pursuit of wrongdoers, Mr. Giancarlo sounded a note of caution about excessive regulation, signaling what could be a point of tension within the commission as it continues to enforce the more than 60 rules and orders it has issued over recent years.

“Regulatory effectiveness must be a higher priority than speed,” said Mr. Giancarlo, a senior executive of the inter-dealer broker GFI Group, who will fill the Republican seat vacated by Jill E. Sommers. He told the committee he planned to focus on how businesses like airlines used derivatives to hedge their risks.

Ms. Bowen, a former securities lawyer at Latham & Watkins, where she represented corporations and financial firms, discussed the excessive risk-taking and speculation in the swaps market and the importance of new rules to regulate them.

“The next phase of the C.F.T.C.’s mandate requires effective implementation of these rules, with the participation and coordination of regulatory bodies both inside and outside of the U.S.,” Ms. Bowen said. She will succeed Bart Chilton, the commission’s most liberal and outspoken member, who announced in December that he would step down.

Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee, reminded the nominees of their duty to “make sure that we never see another MF Global or Peregrine Financial shatter faith in either the markets or the ability of regulators to oversee those markets.”

After the collapse of the brokerage MF Global, the commission was responsible for cleaning up the mess.

More recently, the agency has levied record fines on big financial institutions like Barclays and UBS as part of a wider crackdown on the manipulation of the benchmark London interbank offered rate. It also scored a victory in a $100 million settlement and an admission of guilt from JPMorgan Chase related the bank’s multibillion-dollar loss from derivatives trades through its London office.

During the hearing, Mr. Massad and Mr. Giancarlo clashed on the issue of money for the commission. Earlier this week, Mr. Obama proposed a 2015 budget of $280 million for the agency, which is $35 million less than the agency requested.

Mr. Massad told the committee it was “critically important” for the regulator to receive more money. Disagreeing, Mr. Giancarlo told the committee “we live in a time where resources need to be stretched.”

Elsewhere on Thursday, Mark P. Wetjen, who has been acting chairman since Mr. Gensler’s departure, addressed the House Appropriations Committee about the agency’s budget.

“The unfortunate reality is that, at current funding levels, the commission is unable to adequately fulfill the mission given to it by Congress,” Mr. Wetjen said.

This post has been revised to reflect the following correction:

Correction: March 6, 2014

An earlier version of this article and headline misstated the action taken by the Senate Agriculture Committee. While it heard testimony from the three nominees for the Commodity Futures Trading Commission, it did not vote on the nominations.

Greek Bank Set to Be First in 5 Years to Tap Capital Markets

ATHENS â€" Piraeus Bank, Greece’s largest lender, is set to became the first Greek bank to tap the capital markets since the euro zone crisis erupted five years ago.

Piraeus is planning to issue a senior bond after a European road show that is to begin next week “with a series of meetings with fixed-income investors in selected European cities,” the bank said in statement on Thursday. It did not specify the value of the debt issue, but media reports indicated it would be 500 million euros.

The bond issue will be ahead of the planned assessment by European regulators of regional banks this fall. Piraeus Bank said it was able to make the leap because of “the constantly improving economic environment in Greece and the strong position of Piraeus Bank.”

It added, “Piraeus Bank aims to access debt capital markets for the first time in five years, further differentiating its sources of liquidity and reaffirming its institutional role in the Greek economy.”

Piraeus Bank is one of the country’s four main lenders that were recapitalized with 28 billion euros last summer as part of a loan agreement with Greece’s so-called troika of international creditors â€" the European Commission, European Central Bank and International Monetary Fund.

The latest round of negotiations between Greece and the troika have stalled on a dispute over the capital needs of Greek banks. On Thursday afternoon, the Bank of Greece released the results of stress tests carried out on Greece’s main four lenders, stating that their total capital needs amount to 6.4 billion euros. The troika’s estimate is at least three billion euros more, officials have said.

