Hurt in Crisis, TPG Pursues Smaller Deals

Largest TPG-Backed Leveraged Buyouts

VALUE, IN BILLIONS TARGET BUYER INVESTORS ANNOUNCED

Source: Thomson Reuters
$44.4	TXU Corp	TXU Corp SPV	Morgan Stanley; Citigroup; Lehman Brothers Holdings; Kohlberg Kravis Roberts; Texas Pacific Group and Goldman Sachs	Feb. ’07
27.6	Harrah’s Entertainment	Investor Group	Texas Pacific Group and Apollo Management	Oct. ’06
27.3	Alltel Corp	Atlantis Holdings	TPG Capital and GS Capital Partners	May ’07
17.4	Freescale Semiconductor	Firestone Holdings	Texas Pacific Group; Blackstone Group; Permira Beteiligungsberatung and The Carlyle Group	Sept. ’06
13.4	Univision Communications	Umbrella Holdings	Saban Capital Group; Madison Dearborn Capital; Providence Equity Partners; Texas Pacific Group and Thomas H Lee	June ’06
10.8	SunGard Data Systems	Investor Group	Silver Lake Management; Bain Capital; Blackstone Group; GS Capital Partners; Kohlberg Kravis Roberts; Providence Equity Partners and Texas Pacific Group	Mar. ’05
9.4	Biomet	LVB Acquisition	GS Capital Partners; Blackstone Group; Kohlberg Kravis Roberts and Texas Pacific Group	Dec. ’06
7.2	Avaya	Sierra Merger	Silver Lake Management and TPG Capital	June ‘ 07

When the financial crisis erupted in 2008, TPG suffered more than most private equity firms, having invested in three of that era’s most troubled deals.

Now, with stock markets performing well and mergers back in vogue, TPG is coming back, largely with much smaller deals and a recalibrated approach to private equity.

The experience of the 22-year-old private equity stalwart offers a window into how private equity firms are now seeking to become more nimble.

Private equity firms, whose industry grew up in the 1980s, typically raise money from large investors, like public pension funds and university endowments, and use that cash â€" with a fair amount of borrowed money, or leverage â€" to buy entire companies.

For TPG, which still has several soured deals from the pre-crisis era in its portfolio, including huge losses on a troubled energy utility, the new approach involves moving beyond the gigantic acquisitions. Instead, it is looking more at buying minority stakes â€" common in the world of venture capital but rarer in the realm of buyout titans.

None of TPG’s transactions since the financial crisis have topped the $5.2 billion that TPG and two partners spent in 2009 for IMS Health, which on Monday disclosed more information about its coming initial public offering.

The two most prominent deals that TPG has made or is poised to make of late are relatively small: It co-led a $285 million investment in the car ride start-up Uber and is in talks to lead a huge investment in Airbnb.

Its big rivals, including the Blackstone Group and Kohlberg Kravis Roberts, have gone public in recent years, but TPG has remained privately held. Internally, TPG executives draw a comparison to Goldman Sachs, which was the last of the big investment banks to go public, and say they are keeping a close eye on the successes and failures of their publicly traded rivals.

As it considers an eventual initial public offering, TPG is also taking stock of its own battle scars. In conversations with investors in its funds, it is already portraying itself as a wiser firm than it was during the heady days before the crisis.

“We have returned to what private equity does well, after a period of time when the industry did a lot of large deals with mixed results,” James Coulter, a co-founder of TPG, said in a meeting this year with the Oregon Investment Council, which sets investment policy for the Oregon Public Employees Retirement Fund. “We’ve stayed away from consortiums, public-to-privates and some of the things that have been hot in the marketplace.”

TPG is making that pitch as it raises about $2 billion for a new fund to connect its current buyout fund to its next one, which it may begin raising by the end of this year. The Oregon pension fund committed $700 million to the interim fund, and the Washington State Investment Board subsequently committed $600 million.

But Mr. Coulter, with David Bonderman, 71, TPG’s co-founder, faced tough questions from the Oregon council about the firm’s past stumbles.

Perhaps the biggest soured investment is the Texas energy company TXU, which the firm, with Kohlberg Kravis Roberts and Goldman Sachs, bought for $45 billion in 2007. Hailed at the time as the biggest leveraged buyout in history, the deal soon inspired superlatives of a different kind, as the company sank under the weight of a huge debt load and squabbling among creditors.

The utility, now known as Energy Future Holdings, is poised to file for bankruptcy protection in the next few weeks, according to people briefed on the matter. Unless its many creditors can come to an agreement on how to reorganize the company under Chapter 11, the case is likely to be among the costliest and most raucous bankruptcies on record.

TPG and its partners, who bought the company as a bet on rising natural gas prices, are likely to recover little, if anything, in the bankruptcy filing.

Another investment, Caesars Entertainment, a giant casino operator that TPG bought in 2006 with Apollo Global Management and that subsequently struggled in the economic recession under a mountain of debt, is still in the red.

TPG’s portion of the investment, which more than doubled in value last year in a soaring stock market, has now produced a negative 13 percent internal rate of return, according to a year-end letter sent to investors.

And there was Washington Mutual. TPG led a group of investors in extending a $7 billion lifeline to the struggling bank in the spring of 2008. Just months later, the government seized WaMu, and TPG lost every penny.

Those losses have weighed on TPG. The firm’s fifth buyout fund, which includes investments in Energy Future Holdings and Caesars, showed a net internal rate of return of 1.18 percent as of Sept. 30, according to the Washington State Investment Board, an investor in the fund. By comparison, the average performance of similar funds was 6.97 percent, according to the consulting firm Cambridge Associates.

“In the bleakest, darkest moment, a lot of institutional investors and private equity managers said there’s got to be something else,” said Andrea Auerbach, the head of the United States private equity research team at Cambridge Associates. “Growth equity, or minority investments in growing companies or sectors that are growing faster than the overall economy, it’s become mainstream.”

TPG’s buyout side has stayed busy. On Friday, it announced a deal to acquire a warranty insurance company for $1.5 billion. And within two weeks the firm will sell more than eight million shares of the prescription data provider IMS Health in an I.P.O. If IMS sells its stock at the high end of its expected range, $21 a share, TPG stands to collect as much as $300 million by selling part of its stake.

But TPG’s most prominent deal activity of late lies far away from the world of traditional leveraged buyouts. Instead, its growth-capital arm has been involved in sometimes unusual investments in fast-growing start-ups.

Last summer, TPG Growth united with Google’s venture capital division to pour $258 million into Uber, the car service, and Mr. Bonderman joined the start-up’s board. The round valued Uber at $3.5 billion, making it one of the more valuable elite start-ups. More intriguingly, TPG Growth is in talks to raise more than $400 million for Airbnb in a round that would value the home-sharing company at an astonishing $10 billion, people briefed on the matter have said, making it worth more than the 57-year-old Hyatt hotel chain.

Neither investment is a sure bet. Uber and Airbnb face many legal obstacles from local governments and other regulators skeptical of their business models. Those hurdles appear unlikely to faze TPG, which is no stranger to investing in companies facing potential government action. In any event, TPG appears to think it can perform better by sticking with smaller transactions. In a sign of its scaled-down ambitions, its coming buyout fund is expected to be no larger than $12 billion, compared with the $19 billion fund it previously raised in 2008.

“In investing, you will from time to time make mistakes,” Mr. Coulter said in the meeting with the Oregon Investment Council. “But the most important thing to do is learn from the mistakes.”

