Judge Dismisses Examiner’s Suit Against New York Fed

A former bank examiner with the Federal Reserve Bank of New York lost a lawsuit against her former employer after a federal judge ruled she had not shown that she was fired over refusing to change certain findings about Goldman Sachs.

In her ruling on Wednesday, Judge Ronnie Abrams said that the examiner, Carmen M. Segarra, failed to prove that her firing was directly related to her finding that the bank had exhibited certain questionable ethics practices, including a lack of internal conflict-of-interest policies.

“The law only protects those who adequately allege that they have suffered retaliation for providing information regarding a possible violation of a ‘law or regulation,’ as distinct from what the law treats as advisory guidance,” the judge wrote. “Plaintiff has not done so here.”

Ms. Segarra raised alarm bells at the Fed after discovering that Goldman lacked any firmwide conflict of interest policies, and that it had not conducted an anti-money laundering analysis on one deal on which the bank had advised, according to the lawsuit.

Representatives for Ms. Segarra could not be reached.

“We’re pleased the suit was dismissed,” said Michael DuVally, a spokesman for Goldman Sachs. A spokeswoman for the Fed, Andrea Priest, declined to comment.

There is little debate that Ms. Segarra’s findings raised her superiors’ eyebrows. In March 2012, a group of Fed examiners voted to downgrade a confidential rating that the agency issues, a move that could have led to other disciplinary actions against the bank.

Weeks later, Ms. Segarra said in her lawsuit, her bosses asked her to change her conclusions about Goldman amid concerns that such conclusions could cause the firm substantial financial harm. Ms. Segarra claimed that she refused and was subsequently fired.

Ms. Segarra also said that the Fed and its employees “repeatedly” interfered with her investigation of Goldman Sachs, and that they had “irreparably damaged” her career in banking.

Ms. Segarra, who attended Harvard, Columbia and Cornell University Law School, began working as a senior bank examiner at the Fed in October 2011, according to court filings. Her supervisor assigned Ms. Segarra to look into Goldman Sachs’s conflict-of-interest policy, particularly the firm’s actions in a number of deals that had drawn regulatory scrutiny.

Soon after she joined the Fed, Ms. Segarra looked into Goldman’s advisory work on El Paso, an energy company which sold itself to Kinder Morgan in 2011. Goldman owned a large stake in Kinder Morgan, which led El Paso shareholders to argue that Goldman had an incentive to undervalue the company.

Goldman argued that it had acted above-board on the deal, but it led Ms. Segarra to press the bank for its firmwide conflicts-of-interest policy, only to learn that it had none.

While the Fed appeared to initially take Ms. Segarra’s concerns seriously, executives later began to doubt her conclusions. In one email in May of 2012, Michael Silva, one of the senior executives named in the suit, called Ms. Segarra’s claims “debatable at best, or alternatively, plainly incorrect.”

Private Equity Takes Steps Toward Wooing Smaller Investors

One of Wall Street’s most exclusive investment products is inching toward the mainstream.

Private equity funds â€" vast pools of capital that buy and sell entire companies â€" may become more accessible to smaller investors under a plan being contemplated by the company that runs the Nasdaq stock exchange, a person briefed on the matter said on Friday. The plan, still in its preliminary stages, envisions a market where current investors in private equity funds can sell their stakes to individuals whose net worth falls far below the customary threshold for such investments.

It is uncertain whether the new market will pass muster with regulators. Any effort to sell private equity fund stakes to smaller investors raises a number of thorny legal questions, private equity lawyers said. The Nasdaq OMX Group has not yet filed paperwork with the Securities and Exchange Commission and is aware that the S.E.C. may not approve the plan, the person briefed on the matter said.

The effort was first reported by The Wall Street Journal.

Whatever the outcome, the plan by Nasdaq points to a desire among some of the giants of private equity â€" names like Kohlberg Kravis Roberts, the Blackstone Group and the Carlyle Group â€" to allow smaller investors into their funds.

To do buyout deals, these firms typically raise billions from institutional investors like pension funds and university endowments, and from ultrawealthy individuals, who commit a minimum of millions of dollars. But the private equity barons see a new frontier for capital in the vast numbers of doctors, lawyers, engineers and other affluent professionals who may want to add tens of thousands of dollars in alternative investments to their more modest portfolios.