To Serve Wall Streeters, Long Hours and Exacting Labor

A year ago, Rudy Milian felt that he was doing the same thing day after day. He often got to work early and stayed into the night, ducking out only briefly, if he could, to grab lunch. And he was not allowed to grow a beard.

But Mr. Milian wasn’t a junior Wall Street worker. He just served Wall Street workers.

Early last year, Mr. Milian became one of the three barbers at Salvatore’s, a shop that caters to Goldman Sachs employees in the atrium of the Conrad Hotel, next to the bank’s global headquarters at 200 West Street in Battery Park City.

By his account, all of his clients, junior employees at the bank, would ask for haircuts that didn’t look like haircuts so no one would realize they had left the office. They rarely requested shaves, and when they did, Mr. Milian said, it was always before the opening bell, a sure sign that they had stayed at the office through the night. And forget about after-shave.

He said he started hearing buzz about a new barbershop that had opened in SoHo, where he thought he could be more creative. He left Salvatore’s in December and can now be found at Harry’s, a light-filled, two-chair shop born from an Internet shaving start-up founded by two friends. The 300-square-foot space, at the southeast corner of West Houston and MacDougal Streets, harkens back to the barbershops of times past, when barbers provided straight-razor neck shaves that included hot towels.

“When it came to Goldman, I was a soldier,” Mr. Milian said over a snack of chips and guacamole at a small restaurant down the block from Harry’s. “I was there to cut hair and serve them.” Now, he said, “I’m happy.”

To hear Mr. Milian, 43, compare his year as a Goldman Sachs barber with his new life at Harry’s, in some ways, much like listening to a former Goldman junior banker talk about his work before he joined a start-up or went to business school.

With Goldman, Mr. Milian said, he gave at least 20 haircuts a day, mostly to junior bankers, all the same style (“A little off the ears, a little of the back,” he said.), sometimes working from 8 in the morning until 8 at night. It was a mind-numbing routine for a barber who, when he worked at a combination barbershop and dance club in Miami Beach, once took care of celebrities like Jay-Z and Shaquille O’Neal.

When he moved to Wall Street, Mr. Milian said he often felt overqualified and his services undervalued. And perhaps he is right. Mr. Milian started cutting hair in 1985 when he was 15, working in the hallway of a building on Carpenter Avenue in the Bronx. At one point, he opened two sports-themed barbershops in the Bronx, where his clients included members of the New York Yankees.

When he moved to Salvatore’s in 2013, he was the youngest of the three barbers there, assigned to work only with the younger Goldman clients. Salvatore Anzalone, the man behind the barbershop, trims the hair of the more senior employees, including Goldman’s chief executive, Lloyd C. Blankfein.

Goldman employees used to come to Mr. Anzalone’s shop in the basement of the building in Lower Manhattan that housed the firm’s trading floor. When the bank moved to its current location in Battery Park City, Mr. Anzalone moved with it, opening a location in the Conrad Hotel next door.

Technically, the shop is open to everyone, but its customers are almost exclusively Goldman employees. Mr. Milian insisted that a non-Goldman employee would not even be able to find the shop. (It is, however, listed as one of the Conrad’s services and amenities on the hotel’s website.)

While he may have done the same haircut over and over, he said that cutting hair was not easy at Salvatore’s. Customers would often jerk their heads to watch the television, which they insisted be tuned to Bloomberg TV. Mr. Milian said he feared that they would mess up their cuts with their constant head tilts, so he would spin their chairs around to face the screen.

Chatter was mostly between the customers and mostly about the financial news they were watching, including one furious discussion Mr. Milian recalled about Buffalo Wild Wings, a public company that owns a chain of restaurants and sports bars. When they did talk to Mr. Milian, it was usually about why they were losing their hair.

“I didn’t want to do 10-minute haircuts,” said Mr. Milian, who has a tattoo of straight-razor blades on his left forearm. “I wanted to make something.”