A Question of What’s a Reasonable Reward

Earlier this month, Coca-Cola sent out its annual report and proxy statement to shareholders.

The red-and-white report was relatively predictable. Until you get to Page 85.

That’s the page that stopped an analyst for David Winters, a longtime money manager and founder of Wintergreen Advisers, in his tracks.

Doing a little quick math, he determined that the company planned to award stock worth about $13 billion to its senior managers over the next four years, based on the company’s current stock price. Getting out his calculator, his analyst estimated that between the proposed compensation plan and a previous plan, the company had allocated as much as $24 billion toward stock-based rewards for its senior people.

“I just couldn’t believe it,” said Mr. Winters, a longtime Coco-Cola shareholder with about 2.5 million of the company’s shares in his fund. “I was so stunned.”

So stunned that late on Friday, Mr. Winters sent a letter, which he released publicly, to Coca-Cola’s shareholders and its board. Coca-Cola has disputed some of his calculations, but Mr. Winters still says he sees the plan as excessive.

“We can find no reasonable basis for gifting management 14.2 percent of the share capital of Coca-Cola, worth $24 billion at today’s share price. No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation,” he wrote. “This compensation plan appears to place the economic well-being of management far ahead of the interests of the company’s owners.”

The compensation plan requires shareholder approval, so the company’s annual meeting could be a little carbonated.

Mr. Winters also sent a separate letter to one of Coke’s biggest and most influential investors, Warren E. Buffett, who controls 9.1 percent of the stock through Berkshire Hathaway’s holdings.

“You have often decried how excessive compensation is so difficult to rein in precisely because shareholders have no direct voice in the negotiation with management and because compensation committees are often comprised of lap dogs rather than Dobermans,” he wrote. “In this situation, with Berkshire as the largest shareholder of the company in question, you hold significant sway over the process.”

Mr. Buffett’s son Howard Buffett, whom his father has said will become the next chairman of Berkshire Hathaway if he ever retires, is on the board of Coca-Cola.

Mr. Winters, who is also a Berkshire Hathaway shareholder and a huge fan of Mr. Buffett, said he was dismayed by the proposed compensation plan because, “We want to own Coca-Cola forever” and that the compensation program “hurts the underlying investment case.” Despite knowing Mr. Buffett and several of the Coca-Cola’s board members personally, he said he felt a fiduciary duty to go public with his problems. “We can’t support this,” he said.

Coca-Cola, for its part, says Mr. Winters’s analysis “is misinformed and does not reflect the facts.”

It is hard to make an apples-to-apples comparison of Coca-Cola’s compensation program to its rivals, like Pepsi. Muhtar Kent, Coke’s chief executive, was paid $20.4 million last year, which was down 33 percent from the $30.5 million he was paid in 2012. In comparison, Indra Nooyi, PepsiCo’s chief, was paid about $12.6 million in 2013.

Coca-Cola said that the plan Mr. Winters criticized “is not limited to senior executives, but extends to a large group of employees and is important for incentive and retention. Approximately 6,400 were eligible in 2013. The amount of long-term equity compensation awards granted each year are within industry norms.”

If that is the case, each of Coca-Cola’s managers eligible would be entitled to, on average, a little more than $2 million each. Of course, the bonus money won’t be doled out equally.

In fairness, it is worth noting that Mr. Winters’s $13 billion and $24 billion figures are probably somewhat inflated. The calculation treats all shares â€" options and restricted shares â€" alike. Executives can cash in on options only if the stock price trades above the grant price.

Moreover, it is not likely that all of the current shares that Coca-Cola has allocated for compensation will be paid out. When an employee leaves the company, they forfeit restricted shares and options that had been granted to them. Those shares are included in Mr. Winters’s calculation.

Perhaps most important, Coca-Cola’s senior managers need to meet specific performance targets; if they don’t meet the targets, they don’t receive the shares. Mr. Kent, for instance, received 33 percent less in 2012 because the company didn’t meet its targets. That’s the way pay for performance is supposed to work.

A spokesman for Coca-Cola declined to comment beyond its public statement. Mr. Buffett also declined to comment.

Still, Mr. Winters argues that the compensation plan would dilute shareholders, whom he said had expected Coca-Cola’s share buyback program to make each share worth more, not less.

“By necessity, a large portion of the company’s growth in per-share earnings and value must come from shrinking the number of shares outstanding, so that each share is entitled to a larger share of the company’s profits. He wrote to the board, “Now instead of meaningfully reducing shares outstanding and growing value on a per-share basis, this share repurchase program will merely help to offset the new shares issued to management under the plan.”

According to Mr. Winters, Coca-Cola’s last compensation plan, in 2008, planned to issue 280 million shares, split-adjusted; the new proposed plan jumps to 340 million shares.

So, I asked Mr. Winters: How much should Coca-Cola pay its senior people? He paused for a moment. “I don’t know the answer,” he said. “But I know $24 billion is excessive.”

He added, “This is a 100-year-old company. They are the custodians of the secret formula.”

Then, perhaps pausing for effect, he said: “They should be well paid.” Just how well paid is up to shareholders.

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

David Einhorn Gets His Blogger

David Einhorn, the hedge fund manager, dropped a controversial lawsuit aimed at unmasking an anonymous blogger on the Seeking Alpha financial website, who had discussed one of his hedge fund’s stock positions before it was publicly announced.

Mr. Einhorn’s Greenlight Capital moved to discontinue the civil lawsuit at the same time it issued a statement in which it said the hedge fund had identified the blogger. In the statement, which did not name the blogger, Greenlight said it “has resolved the matter privately to our satisfaction.”

Jonathan Gasthalter, a spokesman for Mr. Einhorn, declined to comment beyond the statement.

It’s not clear how Greenlight managed to unmask the identity of Valuable Insights or what it intends to do next.

Colin Lokey, director of contributor success for Seeking Alpha, in a statement, said the website did not provide Greenlight with the identity of the blogger. He said the website remains committed to protecting the rights of its posters to remain anonymous if they desire.

“Greenlight dropped the suit of its own accord,” said Mr. Lokey. “We did not at any time disclose the author’s identity formally or informally, and at no time were our actions dictated by reaching a deal with Greenlight.”

David Korzenik, a lawyer for Seeking Alpha, did not immediately respond to a request for comment.

A New York state court judge had scheduled a hearing for April 1 on Greenlight’s motion to force Seeking Alpha to divulge the name of the blogger, known only as Valuable Insights. In February, Greenlight filed the lawsuit claiming that a Nov. 14 post by Valuable Insights on the financial website had interfered with the hedge fund’s strategy of buying shares of Micron Technology. In the lawsuit, the hedge fund argued that only a few people could have known that Greenlight was amassing a big stock position in Micron and that the fund wanted Seeking Alpha to divulge the name of the blogger so it could learn who had leaked the confidential information.

The lawsuit stirred controversy on Wall Street with some saying it was infringement on a bloggers right to free speech, while others saying Mr. Einhorn was protecting his right to keep his trading strategies secret.

Greenlight had wanted to keep the investment in Micron confidential until at least Nov. 21, when Mr. Einhorn publicly discussed it at a charitable event, where prominent money managers were invited to present their “best investment ideas.” To do that, the hedge fund filed a request for confidential treatment with the U.S. Securities and Exchange Commission, a move that enabled the $10 billion fund to delay disclosing the stock position in a regulatory filing.