Some private equity experts argue that the push to gather smaller checks is a worrisome sign for the industry. Josh Lerner, a professor at Harvard Business School, said the returns for such investments tend to be lower than when big institutions invest.

“These are being sold to investors who are not necessarily the most sophisticated,” Mr. Lerner said. “The one rule of alternative investing is that the worst time to be doing the investing is when everyone is excited about doing it.”

K.K.R., for its part, is in talks with Nasdaq about its possible new market, according to two people briefed on the matter. But K.K.R.’s ultimate plans may go beyond any Nasdaq deal.

Earlier this year, in a little-noticed announcement, K.K.R. said it was in the process of developing a private equity product for individual investors. Details of that product are expected to be filed with regulators next week.

A K.K.R. rival, Carlyle, which is based in Washington, got a head start early last year, unveiling a novel way for individuals to commit as little as $50,000 to invest in buyout funds.

The Carlyle operation, which is handled by a third-party firm that charges an additional layer of fees, has now raised about $200 million, according to a person briefed on the matter who was not authorized to discuss it publicly. The investors are considered “accredited,” meaning their net worth exceeds $1 million, not including their primary home â€" a far lower bar than the industry standard.

The outreach to small investors is expected to continue. One investment firm, the Partners Group, recently called on regulators to define rules for allowing participants in 401(k) plans to invest in private equity. And Carlyle may have similar ambitions.

“Nonaccredited investors â€" people who are not qualified to be in private equity today â€" will be able to go into private equity,” David M. Rubenstein, a co-founder and co-chief executive of Carlyle, said at a conference earlier this year.

“Everybody will recognize that private equity is mainstream,” he added. “It’s not just an alternative thing.”

Regulators are sure to scrutinize any innovations.

One major obstacle stems from a law called the Investment Company Act of 1940. Private equity funds are able to avoid registering under that law by limiting their investors to “qualified purchasers,” which includes individuals with at least $5 million in investments. It is not clear whether the market contemplated by Nasdaq would be able to allow “accredited” investors, who have a lower net worth, to participate.

Carlyle’s solution to this problem was to work with the third-party firm, the Central Park Group, which established a “regulated investment company” to comply with the act. The Central Park Group buys stakes in Carlyle funds from existing investors who want to cash out, and then sells them to smaller investors.

A spokeswoman for the S.E.C., which would police the matter, declined to comment on Nasdaq’s plans.

For Nasdaq, the new market would be part of a broader push into illiquid investment products. The company last month opened a new marketplace to buy and sell shares of private companies, hoping to capitalize on the demand for hot start-ups that have yet to go public.

If the private equity market does take off, it will probably look very different from the major stock exchanges, which have vast numbers of buyers and sellers, said Steven E. Siesser, chairman of the specialty finance group at the law firm Lowenstein Sandler. “I will be very surprised if a robust market develops around it,” he said.

But one day, Mr. Siesser said, private equity firms may find a way of creating a “publicly traded private equity fund.”

“This is a step,” he said, “to the ultimate goal of you being able to sign on to E*Trade and buy a share of stock of a private equity fund.”

Weekend Reading: Unusual Bid Makes Strange Bedfellows

William A. Ackman’s unconventional hostile bid for the maker of Botox has surprised corporate America and brought out some unexpected alliances.

The $45.6 billion bid for Allergan by Mr. Ackman’s hedge fund and the health care company Valeant raised questions about a conflict of interest when activist investors and corporations work together. A news analysis in DealBook said the bid may have exploited a loophole in the rules for insider trading.

To ensure that the potential deal will win approval from regulators, Mr. Ackman has turned to Robert Khuzami, the former head of enforcement at the Securities and Exchange Commission who is now a partner at Kirkland & Ellis. At the S.E.C., Mr. Khuzami was known as an aggressive regulator, and he opened a special unit focused on hedge fund returns. Now as a Wall Street lawyer, Mr. Khuzami has verified that buying 9.7 percent of Allergan while preparing a hostile bid did not violate the S.E.C.’s rule on insider trading.