He now wears vests instead of suspenders, a mustache instead of a stiff upper lip. He gives two or three straight-blade shaves a day, using a soft white towel with an “H” embroidered in the corner.

Most important, he said, he feels like he is part of something rather than just a cog in a machine. At Harry’s, he can express himself. And now, he said, he can even grow a beard.

Andreessen Horowitz Backs DigitalOcean, a Cloud Computing Start-Up

Ben Uretsky, the chief executive of a cloud computing start-up called DigitalOcean, uttered what may be the ultimate Silicon Valley “humblebrag” when he explained why his company had to raise millions from venture capitalists just months after an earlier financing round.

“The challenge was the rate of growth kept increasing,” Mr. Uretsky said in an interview.

That prodigious growth was enough to entice Andreessen Horowitz, one of Silicon Valley’s most prominent venture capital firms, to lead a $37.2 million financing round in DigitalOcean, according to an announcement on Thursday. The start-up previously announced a $3.2 million round in August.

DigitalOcean - in the business of setting up virtual computer servers, partitioning them into slices and selling those slices by the month or the hour - now has more than 100,000 customers, it says. It had just 2,000 at the start of last year.

Its industry is dominated by giants like Amazon, IBM and Microsoft that sell server time to corporations. But DigitalOcean tries to stand out by focusing on smaller customers, like individual developers, and putting an emphasis on simplicity.

The company tries in particular to appeal to young start-ups, allowing its customers to rent access to servers by the hour, at rates as low as seven-tenths of a penny.

“Before we came along, there was really no one else that occupied that space and was focused on the experience that a user would get,” Mr. Uretsky said.

The company, which introduced its cloud service in 2012, became profitable in the second half of last year, Mr. Uretsky said. He declined to say its valuation with the new financing.

Though it lacks the dominance of Amazon Web Services, DigitalOcean does have some well-known clients, including the singer Beyoncé, whose website it runs. The start-up also has done work with Nike and the eyeglass company Warby Parker, Mr. Uretsky said.

The new money, which the company plans to use to build new data centers and hire more employees, came after DigitalOcean wrote up a “wish list” of investors, Mr. Uretsky said. But not all the meetings went as hoped.

“Ninety percent of investors have a hard time believing the story,” Mr. Uretsky said. “It’s one thing when that happens during the seed round. It’s a completely different thing when you have 100,000 customers and you’re growing like wildfire and investors are still having a hard time believing the story.”

The company clearly hit it off with Andreessen Horowitz. Though the venture capital firm tends to focus on companies located in Silicon Valley, it made an exception for DigitalOcean, which is based in Manhattan.

“It requires a very special company to go do something outside the Valley,” Peter Levine, a partner at Andreessen Horowitz, said in an interview. “This is one of those.”

Morning Agenda: More Trouble For a Once-Mighty Law Firm

Three former top executives of Dewey & LeBoeuf, the giant law firm that filed for bankruptcy protection in 2012, are expected to be charged on Thursday with misleading other lawyers and lenders about the financial health of the firm, Matthew Goldstein and Ben Protess write in DealBook. The details of the charges are still unclear, but two people said the lawyers might be accused of grand larceny.

“The filing of charges against the three lawyers would be the most significant event yet in the collapse of a once-mighty firm that was created by the 2007 merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, two of New York City’s most prestigious law firms,” Mr. Goldstein and Mr. Protess write. The firm once had 26 offices around the globe and employed 1,300 people. The Securities and Exchange Commission is also expected to file a civil action related to apparent misrepresentations in the firm’s 2010 sale of $125 million in debt notes to refinance some of its bank debt, and civil and criminal charges could also be filed against others who once worked at the firm.

FOREIGN EXCHANGE SCANDAL SNAGS BANK OF ENGLAND  |  In the latest twist in the global inquiry into the foreign exchange scandal, the Bank of England said on Wednesday that it had suspended an employee and escalated a review into claims that officials had known about or condoned potential manipulation of the currency markets, Chad Bray writes in DealBook. The move comes as regulators in Britain, the United States and other countries are looking into whether traders at the world’s largest banks colluded to manipulate foreign exchange rates.