In the November blog post, Valuable Insights hinted that a large hedge fund manager would soon to be disclosing a large stock position in Micron. In response to a reader comment wondering whether the manager was Mr. Einhorn, the blogger confirmed the reader’s guess.

Mr. Einhorn had wanted to keep his position in Micron quiet until he unveiled it as one of his “best ideas” at a charity event.

David Einhorn Gets His Blogger

David Einhorn, the hedge fund manager, dropped a controversial lawsuit aimed at unmasking an anonymous blogger on the Seeking Alpha financial website, who had discussed one of his hedge fund’s stock positions before it was publicly announced.

Mr. Einhorn’s Greenlight Capital moved to discontinue the civil lawsuit at the same time it issued a statement in which it said the hedge fund had identified the blogger. In the statement, which did not name the blogger, Greenlight said it “has resolved the matter privately to our satisfaction.”

Jonathan Gasthalter, a spokesman for Mr. Einhorn, declined to comment beyond the statement.

It’s not clear how Greenlight managed to unmask the identity of Valuable Insights or what it intends to do next.

Colin Lokey, director of contributor success for Seeking Alpha, in a statement, said the website did not provide Greenlight with the identity of the blogger. He said the website remains committed to protecting the rights of its posters to remain anonymous if they desire.

“Greenlight dropped the suit of its own accord,” said Mr. Lokey. “We did not at any time disclose the author’s identity formally or informally, and at no time were our actions dictated by reaching a deal with Greenlight.”

David Korzenik, a lawyer for Seeking Alpha, did not immediately respond to a request for comment.

A New York state court judge had scheduled a hearing for April 1 on Greenlight’s motion to force Seeking Alpha to divulge the name of the blogger, known only as Valuable Insights. In February, Greenlight filed the lawsuit claiming that a Nov. 14 post by Valuable Insights on the financial website had interfered with the hedge fund’s strategy of buying shares of Micron Technology. In the lawsuit, the hedge fund argued that only a few people could have known that Greenlight was amassing a big stock position in Micron and that the fund wanted Seeking Alpha to divulge the name of the blogger so it could learn who had leaked the confidential information.

The lawsuit stirred controversy on Wall Street with some saying it was infringement on a bloggers right to free speech, while others saying Mr. Einhorn was protecting his right to keep his trading strategies secret.

Greenlight had wanted to keep the investment in Micron confidential until at least Nov. 21, when Mr. Einhorn publicly discussed it at a charitable event, where prominent money managers were invited to present their “best investment ideas.” To do that, the hedge fund filed a request for confidential treatment with the U.S. Securities and Exchange Commission, a move that enabled the $10 billion fund to delay disclosing the stock position in a regulatory filing.

In the November blog post, Valuable Insights hinted that a large hedge fund manager would soon to be disclosing a large stock position in Micron. In response to a reader comment wondering whether the manager was Mr. Einhorn, the blogger confirmed the reader’s guess.

Mr. Einhorn had wanted to keep his position in Micron quiet until he unveiled it as one of his “best ideas” at a charity event.

Former F.B.I. Director Joins WilmerHale

Robert S. Mueller III, who was director of the Federal Bureau of Investigation for 12 years before stepping down in September, is joining the law firm WilmerHale as a partner.

He took the reins of the F.B.I. just a week before the Sept. 11 terrorist attacks on the United States. Under his leadership, the bureau transformed itself into a counterterrorism agency. In 2011, President Obama asked the Senate to extend Mr. Mueller’s tenure by two years - making him the longest-serving F.B.I. director since J. Edgar Hoover.

“Bob brings to the firm his broad range of experience as a career prosecutor, an ability to lead the most sensitive investigations, his steady hand in a crisis and unquestioned integrity,” Robert Novick, co-managing partner of WilmerHale, said in a statement.

Mr. Mueller has had a long career in government service. He served as the United States attorney in both San Francisco and Boston, and he was assistant attorney general in charge of the criminal division of the Justice Department.

A 1966 graduate of Princeton, he served with the Marines in Vietnam, where he was awarded the Bronze Star, the Purple Heart and the Vietnamese Cross of Gallantry. After he received a law degree at the University of Virginia in 1973, he joined the United States attorney’s office in San Francisco in 1976. He received a master’s in international relations from New York University in 1969.

In one of his few stints in private practice, Mr. Mueller was a partner at Hale & Dorr of Boston from 1993 to 1995, before the firm combined with Wilmer Cutler Pickering of Washington in 2004.

5 Former Madoff Aides Found Guilty of Fraud

A federal jury on Monday found five associates of the convicted swindler Bernard L. Madoff guilty on 31 counts of aiding one of the largest Ponzi schemes in history.

The case centered around whether or not the employees had committed securities fraud and other deceptive acts to knowingly mislead auditors and investors in Madoff Securities. The trial in the United States District Court in Manhattan went on for more than five months, making it one of the longest white-collar trials in recent memory.

Federal prosecutors made a case that two computer engineers, Jerome O’Hara and George Perez, helped Mr. Madoff pull off an enormous Ponzi scheme by knowingly creating computer programs that could create fake trades and records.

Prosecutors also alleged that Mr. Madoff’s portfolio managers Joann Crupi and Annette Bongiorno as well as the firm’s operations director, Daniel Bonventre, conspired in various ways to lie to customers, cheat on taxes and falsify records at Madoff Securities.

“These convictions, along with the prior guilty pleas of nine other defendants, demonstrate what we have believed from the earliest stages of the investigation: this largest-ever Ponzi scheme could not have been the work of one person,” said Preet Bharara, the United States attorney in Manhattan, whose office brought the case. “The trial established that the Madoff fraud began at least as far back as the early 1970s, decades before it came to light,” he said. “These defendants each played an important role in carrying out the charade, propping it up, and concealing it from regulators, auditors, taxing authorities, lenders, and investors.”

While lawyers for the defense claimed that their clients did not knowingly participate in any of the deception, prosecutors made the case that the defendants were well aware of the fraud taking place at Mr. Madoff’s firm. That included the knowledge, for example, that Mr. Madoff’s firm was providing a “second set of books and records” to the Securities and Exchange Commission.
The prosecution’s case centered around the testimony of Frank DiPascali, Mr. Madoff’s right-hand man who pleaded guilty in 2009. Mr. DiPascali has been cooperating with federal prosecutors in a bid for a more lenient sentence. He is currently facing up to 125 years in prison. Lawyers for the five  former employees had argued that Mr. DiPascali’s self-interest undermined his credibility.

Madoff Securities collapsed in 2008 after Mr. Madoff confessed to the Ponzi scheme. He is currently serving 150 years in prison.

Deducting the Costs of a Government Settlement

Taxes are inevitable, but not so deductions. And that has become an issue of late as the courts weigh in on whether a taxpayer â€" either an individual or a company â€" can deduct the costs related to a government enforcement action.

A recent decision from the Court of Federal Claims in Washington looked at whether the forfeiture of the proceeds from insider trading qualifies for a deduction, raising the question of how the tax code may be seen as indirectly subsidizing wrongdoing.

The law allows for the deduction of “any loss sustained during the taxable year and not compensated for by insurance or otherwise.” But another provision specifically excludes “any fine or similar penalty paid to a government for the violation of any law.” Criminal fines imposed by a court are clearly not deductible, but it is not so easy to categorize the treatment of orders requiring the forfeiture of the proceeds derived from criminal activity.