But the most surprising ally that Mr. Ackman has gained may be his former activist adversary Carl C. Icahn. Mr. Ackman has battled him, along with Daniel S. Loeb and George Soros, over Herbalife, the nutritional supplements company. Mr. Ackman has made a $1 billion bet against the company, which he contends is a pyramid scheme.

After calling Mr. Ackman “a crybaby in the schoolyard” last year, Mr. Icahn said this week that “we have our differences, but I never said he’s not a smart guy.”

“I never thought I’d be defending him, but I don’t think there’s anything wrong with that,” Mr. Icahn said when asked about the bid for Allergan during an interview on CNBC this week. The billionaire investor added that he would consider following in Mr. Ackman’s footsteps and partnering with a company for his own takeover bid.

“Any activism is good as long as it’s legal,” Mr. Icahn added.

A look back on our reporting of the past week’s highs and lows in finance.

THURSDAY

Bare Knuckles at Auction House | DealBook »

Justice Dept. Seeks Deal With Bank Over Loans | DealBook »

Zimmer Holdings to Buy Biomet for $13.35 Billion | DealBook »

K.K.R. Profit Falls, but Tops Estimates | DealBook »

New Evidence May Reopen Broker Fraud Case | DealBook »

WEDNESDAY

Strict Cost-Cutters Who Want to Spend $45 Billion on Takeover | DealBook »

New York Financial Regulator Uses Dodd-Frank to Sue Auto Lender | DealBook »

Investors Bet on Live-Streamed Spinning Classes in the Home | DealBook »

Seeking to Grow, Chobani Secures $750 Million Loan | DealBook »

TUESDAY

Appeal Judges Hint at Doubts in Insider Case | DealBook »

Mergers on the Rise for Drug Makers Chasing Growth | DealBook »

Top Italian Banks Tap Private Equity for Help With Troubled Loans | DealBook »

Novartis and Glaxo Agree to Trade $20 Billion in Assets | DealBook »

Deal Professor: Allergan Bid Charts New Territory in Corporate Takeovers | DealBook »

MONDAY

Unusual Hostile Bid for Maker of Botox | DealBook »

Barclays Said to Join Commodity Exodus | DealBook »

WEEK IN VERSE

‘I Put a Spell On You’ | If Screamin’ Jay Hawks can record this while drunk then, Carl Icahn can give financial advice while sipping champagne. YouTube »

Alstom Split Would Energize Its Business Units

Ending the days of Alstom as an unwieldy conglomerate would end many of its headaches. Given time, the group could probably take care of its problems on its own. Outside help would allow it to speed up the recovery. And General Electric could be a powerful catalyst for the transformation.

According to media reports, Alstom, the French engineering group, is considering hiving off its power divisions to G.E. The unit that makes high-speed trains including the TGV could remain as part of a standalone company.

The idea makes sense, both from a financial and strategic viewpoint. The company is burdened by too much debt, a weak credit rating and looming refinancing needs of some 750 million euros ($1 billion) in 2014. Moreover, Alstom is facing falling demand and more competition in power generation, which accounts for 45 percent of revenue and 65 percent of operating profit.

The weak balance sheet hampers Alstom’s ability to offer customers attractive financing conditions - a key competitive disadvantage relative to better-financed rivals, as analysts at Berenberg point out. It also limits the group’s research and development firepower.

Analysts see Alstom’s net debt at an average 3.5 billion euros ($4.8 billion) or two times Ebitda, or earnings before interest, taxes depreciation and amortization, Thomson Reuters data shows. Negative cash flow for the year stands above half a billion.

Alstom had already started to address its problems. It aims to shrink costs by 8 percent annually by 2016, with an asset disposal plan worth up to 2 billion euros ($2.7 billion). After flogging its heat exchanger unit for 730 million euros, the next step is to sell or list a minority stake in the train unit. That could generate another billion.

Delivering on these plans could be enough to avoid a junk rating on its debt. But the process may take more time than its shareholders - including the French construction group Bouygues, which has a 29 percent stake - are willing to allow.

Selling power generation and distribution - together more than 70 percent of its overall revenue - to G.E. would be a quicker fix.