The central bank said an extensive internal review of documents, thousands of emails and chat room recordings and more than 40 hours of recorded telephone calls had uncovered no evidence that Bank of England employees colluded to manipulate the currency market or shared confidential client information. “The bank requires its staff to follow rigorous internal control processes and has today suspended a member of staff, pending investigation by the bank into compliance with those processes,” the bank said.

The central bank also released minutes of meetings between officials and industry representatives that indicated there were concerns about possible manipulation for rates like the 4 p.m. fix for the pound to the United States dollar as early as July 2006. In the minutes of a July 2006 subcommittee meeting, “It was noted that there was evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix.”

A STAR TRADER SETTLES DOWN  |  Colleagues of Paul Tudor Jones II used to be in awe of his ability to post huge profits on big market swings. Indeed, as late as 2001 to 2002, he gained 48.1 percent over two years during the sell-off in technology stocks. But lately, his trading results have dimmed. And while Mr. Jones can still claim long-term annual returns of close to 19.5 percent in his $10.3 billion flagship fund, Tudor BVI Global, it has been 11 years since he last hit that level, Randall Smith writes in DealBook.

It’s difficult to pinpoint exactly why Tudor has not been able to perform as well as it once did. One possible reason is that low interest rates over the last five years hurt many macro traders like Mr. Jones. He also began managing more money from pension funds and other institutions, prompting him to invest more conservatively to curb losses. The 2008 stock market crash did not help his returns, and neither did increasing competition in the hedge fund universe, which limited trading opportunities. But one investor said that perhaps it was simply that Mr. Jones was distracted by the accumulation of wealth. “Your life becomes more complicated, and a little part of your brain has to deal with that,” this investor said.

From an October 2007 article in The New York Times, on Mr. Jones: “Don’t expect Mr. Jones to relive his 1987 glory. One investor who has spoken with him in the last week, who asked not to be identified because he is not authorized to speak publicly about Mr. Jones’s investment strategies, said that the recent rate cut had made Mr. Jones increasingly bullish. Indeed, as opposed to 1987, Mr. Jones is said to be reminded of 1998, when cuts by the Federal Reserve led to the stock market boom of the late 1990s.”

ON THE AGENDA  |  February’s Challenger report on job cuts is out at 7:30 a.m. Weekly jobless claims are out at 8:30 a.m. January factory orders are out at 10 a.m. William C. Dudley, the president of the New York Fed, speaks at 8:30 a.m. Charles I. Plosser, the president of the Philadelphia Fed, gives a speech on the economy in London at 1 p.m. William H. Gross, the co-founder of Pimco, is on CNBC at 2 p.m.

DEAL FOR SAFEWAY GETS COMPLICATED  |  The private equity firm Cerberus Capital Management is looking to seal a deal valued at more than $9 billion for the Safeway grocery store chain, but its efforts have been complicated by the Kroger Company, a supermarket giant, which is considering a bid of its own, The Wall Street Journal reports. Cerberus, which already owns Albertsons supermarkets, is thought to be more likely to emerge with a deal, in part because of antitrust risk associated with a merger between Safeway, which is the nation’s second-largest grocery chain, and Kroger, its largest rival. Cerberus is offering to pay $40 a share for the company.

A deal would be one of the largest supermarket buyouts in years. But this would not be the first time Safeway came under private ownership: The grocery chain’s relationship with private equity firms dates to the mid-1980s, when Kohlberg Kravis Roberts executed a $4.8 billion buyout of the company.