Joseph P. Nacchio, the former chief executive of Qwest Communications, and his wife challenged a decision by the Internal Revenue Service that denied them a refund of nearly $18 million for capital gains taxes they paid when he sold shares of the company in 2001. Six years later, he was convicted of insider trading for those sales and ordered to forfeit more than $44 million as the proceeds of his crime.

Having paid taxes on the profits, Mr. Nacchio took the common sense approach that he shouldn’t have to pay taxes on earnings he later had to turn over because the forfeiture stripped him of the proceeds, generating the loss for tax purposes. The Internal Revenue Service denied his claim, however, by finding that the forfeiture operated as a “similar penalty” for his violation and, therefore, could not be deducted.

The government argued that allowing the refund would be against public policy by taking some of the sting out of a criminal conviction for fraudulent conduct. But the claims court relied on the Supreme Court’s statement in Commissioner v. Tellier that taxes are “not a sanction against wrongdoing.” So denying the deduction to increase the penalty for a violation was improper.

The claims court also rejected the I.R.S.’s argument that the forfeiture was similar to a fine because it came as the result of a criminal conviction. The court found that, unlike the 72-month prison term and $19 million fine imposed on Mr. Nacchio, “the forfeiture exclusively represented the disgorgement of Mr. Nacchio’s illicit net gain from insider trading.” So it was not a punishment.

The Supreme Court distinguished between forfeitures in criminal and civil cases in United States v. Bajakajian. The court noted that a civil forfeiture was not intended to punish a defendant but instead applied the legal fiction of punishing the property. As a result, it would not be considered a type of fine.

Criminal forfeiture, however, had traditionally been viewed as “part of the punishment imposed for felonies and treason in the Middle Ages and at common law.” Thus, a criminal forfeiture operates much the same as a prison sentence and fine.

Of course, the tax code does not always follow the same logic as other areas of the law. The claims court found that the forfeiture of Mr. Nacchio’s insider trading gains deprived him of the benefit of his illegal conduct, and thus was more an equitable remedy of disgorgement of ill-gotten gains than a punishment. So the amount could be deducted.

Another issue in the case was whether Mr. Nacchio actually believed he had the right to the profits from his trading, which is required by the tax law before he can deduct the forfeited money. The claims court concluded that this was an issue requiring a trial because it revolves around subjective intent, which requires testimony about his state of mind when selling the Qwest shares.

The issue of taking a deduction for the costs of a settlement is much more important for corporations, which have paid out billions of dollars in recent cases. There has been debate about whether the government effectively subsidizes those payments by allowing for a deduction from income when companies pay large civil settlements.

The $13 billion settlement that JPMorgan Chase reached with the Justice Department last November over its sales of residential mortgage-backed securities included a $2 billion penalty and another $7 billion in payments to states and federal agencies, including Fannie Mae and Freddie Mac. As DealBook reported, JPMorgan’s chief financial officer emphasized on the day the settlement was announced that te bank believed the $7 billion was tax deductible.

The Justice Department’s settlement with Toyota last week requires the company to forfeit $1.2 billion, described in the agreement as the proceeds of Toyota’s illegal activity in covering up defects in its vehicles. That type of payment would ordinarily be deductible because it was not a fine, but a provision in the deferred prosecution agreement provides that it “shall be treated as a penalty paid to the United States government for all purposes, including all tax purposes.”

Legislation has been introduced in the House and the Senate to prohibit taxpayers from deducting payments made in connection with a government investigation, lawsuit or settlement related to a violation of the law. That would probably knock out the deduction for future settlements like the one JPMorgan reached.

There is also the question whether companies and individuals should be treated the same, which the legislative proposals do.

When the government settles with a company, the amount paid is usually the product of negotiations and, at best, a rough estimate of the benefit the company obtained from illegal conduct. Toyota’s $1.2 billion forfeiture, for instance, is described as its gains from a wire fraud scheme to deceive car buyers and the general public. But there is no specific calculation in the charging documents of the benefits the company received by covering up the vehicle defects.

A large company will have multiple revenue streams, and separating out illegitimate gains from normal profits may be impossible. So prohibiting a tax deduction can be part of a calculation to achieve rough justice in resolving a case.

Individuals, however, have much more clearly identifiable sources of income tied to illegal conduct, like increased bonuses or profits from the sale of inflated shares. For them, a forfeiture is closely tied to their actual gains, like the $44 million that Mr. Nacchio realized from the sales that were found to be based on material nonpublic information.

The calculation of a defendant’s gain does not usually incorporate the taxes the person paid on the money received. So refusing to refund that amount is much more likely to appear to be unfair. If legislation is necessary to preclude the deduction of settlements, an exception can be included to let a taxpayer like Mr. Nacchio show that he ought to get back what he paid to the government on money later forfeited.

Rich Price, Strong Potential in Payments Company Buyout

Private equity has prospered investing in essential modern infrastructure like cable networks.

The $3 billion-plus sale of Nets in Denmark shows that buyout firms are just as keen to buy into the world’s financial plumbing. Advent International and Bain Capital already own WorldPay, a big payments processor which Royal Bank of Scotland sold as penance for receiving state aid. Now the two have partnered with Danish pension giant ATP to buy Nets, WorldPay’s Nordic equivalent.

An enterprise value of 17 billion Danish crowns ($3.1 billion) equates to a rich 12.4 times earnings before interest, taxes, depreciation and amortization, or Ebitda,  using figures previously reported by TRLPC, or an even fuller 12.8 times if a 498 million crown dividend is included. The buyers reckon the multiple is closer to 11 times adjusted Ebitda for the last 12 months, people familiar with the matter say. By conventional buyout standards that is still pretty full - albeit in line with listed American peers like Global Payments, Heartland Payment Systems, TSYS and Vantiv.

Still, there are four reasons to believe leveraged buyouts can generate decent returns in this business - hence the competitive auction for Nets. First, these assets are mainly disposals from distracted corporate owners. Private equity can’t get enough of “carve-outs” like this. Nets belonged to 186 banks, who were also its customers. That was a recipe for stasis. New owners can speed up decision-making and start focusing on profitability, much as stock exchanges did upon floating.

Second, handling bank-card payments is a vital, utility-like function. Cash flows are strong and predictable, and equity returns can be easily amplified by leverage. Net debt will be about 5.5 times Ebitda in this case.

Third, there is growth potential. Payments technology is evolving fast as notes, coins and cheques fall out of favour.

Finally, buyout firms have already accumulated know-how in this sector. Advent put $561 million in cash into Vantiv in 2009; since a 2012 flotation it has banked about $1.8 billion, before expenses, from selling stock in the United States company. Processing those payments must have made this latest deal an easier sell at the investment committee.

Quentin Webb is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Rabobank Names New Executive Chairman

LONDON - The Dutch lender Rabobank said on Monday that its supervisory board had nominated Wiebe Draijer to serve as its new executive chairman after the bank’s former top executive resigned down because of a scandal involving the manipulation of global benchmark interest rates.

Piet Moerland, the chairman of Rabobank’s executive board, stepped down in October after Rabobank admitted to criminal wrongdoing by its employees and agreed to pay more than $1 billion in criminal and civil penalties for its role in setting the London interbank offered rate, or Libor, and other global interest rate benchmarks.