There are few synergies between power plants and TGVs. In fact, independent, focused train makers like Switzerland’s Stadler Rail tend to be more successful than their competitors trapped in conglomerates. In power generation, Alstom’s gas turbines business is too small to succeed. But its transmission solutions and hydro technologies would complement G.E.’s portfolio nicely.

If the French government, for political reasons, opposes any combination with G.E., Alstom could conceivably survive as a limping French conglomerate. But a split and sale would make its different parts stronger.

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

The Most Important Question You Can Ask

When I heard this week that Michael Phelps was planning to return to competitive swimming, my first reaction was to feel a little sad for him. I honor Mr. Phelps for the discipline, grit and passion he needed to win a record 18 gold medals. But I also sense that he’s going back to swimming because he’s chasing a high that hasn’t held up.

In the same way, I respect Michael Jordan for all he achieved in basketball. But after reading Wright Thompson’s brilliant article about him in ESPN Magazine, I was struck by the emptiness of his life since he retired as a player 11 years ago.

We celebrate and envy people’s extraordinary individual accomplishments and successes, but the pleasure they derive from their efforts is often surprisingly fleeting. And there is a reason for that. What generates an enduring experience of meaning and satisfaction in our work is the sense that what we’re doing really matters â€" that we’re truly adding value in the world.

Or as Viktor Frankl put it so eloquently: “Don’t aim at success. The more you aim at it and make it a target, the more you are going to miss it. For success, like happiness, cannot be pursued, it must ensue, and it only does so as the unintended side effect of one’s personal dedication to a cause greater than one’s self.”

For me, the threshold question is this: In the service of what?

It’s the question I find myself asking when I read about the amazing wealth being accrued by hedge fund managers. I respect the financial acumen of someone like David Tepper, who earned $3.5 billion last year or John Paulson, who earned $1.9 billion, or Carl C. Icahn, who earned $1.7 billion. But ought we to revere these investors simply for accumulating ever more wealth? Building one’s own value to feel more valuable is ultimately a losing game.

Imagine instead that Mr. Tepper decided he had enough money for himself and his family, and truly dedicated himself instead to a greater cause. Mr. Tepper could use the $3.5 billion he earned in 2013 â€" or even just keep $100 million â€" and hire 75,000 people at $40,000 each over the next year to create his own Works Projects Administration and take on our crumbling infrastructure. Or he could use that money to support tens of thousands of passionate but struggling artists, or give generous grants to thousands of worthy scientists whose critical research isn’t funded sufficiently, if at all.

It’s great that a group of billionaires, led by Warren E. Buffett and Bill Gates, have pledged to give away half of their fortunes when they die. But why wait? Why not right now?

Of course, “In the service of what?” isn’t just a question for billionaires. It’s one we all need to be asking ourselves.

I’ve long been haunted by an article called “The Tragedy of the Commons” written by the ecologist Garrett Hardin for the magazine Science in 1968. The article focuses on the dangers of overpopulation, but Mr. Hardin’s broader argument is about how individuals, acting from their rational but narrow self-interest, can collectively destroy something they all need to survive and prosper. He uses the example of an open pasture to which struggling herdsmen are invited to bring their cattle to feed. Eager to improve their economic circumstances, the herdsmen naturally want to feed as many cattle as possible. The problem is that over time, overgrazing takes a progressive toll on the commons, and, ultimately, it’s destroyed for everyone.

We need to redefine self-interest to recognize that it requires serving the commons â€" even if only for the selfish reason that our survival, and the survival of our children, depends on protecting our shared planet.

The answer to “In the service of what?” is to add more value to the commons than we take out, and not to discount any good that we can do.

“We must not, in trying to think about how we can make a big difference,” said the children’s rights advocate Marian Wright Edelman, “ignore the small daily differences we can make, which, over time, add up to big differences that we cannot foresee.”

Personal accomplishments make us feel good. Adding value to other people’s lives makes us feel good about ourselves. But there is a difference. The good feelings we get from serving others is deeper and lasts longer. Think for a moment about what you want your children to remember about you after you’re gone. Do more of that.

Jimmy Elliott, a Senior JPMorgan Deal Adviser, to Retire

Jimmy Elliott, one of JPMorgan Chase’s most senior deal makers, plans to retire, the firm announced in an internal memorandum on Friday.