 

Mergers & Acquisitions »

Morgan Stanley Is Said to Weigh Sale of Its Swiss Private Bank  |  Morgan Stanley is in the early stages of a strategic review of its private banking business in Switzerland, and the options it is exploring include selling the unit, according to a person familiar with the matter. DealBook »

Behind Closed Doors, Microsoft’s Board Reportedly Battled Chief Over Nokia Deal  |  In its latest issue, Bloomberg Businessweek reports that Steven A. Ballmer, then Microsoft’s chief executive, chafed when fellow directors questioned the wisdom of buying any part of Nokia’s hardware operations. DealBook »

Yahoo Acquires Social Data Start-Up Vizify  |  Vizify announced on its website Wednesday that it had been purchased by Yahoo, The Wall Street Journal reports. The terms of the deal were not disclosed. WALL STREET JOURNAL

Vivendi Receives Bids for Mobile Unit  |  Vivendi, based in Paris, said it had received two separate bids from its French rival Bouygues Telecom and the cable and cellphone provider Altice for its mobile unit SFR, Bloomberg News writes. Altice’s offer is said to be valued at about $20 billion. BLOOMBERG NEWS

INVESTMENT BANKING »

Barclays Chief Defends Contentious Increase in Bonus Pay  |  Barclays’ chief executive, Antony P. Jenkins, said in a newspaper interview that he decided to increase bankers’ pay last year in spite of falling profits to avoid a “death spiral” in the investment bank unit. DealBook »

In Banking Overhaul Fight, a Ruckus Over an Obscure Product  |  The banking industry has been making loud noises about the regulation of collateralized loan obligations, a little-known but risky financial product, Jesse Eisinger writes in The Trade column. The Trade »

Standard Chartered Cuts Bonuses  |  Peter Sands, the chief executive of London’s Standard Chartered, reduced the bank’s bonus pool and highlighted its financial strength after the bank reported its first annual profit drop in a decade, Bloomberg News writes. BLOOMBERG NEWS

Goldman Hires New Chief of For-Exchange Trading  |  Goldman Sachs has hired a former JPMorgan Chase executive as its new global chief of foreign exchange trading, Bloomberg News writes. The executive, Kayhan Mirza, headed JPMorgan’s foreign exchange trading in Europe, the Middle East and Africa and was global chief of foreign exchange options trading.
BLOOMBERG NEWS

PRIVATE EQUITY »

K.K.R. Raises $2 Billion Energy Fund  |  The private equity giant Kohlberg Kravis Roberts is making a bigger push into the North American energy business. DealBook »

Canadian Energy Start-Up Secures $270 Million From Lime Rock  |  The Imaginea Energy Corporation, a Canadian energy start-up, announced it had raised $270 million from the American private equity firm Lime Rock Partners, The Wall Street Journal writes. WALL STREET JOURNAL

Carlyle Looks to Raise Debt and Equity  |  The Carlyle Group said it would raise both debt and equity in a move that reflects the favorable market conditions for financing and the firm’s plans to expand, The Wall Street Journal writes. WALL STREET JOURNAL

HEDGE FUNDS »

Convicted SAC Trader Loses His Business School Degree  |  Mathew Martoma, the former SAC Capital Advisors trader convicted of insider trading in February, can no longer say he has a degree from Stanford Graduate School of Business. The business school now says it has not awarded a degree to Mr. Martoma. DealBook »

LinkedIn Co-Founder Defends eBay Against Icahn  |  Reid Hoffman criticized Carl C. Icahn’s campaign against eBay, arguing that the assault is rooted in short-term thinking that runs counter to Silicon Valley’s focus on long-term growth. DealBook »

Riverbed Chief Chastises Activist Shareholders  |  Jerry Kennelly, the founder and chief executive of Riverbed Technology, said his company had not received any “credible bids” from buyout firms and should not have been targeted by activist shareholders, including the hedge fund Elliott Management, Bloomberg News reports. BLOOMBERG NEWS

I.P.O./OFFERINGS »

Virgin America Aims for I.P.O. in 2nd Half of 2014  |  Virgin America, the airline that counts Richard Branson as an investor, thinks it may go public in the second half of the year, its chief executive told Reuters on Wednesday. REUTERS