Rinus Minderhoud, a member of the bank’s supervisory board, has been serving as interim executive chairman since Mr. Moerland’s departure.

Mr. Draijer, 48, is a former consultant with McKinsey & Company and is currently president of the Social and Economic Council of the Netherlands, which advises the government on national and international social and economic policy.

“With Wiebe Draijer on board, we will have an all-round chairman of the executive board,” said Wout Dekker, the chairman of Rabobank’s supervisory board. “In view of his background and personality, we have found a perfect match. Rabobank will benefit from his industrial and strategic expertise and his societal leadership.”

Mr. Draijer’s appointment has been submitted to Dutch regulators for review.

Rabobank started out as an agriculture cooperative in the Netherlands in the late 19th century and has become the country’s biggest lender.

As part of the settlement with regulators in the United States, Britain and the Netherlands, Rabobank entered into a deferred prosecution agreement; it will avoid criminal charges as long as it continues to cooperate with investigators and stays out of further trouble.

Mr. Moerland stepped down in light of the findings of the investigations and said at the time that he understood and shared “the sense of indignation that the findings of the Libor and Euribor investigations will cause.”

“I wish to send a strong message on behalf of the bank and on behalf of the executive board: We sincerely apologize for, and strongly condemn, this inappropriate behavior,” he said at the time.

This post has been revised to reflect the following correction:

Correction: March 24, 2014

An earlier version of this article misspelled the surname of a former Rabobank executive chairman in one instance. He is Piet Moerland, not Moreland.

Monday Markets

United States stock index futures were higher on Monday morning. But European markets were lower as President Obama and the leaders of the Group of 7 nations prepared to meet in The Hague over the situation in Crimea. London stocks were down 0.5 percent, while German stocks were off 0.7 percent. Also weighing on markets was a preliminary Chinese purchasing managers’ index from HSBC for March that was weaker than expected.

Blackstone to Reduce Stake in SeaWorld

The Blackstone Group is reducing its stake in SeaWorld Entertainment, almost a year after taking the theme park operator public.

Blackstone plans to sell 15 million shares of SeaWorld in a secondary offering, according to a prospectus filed on Monday. At Friday’s closing price of $33.17 a share, the offering would be worth $498 million.

The deal will allow Blackstone to realize additional profit from its investment in SeaWorld, which it bought for $2.3 billion in 2009. Last April, the company was valued at $2.5 billion in its initial public offering, with its shares priced at $27. Blackstone sold shares in the I.P.O. but retained a majority stake.

Now, Blackstone, which currently has a 42.8 percent stake in SeaWorld, is expected to wind up with a stake of 25 percent after the latest offering. If the underwriters exercise an option to buy additional shares, the private equity firm would have a 22.5 percent stake, according to the prospectus.

As part of the deal, the company is considering buying 1.75 million shares of its stock directly from Blackstone in a private transaction.

SeaWorld, based in Orlando, Fla., has contended with several challenges since its stock market debut. Last summer, the company went on the defensive after a documentary, “Blackfish,” raised troubling questions about its treatment of orca whales in captivity.

Several weeks after the film was released, SeaWorld cut its ticket prices after a decline in attendance, and the stock price suffered.

In December, Blackstone sold 18 million shares in a secondary offering, at a price of $30 a share. SeaWorld bought 1.5 million shares in that deal.

The latest offering is being underwritten by Goldman Sachs and JPMorgan Chase.

Morning Agenda: A Top JPMorgan Banker Resigns

Fang Fang, one of JPMorgan Chase’s top deal makers in China and a focus of the United States government’s investigation into the bank’s hiring practices in China, is resigning, Neil Gough writes in DealBook. Mr. Fang announced his decision in an internal memo sent to employees on Monday.

Mr. Fang was one of several JPMorgan executives whose emails discussing hiring practices were turned over to authorities by the bank as part of a federal bribery investigation in the United States that is looking into the bank’s “Sons and Daughters” hiring program. Neither Mr. Fang nor any JPMorgan executives have been accused of wrongdoing as a result of the United States investigation.

ICAHN TO GET 3 MORE SEATS ON HERBALIFE BOARD  |  Herbalife, the besieged nutritional supplements company, said on Monday that it had renegotiated its agreement with Carl C. Icahn, allowing him three additional seats on its board, which would bring his representation to five seats. Mr. Icahn currently controls a 16.8 percent stake in the company.

With Herbalife, Mr. Icahn is taking on a rival, William A. Ackman, who has made a $1 billion bet against the company, declaring that it is a pyramid scheme and arguing that it is at risk of being shut down by federal regulators.

CREDIT RATINGS STILL LOOM LARGE  |  After the 2008 financial crisis, the Dodd-Frank financial reform law directed the Securities and Exchange Commission to regulate credit rating agencies, whose high grades on complex mortgage securities contributed to the collapse of the financial system. Now, some investor advocates are hoping that the S.E.C. will toughen the rules, which are still not final, or start over, Gretchen Morgenson writes in the Fair Game column.

Scrutiny after the financial crisis revealed that the agencies had not only inflated the ratings for mortgage securities, but had also been paid by the very issuers whose securities they rated. The slow pace of regulatory change is especially baffling because Dodd-Frank directed the S.E.C. to combat these practices back in 2010. And while the S.E.C. did issue new rules, many continue to be frustrated with weaknesses in the proposed regulations. For their part, the rating agencies say they have improved their systems and can manage the conflicts of interest.

Ms. Morgenson writes: “The root of the rating-agency problem, of course, is an overreliance on these grades throughout the financial system. Institutional investors who are too lazy to assess a security lean on ratings, and financial regulators rely on them when writing their rules.”

TREMORS AT PIMCO  |  Pimco, the giant asset manager, “has been attracting attention for all the wrong reasons,” Jeff Sommer writes in the Strategies column. For one, investors have been removing assets from the firm’s flagship Pimco Total Return bond fund, managed by William H. Gross, Pimco’s founder. But perhaps more damaging has been the scrutiny directed at the firm’s corporate culture since Mohamed A. El-Erian, the chief executive and Mr. Gross’s heir apparent, announced in January that he was resigning to spend time with his family and to work on projects like writing a book.

Since Mr. El-Erian announced his departure, many have raised questions about Mr. Gross’s leadership style and his fund’s recent performance. And while some have called Mr. Gross a “genius,” others have indicated that he oversees his firm with a heavy hand. For many investors, including the Florida Retirement System Pension Plan, the most relevant question is whether the shake-up is affecting the performance of Pimco funds. But despite these latest troubles, Mr. Sommer writes, “The bond king’s investing talent isn’t really in doubt; his ability to run a happy and collegial workplace is.”

ON THE AGENDA  |  The Purchasing Managers’ Index for March is out at 9:45 a.m. Jeremy C. Stein, a Fed governor, speaks in Washington at 9 a.m. Richard W. Fisher, the president of the Dallas Fed, speaks in London at 1:45 p.m. The Senate meets to consider a bill on Ukraine assistance along with Russia sanctions. Biz Stone, a co-founder of Twitter, is on CNBC at 10 a.m. Robert B. Zoellick, a former president of the World Bank, is on CNBC at 3:30 p.m.

MURKY BEGINNINGS IN THE SILK ROAD CASE  |  Last May, federal prosecutors in Maryland indicted a man known as Dread Pirate Roberts in a suspected murder-for-hire plot. It turns out that the indictment was the quiet beginning to a criminal case against Ross W. Ulbricht, the man who federal prosecutors contend is the mastermind behind the notorious Silk Road online marketplace for illegal drugs and hacked credit card numbers, Matthew Goldstein writes in DealBook.

The three-count “John Doe” indictment was unsealed recently by the United States attorney for Maryland, whose office filed another indictment against Mr. Ulbricht that identified him by name on Oct. 1, the day the F.B.I. arrested him at a library in San Francisco. The court filing helps to fill in some gaps in the timeline of the federal government’s undercover investigation into Silk Road. But despite some clues, including information found on a server in Iceland, it still remains a mystery how the F.B.I. and other law enforcement officials working on the investigation were able to unmask Mr. Ulbricht as Dread Pirate Roberts.

“Mr. Ulbricht’s case has garnered more attention than the average drug-trafficking case, not only because of the sensational nature of the murder-for-hire plot but also because Silk Road accepted only Bitcoin as payment and operated in the hidden corners of the Internet accessible only through a special software system,” Mr. Goldstein writes, adding, “Some Bitcoin proponents are following Mr. Ulbricht’s case closely out of fear that it will taint the digital currency as primarily a vehicle for criminals to engage in illegal activity on the Internet with a high degree of anonymity.”

 

Mergers & Acquisitions »

Nokia Handset Sale to Microsoft Delayed  |  Microsoft said on Monday that its $7.5 billion takeover of Nokia’s handset business would now close in April. The deal had been expected to be completed by the end of March. DealBook »

Madison Square Garden Buys Stake in Indie Film Bastion  |  Tribeca Enterprises, the Manhattan-based independent film concern co-founded by Robert De Niro, has agreed to sell a 50 percent stake to the Madison Square Garden Company in a deal that values Tribeca at $45 million, The New York Times reports. NEW YORK TIMES

Standard Life in Advanced Talks to Buy Phoenix Asset Management Unit  |  The British life insurance and pensions group Standard Life has announced it is in “exclusive and advanced” talks to buy Ignis Asset Management from Phoenix Group Holdings. REUTERS

Battle for SFR Puts Vivendi in Driver’s Seat  |  The bidding war between two eager rivals for the mobile phone unit SFR gives Vivendi leverage to extract a better deal, Quentin Webb writes for Reuters Breakingviews. DealBook »

Acquisition by Media General Creates Second-Largest Local TV Owner  |  Media General is paying $1.6 billion for LIN Media, another operator of local TV stations, and will run 74 stations in 46 markets. Only Sinclair Broadcasting manages more stations. DealBook »

INVESTMENT BANKING »

Credit Suisse Reaches $885 Million Mortgage Settlement  |  The Swiss bank says it will take a charge of about $311.5 million to resolve claims it sold questionable loans to Fannie Mae and Freddie Mac. DealBook »

Banks Urge Young Analysts to Do the Unthinkable: Take Weekends Off  |  In an industry in which grueling schedules are embraced as a badge of honor, efforts to promote work-life balance reflect a significant change in corporate culture, Rachel L. Swarns writes in The Working Life column. NEW YORK TIMES

Banker Deaths in London Under Scrutiny  |  Coroners in London are preparing to investigate two recent apparent suicides by bankers, as unexpected deaths by finance workers around the world have raised concerns about mental health and stress levels in the industry, Bloomberg News reports. BLOOMBERG NEWS

Wall Street’s Ties to Putin Are Scrutinized  |  The crisis in Ukraine has led to calls for big banks to re-examine their ties to the annual St. Petersburg International Economic Forum. The attendance of chief executives from Goldman Sachs and Morgan Stanley is now in doubt, Bloomberg News reports. BLOOMBERG NEWS

PRIVATE EQUITY »

ATP and 2 Private Equity Firms to Buy Danish-Based Payments Company  |  The private equity firms Advent International and Bain Capital and the Danish pension fund ATP will pay about $3.1 billion in cash for Nets, a secure payment provider based in Copenhagen. DealBook »

TPG to Buy Warranty Insurance Firm for $1.5 Billion  |  The private equity firm TPG Capital said on Friday that it had agreed to buy the Warranty Group, which underwrites insurance contracts for product warranties. DealBook »

Clayton, Dubilier & Rice Said to Be Leading Bids for Dubai’s Mauser  |  The private equity firm Clayton, Dubilier & Rice is said to be the front-runner among four bidders for the packaging group Mauser, which is based in Germany and owned by Dubai International Capital, Reuters reports, citing unidentified people familiar with the situation. REUTERS

Carlyle’s Rubenstein Speaks on Proposed Tax Changes  |  David M. Rubenstein, the co-founder of the private equity firm Carlyle Group, discusses proposed changes in the carried interest tax on CNBC. CNBC

HEDGE FUNDS »

Ackman Close to Breaking Even on Herbalife Bet  |  William A. Ackman’s hedge fund, Pershing Square Capital Management, is close to breaking even on its bet against Herbalife after that company’s stock plummeted on news of an investigation by the Federal Trade Commission, Bloomberg News reports. BLOOMBERG NEWS

Largest British Hedge Funds Getting Bigger  |  Britain’s 20 largest hedge funds control 82 percent of the nation’s assets under management, Bloomberg Businessweek writes. BLOOMBERG BUSINESSWEEK

Australian Hedge Fund Manager to Join Financial Inquiry  |  Michael Hintze, the founder and chief executive of the hedge fund CQS, has been appointed to assist an inquiry into Australia’s financial system, Business Insider reports. BUSINESS INSIDER

I.P.O./OFFERINGS »

Candy Crush Saga Maker to Price I.P.O. on Tuesday  |  The maker of Candy Crush Saga, King Digital Entertainment, plans to price its initial public offering on Tuesday. The European game maker is hoping that the enormous success of its puzzle game will persuade investors to pay as much as $24 a share, valuing the company at $7.6 billion. NEW YORK TIMES

IMS Health Prepares for I.P.O.  |  IMS Health Holdings is in the final stages of preparing for its initial public offering, which could value the company at $7 billion, The Wall Street Journal writes. WALL STREET JOURNAL

Investors Look to Cambian I.P.O. for Signs of Sector’s Rehabilitation  |  A successful initial public offering for Cambian, one of Britain’s largest providers of care for those with behavioral and mental health problems, could indicate the sector’s rehabilitation and encourage other health care companies owned by private equity firms to go public, The Financial Times writes. FINANCIAL TIMES

VENTURE CAPITAL »

Start-Up Data Storage Firm Actifio Hits $1 Billion Mark  |  Actifio is poised to announce that it has raised $100 million in new financing, valuing the entire company at $1 billion. DealBook »

Birchbox, Seller of Beauty Products, Steps Out From Web With a Store  |  Birchbox, which has raised $12 million so far from a variety of venture firms, is opening a physical store as it takes aim at a full-blown shopping and lifestyle “experience,” The New York Times writes. NEW YORK TIMES

Name-Calling in the Virtual Playground  |  Secret is the latest social media platform to confront the tendency of anonymous chat to provide cover for bad behavior, the Bits blog writes. NEW YORK TIMES BITS

Mt. Gox Says It Has Found Missing Bitcoins Worth About $116 Million  |  Mt. Gox, the Tokyo-based Bitcoin exchange that filed for bankruptcy last month, said it had found 200,000 Bitcoins that were held in an “old-format” wallet, or digital storage file. DealBook »