A Deal Maker’s Deal of a Lifetime  |  I.P.O. investors will be granting Ken Moelis, founder of the investment bank Moelis & Company, an exceptional degree of control for the opportunity to ride his coattails, Antony Currie writes in Reuters Breakingviews. DealBook »

Demand High for Danish Outsourcing Firm’s I.P.O.  |  ISS, the global services company based in Denmark, is said to have demand for all of the shares being sold in an initial public offering, valuing the company at as much as $5.8 billion, Bloomberg News writes, citing unidentified people familiar with the situation. BLOOMBERG NEWS

VENTURE CAPITAL »

Peek.com Raises $5 Million in New Financing  |  Peek.com, a start-up that plays both travel agent and tour guide, said on Wednesday that it had raised $5 million in a new fund-raising round. DealBook »

Amazon Chief Bezos Pours More Money Into Business Insider  |  The online news site Business Insider said it had raised $12 million in new funding from investors including Jeff Bezos, the chief executive of Amazon, The Wall Street Journal reports. The latest funding round is Business Insider’s largest so far and brings the total raised over seven years to $30 million. WALL STREET JOURNAL

Google Capital Buys Minority Stake in Auction.com  |  Google Capital, the new investment arm of Google, has acquired a minority stake in the online property marketplace Auction.com for $50 million, The Financial Times writes. The 4 percent stake values the company at $1.2 billion. FINANCIAL TIMES

Winklevoss Twins to Fund Space Trip With Bitcoin  |  Cameron and Tyler Winklevoss, who have been strong proponents of Bitcoin, said on Wednesday that they were planning trips on Richard Branson’s Virgin Galactic, which allows people to travel to space for $250,000, New York magazine writes. The twins said they would pay for the trips with Bitcoin. NEW YORK MAGAZINE

LEGAL/REGULATORY »

Obama Budget Seeks to Eliminate Inversions  |  Deep in President Obama’s $3.9 trillion budget request is a proposal that would essentially forbid so-called inversions, a popular maneuver that allows United States companies to relocate and avoid paying millions of dollars in taxes. DealBook »

Justices May Limit Securities Fraud Suits  |  Supreme Court justices seemed to be leaning toward setting a higher bar for groups of investors to pursue claims they were misled, The New York Times writes. NEW YORK TIMES

New York Demands Data From Mortgage Firm Nationstar  |  New York State’s superintendent of financial services says his office has received “hundreds” of consumer complaints about problems related to Nationstar’s mortgage modifications, improper fees and lost paperwork. DEALBOOK

Plaintiffs in Suit Seek to Freeze Mt. Gox’s U.S. Assets  |  Customers of Mt. Gox are trying to freeze assets in the United States of the bankrupt Bitcoin exchange and its chief executive, Mark Karpeles, but they do not know where those assets are. DEALBOOK

For Bitcoin, Secure Future Might Need Oversight  |  To save their nascent currency, Bitcoin’s backers may be forced to alter their philosophy and embrace the same messy humans â€" auditors, insurers and even regulators â€" that the currency’s most ardent supporters have long abhorred, Farhad Manjoo writes in the State of the Art column in The New York Times. NEW YORK TIMES

Singapore Police Investigating ‘Unnatural’ Death of American Head of Bitcoin Trader  |  Singapore police are investigating what they have called the “unnatural” death of a 28-year-old American woman who ran a small exchange called First Meta that traded virtual currencies, including Bitcoins. NEW YORK TIMES

Fed Confirms Weather’s Effect on Economic Slowdown  |  The Federal Reserve on Wednesday said in its “beige book” report that the severe weather that occurred across the United States held back economic growth in January and February. NEW YORK TIMES

Vivendi Gets Bids for SFR From Bouygues and Altice

LONDON - The French media and telecommunications conglomerate Vivendi said on Thursday that it had received offers for SFR, its cellphone unit, that could value the business at more than $20 billion.