LEGAL/REGULATORY »

Justice Department Names New Leader for Criminal Division  |  David O’Neil, a longtime Justice Department official, will assume the role of acting assistant attorney general on Monday, overseeing some major investigations into Wall Street and corporate misdeeds. DealBook »

Skadden to Pay $4.25 Million in Fletcher Bankruptcy Case  |  The trustee overseeing the bankruptcy of the investment firm once led by the flashy money manager Alphonse Fletcher Jr. has reached a $4.25 million settlement with the law firm Skadden, Arps, Slate, Meagher & Flom, which once represented Mr. Fletcher’s firm. DealBook »

Markets Could Be Underpricing Geopolitical Tension  |  “Markets have been sanguine about geopolitical risk for several years now, a phenomenon illustrated by the relaxed approach they have taken to Ukraine’s crisis,” Mohamed El-Erian, the former chief executive of Pimco, writes in The Financial Times. FINANCIAL TIMES

G.M.’s Bankruptcy Drawn Into Defect Inquiry  |  The nascent federal investigation into General Motors is looking in part into whether the automaker committed bankruptcy fraud by not disclosing defects that could lead to expensive future liabilities, The New York Times writes. NEW YORK TIMES

U.S. Official Lobbies for Trans-Atlantic Trade Pact  |  Completing a landmark trans-Atlantic trade agreement could help Europe wean itself from reliance on Russian energy supplies, the United States trade representative, Michael Froman, has said, The New York Times writes. NEW YORK TIMES

China Reaffirms Goal for Financial Markets  |  Vice Premier Zhang Gaoli of China said that Beijing would “introduce a modern and competitive market system with fair and open market rules.” REUTERS

Morning Agenda: A Top JPMorgan Banker Resigns

Fang Fang, one of JPMorgan Chase’s top deal makers in China and a focus of the United States government’s investigation into the bank’s hiring practices in China, is resigning, Neil Gough writes in DealBook. Mr. Fang announced his decision in an internal memo sent to employees on Monday.

Mr. Fang was one of several JPMorgan executives whose emails discussing hiring practices were turned over to authorities by the bank as part of a federal bribery investigation in the United States that is looking into the bank’s “Sons and Daughters” hiring program. Neither Mr. Fang nor any JPMorgan executives have been accused of wrongdoing as a result of the United States investigation.

ICAHN TO GET 3 MORE SEATS ON HERBALIFE BOARD  |  Herbalife, the besieged nutritional supplements company, said on Monday that it had renegotiated its agreement with Carl C. Icahn, allowing him three additional seats on its board, which would bring his representation to five seats. Mr. Icahn currently controls a 16.8 percent stake in the company.

With Herbalife, Mr. Icahn is taking on a rival, William A. Ackman, who has made a $1 billion bet against the company, declaring that it is a pyramid scheme and arguing that it is at risk of being shut down by federal regulators.

CREDIT RATINGS STILL LOOM LARGE  |  After the 2008 financial crisis, the Dodd-Frank financial reform law directed the Securities and Exchange Commission to regulate credit rating agencies, whose high grades on complex mortgage securities contributed to the collapse of the financial system. Now, some investor advocates are hoping that the S.E.C. will toughen the rules, which are still not final, or start over, Gretchen Morgenson writes in the Fair Game column.

Scrutiny after the financial crisis revealed that the agencies had not only inflated the ratings for mortgage securities, but had also been paid by the very issuers whose securities they rated. The slow pace of regulatory change is especially baffling because Dodd-Frank directed the S.E.C. to combat these practices back in 2010. And while the S.E.C. did issue new rules, many continue to be frustrated with weaknesses in the proposed regulations. For their part, the rating agencies say they have improved their systems and can manage the conflicts of interest.

Ms. Morgenson writes: “The root of the rating-agency problem, of course, is an overreliance on these grades throughout the financial system. Institutional investors who are too lazy to assess a security lean on ratings, and financial regulators rely on them when writing their rules.”

TREMORS AT PIMCO  |  Pimco, the giant asset manager, “has been attracting attention for all the wrong reasons,” Jeff Sommer writes in the Strategies column. For one, investors have been removing assets from the firm’s flagship Pimco Total Return bond fund, managed by William H. Gross, Pimco’s founder. But perhaps more damaging has been the scrutiny directed at the firm’s corporate culture since Mohamed A. El-Erian, the chief executive and Mr. Gross’s heir apparent, announced in January that he was resigning to spend time with his family and to work on projects like writing a book.

Since Mr. El-Erian announced his departure, many have raised questions about Mr. Gross’s leadership style and his fund’s recent performance. And while some have called Mr. Gross a “genius,” others have indicated that he oversees his firm with a heavy hand. For many investors, including the Florida Retirement System Pension Plan, the most relevant question is whether the shake-up is affecting the performance of Pimco funds. But despite these latest troubles, Mr. Sommer writes, “The bond king’s investing talent isn’t really in doubt; his ability to run a happy and collegial workplace is.”

ON THE AGENDA  |  The Purchasing Managers’ Index for March is out at 9:45 a.m. Jeremy C. Stein, a Fed governor, speaks in Washington at 9 a.m. Richard W. Fisher, the president of the Dallas Fed, speaks in London at 1:45 p.m. The Senate meets to consider a bill on Ukraine assistance along with Russia sanctions. Biz Stone, a co-founder of Twitter, is on CNBC at 10 a.m. Robert B. Zoellick, a former president of the World Bank, is on CNBC at 3:30 p.m.

MURKY BEGINNINGS IN THE SILK ROAD CASE  |  Last May, federal prosecutors in Maryland indicted a man known as Dread Pirate Roberts in a suspected murder-for-hire plot. It turns out that the indictment was the quiet beginning to a criminal case against Ross W. Ulbricht, the man who federal prosecutors contend is the mastermind behind the notorious Silk Road online marketplace for illegal drugs and hacked credit card numbers, Matthew Goldstein writes in DealBook.

The three-count “John Doe” indictment was unsealed recently by the United States attorney for Maryland, whose office filed another indictment against Mr. Ulbricht that identified him by name on Oct. 1, the day the F.B.I. arrested him at a library in San Francisco. The court filing helps to fill in some gaps in the timeline of the federal government’s undercover investigation into Silk Road. But despite some clues, including information found on a server in Iceland, it still remains a mystery how the F.B.I. and other law enforcement officials working on the investigation were able to unmask Mr. Ulbricht as Dread Pirate Roberts.

“Mr. Ulbricht’s case has garnered more attention than the average drug-trafficking case, not only because of the sensational nature of the murder-for-hire plot but also because Silk Road accepted only Bitcoin as payment and operated in the hidden corners of the Internet accessible only through a special software system,” Mr. Goldstein writes, adding, “Some Bitcoin proponents are following Mr. Ulbricht’s case closely out of fear that it will taint the digital currency as primarily a vehicle for criminals to engage in illegal activity on the Internet with a high degree of anonymity.”

 

Mergers & Acquisitions »

Nokia Handset Sale to Microsoft Delayed  |  Microsoft said on Monday that its $7.5 billion takeover of Nokia’s handset business would now close in April. The deal had been expected to be completed by the end of March. DealBook »

Madison Square Garden Buys Stake in Indie Film Bastion  |  Tribeca Enterprises, the Manhattan-based independent film concern co-founded by Robert De Niro, has agreed to sell a 50 percent stake to the Madison Square Garden Company in a deal that values Tribeca at $45 million, The New York Times reports. NEW YORK TIMES

Standard Life in Advanced Talks to Buy Phoenix Asset Management Unit  |  The British life insurance and pensions group Standard Life has announced it is in “exclusive and advanced” talks to buy Ignis Asset Management from Phoenix Group Holdings. REUTERS

Battle for SFR Puts Vivendi in Driver’s Seat  |  The bidding war between two eager rivals for the mobile phone unit SFR gives Vivendi leverage to extract a better deal, Quentin Webb writes for Reuters Breakingviews. DealBook »

Acquisition by Media General Creates Second-Largest Local TV Owner  |  Media General is paying $1.6 billion for LIN Media, another operator of local TV stations, and will run 74 stations in 46 markets. Only Sinclair Broadcasting manages more stations. DealBook »

INVESTMENT BANKING »

Credit Suisse Reaches $885 Million Mortgage Settlement  |  The Swiss bank says it will take a charge of about $311.5 million to resolve claims it sold questionable loans to Fannie Mae and Freddie Mac. DealBook »

Banks Urge Young Analysts to Do the Unthinkable: Take Weekends Off  |  In an industry in which grueling schedules are embraced as a badge of honor, efforts to promote work-life balance reflect a significant change in corporate culture, Rachel L. Swarns writes in The Working Life column. NEW YORK TIMES

Banker Deaths in London Under Scrutiny  |  Coroners in London are preparing to investigate two recent apparent suicides by bankers, as unexpected deaths by finance workers around the world have raised concerns about mental health and stress levels in the industry, Bloomberg News reports. BLOOMBERG NEWS

Wall Street’s Ties to Putin Are Scrutinized  |  The crisis in Ukraine has led to calls for big banks to re-examine their ties to the annual St. Petersburg International Economic Forum. The attendance of chief executives from Goldman Sachs and Morgan Stanley is now in doubt, Bloomberg News reports. BLOOMBERG NEWS

PRIVATE EQUITY »

ATP and 2 Private Equity Firms to Buy Danish-Based Payments Company  |  The private equity firms Advent International and Bain Capital and the Danish pension fund ATP will pay about $3.1 billion in cash for Nets, a secure payment provider based in Copenhagen. DealBook »

TPG to Buy Warranty Insurance Firm for $1.5 Billion  |  The private equity firm TPG Capital said on Friday that it had agreed to buy the Warranty Group, which underwrites insurance contracts for product warranties. DealBook »

Clayton, Dubilier & Rice Said to Be Leading Bids for Dubai’s Mauser  |  The private equity firm Clayton, Dubilier & Rice is said to be the front-runner among four bidders for the packaging group Mauser, which is based in Germany and owned by Dubai International Capital, Reuters reports, citing unidentified people familiar with the situation. REUTERS

Carlyle’s Rubenstein Speaks on Proposed Tax Changes  |  David M. Rubenstein, the co-founder of the private equity firm Carlyle Group, discusses proposed changes in the carried interest tax on CNBC. CNBC

HEDGE FUNDS »

Ackman Close to Breaking Even on Herbalife Bet  |  William A. Ackman’s hedge fund, Pershing Square Capital Management, is close to breaking even on its bet against Herbalife after that company’s stock plummeted on news of an investigation by the Federal Trade Commission, Bloomberg News reports. BLOOMBERG NEWS

Largest British Hedge Funds Getting Bigger  |  Britain’s 20 largest hedge funds control 82 percent of the nation’s assets under management, Bloomberg Businessweek writes. BLOOMBERG BUSINESSWEEK

Australian Hedge Fund Manager to Join Financial Inquiry  |  Michael Hintze, the founder and chief executive of the hedge fund CQS, has been appointed to assist an inquiry into Australia’s financial system, Business Insider reports. BUSINESS INSIDER

I.P.O./OFFERINGS »

Candy Crush Saga Maker to Price I.P.O. on Tuesday  |  The maker of Candy Crush Saga, King Digital Entertainment, plans to price its initial public offering on Tuesday. The European game maker is hoping that the enormous success of its puzzle game will persuade investors to pay as much as $24 a share, valuing the company at $7.6 billion. NEW YORK TIMES

IMS Health Prepares for I.P.O.  |  IMS Health Holdings is in the final stages of preparing for its initial public offering, which could value the company at $7 billion, The Wall Street Journal writes. WALL STREET JOURNAL

Investors Look to Cambian I.P.O. for Signs of Sector’s Rehabilitation  |  A successful initial public offering for Cambian, one of Britain’s largest providers of care for those with behavioral and mental health problems, could indicate the sector’s rehabilitation and encourage other health care companies owned by private equity firms to go public, The Financial Times writes. FINANCIAL TIMES

VENTURE CAPITAL »

Start-Up Data Storage Firm Actifio Hits $1 Billion Mark  |  Actifio is poised to announce that it has raised $100 million in new financing, valuing the entire company at $1 billion. DealBook »

Birchbox, Seller of Beauty Products, Steps Out From Web With a Store  |  Birchbox, which has raised $12 million so far from a variety of venture firms, is opening a physical store as it takes aim at a full-blown shopping and lifestyle “experience,” The New York Times writes. NEW YORK TIMES

Name-Calling in the Virtual Playground  |  Secret is the latest social media platform to confront the tendency of anonymous chat to provide cover for bad behavior, the Bits blog writes. NEW YORK TIMES BITS

Mt. Gox Says It Has Found Missing Bitcoins Worth About $116 Million  |  Mt. Gox, the Tokyo-based Bitcoin exchange that filed for bankruptcy last month, said it had found 200,000 Bitcoins that were held in an “old-format” wallet, or digital storage file. DealBook »

LEGAL/REGULATORY »

Justice Department Names New Leader for Criminal Division  |  David O’Neil, a longtime Justice Department official, will assume the role of acting assistant attorney general on Monday, overseeing some major investigations into Wall Street and corporate misdeeds. DealBook »

Skadden to Pay $4.25 Million in Fletcher Bankruptcy Case  |  The trustee overseeing the bankruptcy of the investment firm once led by the flashy money manager Alphonse Fletcher Jr. has reached a $4.25 million settlement with the law firm Skadden, Arps, Slate, Meagher & Flom, which once represented Mr. Fletcher’s firm. DealBook »

Markets Could Be Underpricing Geopolitical Tension  |  “Markets have been sanguine about geopolitical risk for several years now, a phenomenon illustrated by the relaxed approach they have taken to Ukraine’s crisis,” Mohamed El-Erian, the former chief executive of Pimco, writes in The Financial Times. FINANCIAL TIMES

G.M.’s Bankruptcy Drawn Into Defect Inquiry  |  The nascent federal investigation into General Motors is looking in part into whether the automaker committed bankruptcy fraud by not disclosing defects that could lead to expensive future liabilities, The New York Times writes. NEW YORK TIMES

U.S. Official Lobbies for Trans-Atlantic Trade Pact  |  Completing a landmark trans-Atlantic trade agreement could help Europe wean itself from reliance on Russian energy supplies, the United States trade representative, Michael Froman, has said, The New York Times writes. NEW YORK TIMES

China Reaffirms Goal for Financial Markets  |  Vice Premier Zhang Gaoli of China said that Beijing would “introduce a modern and competitive market system with fair and open market rules.” REUTERS