The French construction and telecoms company Bouygues said that it had offered 10.5 billion euros, or $14.4 billion, for 49 percent of SFR, in a deal that would allow Vivendi to retain a 46 percent stake in the French carrier. Bouygues’ minority shareholder, JCDecaux, would hold the remaining shares of SFR.

In a rival bid, the cable and cellphone operator Altice also has offered around $20 billion to buy SFR through a mixture of debt financing, equity and assets, according to people with direct knowledge of the deal, who spoke on the condition of anonymity because they were not authorized to speak publicly.

The proposals, which were submitted late on Wednesday, pit the French entrepreneur Patrick Drahi, who since 2002 has built Altice into a global operation with cable and cellphone assets in Europe and the Caribbean, against Martin Bouygues, the billionaire who runs Bouygues.

In a statement, Vivendi, which is looking to increase its capital reserves to expand its existing media assets like the pay-TV provider Canal Plus, said it would consider the two offers for SFR. Previously, the French company had planned to spin off the cellphone provider through an initial public offering.

Analysts warned, however, that antitrust officials may take a hard line on the proposed takeover, as they seek to protect French consumers’ choice over their cellphone contracts.

That is particularly true for Bouygues, which is currently France’s third largest carrier, as its proposal would lead to reduction in the number of operators active in France. The country’s largest provider, Orange, has faced stiff competition from low-cost rivals that have offered cheap deals to woo customers away from the former state monopoly.

Under its proposals, Bouygues said that it planned to list the combined cellphone unit through an initial public offer that would allow Vivendi to sell a further 15 percent stake in SFR. The plan would value its offer at €19 billion, the French company said in a statement.

As Altice, which owns a 40 percent stake in the French cable provider Numericable, does not have a cellphone business in France, the company believes it will have an easier task of convincing antitrust authorities to back its offer, according to people with knowledge of the company’s strategy.

As part of its rival bid, Altice is offering Vivendi around €11 billion in cash, proceeds from a €750 million capital increase from shareholders and roughly €3 billion in Numericable assets, the people added.

The European telecoms sector has become rife with dealmaking. Announced takeovers involving European telecoms companies reached $194 billion in the 12 months through March 6, a four-fold increase compared to the same period in year earlier, according to the data provider Thomson Reuters. The figure is somewhat skewed because of Vodafone’s $130 billion sale of its 45 percent stake in Verizon Wireless last year.

Lloyds to Exchange Up to $8.36 Billion of Bonds

LONDON - Lloyds Banking Group said on Thursday that it would exchange for other securities as much as 5 billion pounds, or about $8.36 billion, in bonds it issued to shore up its capital during the financial crisis.

The British bank, which is partially owned by the British government, has about £8.4 billion in so-called enhanced capital notes outstanding.

Lloyds said it would offer to swap those bonds for new securities or, for certain eligible investors, for cash. The exchange will allow the bank to better comply with new capital requirements adopted by the European Commission, the bank said.

“Whilst still uncertain, the group’s management believes recent developments resulting in higher capital requirements for banks, including a changed definition of core capital, make it likely that the ECNs will not provide going concern benefit under future stress tests,” Lloyds said in a statement.

The bank said it would take a one-off accounting charge of about £1 billion in the first half of 2014 if all of the new securities are issued.

Lloyds has seen its financial outlook improve and is seeking to move beyond its legacy issues.

In February, Lloyds said it returned to a statutory profit before tax of £415 million in 2013, an important measure for the lender. The bank last posted a statutory profit in 2010.

For the full year, Lloyds reported a loss of £838 million, compared with a loss of £1.47 billion in 2012.

The British government, which provided the Lloyds Banking Group with a £17 billion bailout during the financial crisis, holds a 33 percent stake in the bank and has made selling its remaining holdings a priority. The government sold about 6 percent of its stake in September.