Mr. Elliott, who is the global chairman of investment banking, will leave in June to spend more time on his ranch in Texas, according to the memo from Jeff Urwin, a co-head of global banking at the firm.

During his 35-year career, Mr. Elliott worked on several prominent mergers. Among them were Exxon’s $86 billion takeover of Mobil, Sanofi-Aventis’s $21 billion acquisition of Genzyme and the Chicago Board of Trade’s $11.8 billion merger with the Chicago Mercantile Exchange.

He started his career in 1976 at First Boston, focusing on energy mergers, before leading that investment bank’s risk arbitrage department. He then left to join a hedge fund in 1991 and eventually moved in 1997 to J.P. Morgan & Company as a senior deals banker.

In the memo, Mr. Urwin wrote that Mr. Elliott “immediately stood out as a dedicated leader, partner and true client advocate.”

A spokeswoman for JPMorgan confirmed the contents of the memo.

Ex-Finance Chief at Bank of America to Pay $7.5 Million in Settlement

Andrew Burton/Getty ImagesEric T. Schneiderman, the New York attorney general, has reached other settlements with Bank of America and its executives.

The New York state attorney general announced Friday that the office had reached a $7.5 million settlement with Joe L. Price, the former chief financial officer for Bank of America, over allegations that the bank’s management withheld material information related to its 2008 merger with Merrill Lynch.

The attorney general, Eric T. Schneiderman, accused Bank of America’s top executives, including Mr. Price, of failing to disclose more than $9 billion of projected losses at Merrill Lynch to Bank of America shareholders before a vote on the acquisition.

The settlement is the latest move in Mr. Schneiderman’s broader crackdown on the Wall Street executives who led some of the country’s largest financial institutions during the crisis. Last month, Mr. Schneiderman’s office reached a $10 million settlement related to the Merrill Lynch merger with Bank of America and its former chief, Kenneth D. Lewis, who stepped down in 2009.

“This settlement is one more step in our effort to hold top financial executives accountable for their actions,” Mr. Schneiderman said in a statement announcing the news on Friday. “As with our settlement last month with C.E.O. Kenneth D. Lewis, today’s action sends a message that conduct harming investors, shareholders, and the public will not go unpunished.”

A lawyer for Mr. Price, Colby A. Smith, declined to comment.

As part of the settlement, Mr. Price will not be able to serve as an officer or director of a public company for 18 months. The $7.5 million payment will be used to pay for the costs associated with the attorney general’s investigation, according to court filings.

The attorney general’s office said that it had found evidence that the bank had not only concealed information about Merrill’s financial condition from shareholders, but from the federal government as well. The bank, according to Mr. Schneiderman’s office, sought significant aid from the government during the crisis, but did not disclose what it knew about Merrill’s projected losses until the beginning of 2009.

The ghosts of the financial crisis continue to haunt Wall Street’s largest institutions, even after their top leadership has changed.

The Justice Department is said to be seekingbillions of dollars from Bank of America to settle a civil inquiry into the bank’s sale of toxic mortgage investments before the financial crisis.

And in January, Morgan Stanley revealed that it recorded a $1.2 billion charge to help pay for its legal bills had contributed to a $1.1 billion pretax loss in its institutional securities unit, which houses mortgage lending and trading operations.

Alstom Shares Suspended on Reports of G.E. Bid

Shares of Alstom, the French industrial conglomerate, were suspended Friday on the Paris exchange at the request of the market regulator amid reports that the company is negotiating a multibillion-dollar deal to sell its energy business to General Electric.

The talks have not been confirmed by either company, but France’s economy minister, Arnaud Montebourg, raised the issue publicly for the first time in a newspaper interview published online Friday, warning that the government would closely examine the effect of any deal on jobs and the country’s industrial base.

“Alstom is the symbol of our industrial power and French ingenuity,” Mr. Montebourg told Le Monde, adding that “the government expresses its concern and patriotic vigilance.”

The state, he added, is “working on other solutions and outcomes than those that Alstom came up with on its own without informing the government.”

Mr. Montebourg said he had already spoken with Alstom’s chief executive, Patrick Kron, about the talks, and that he and the French prime minister, Manuel Valls, would meet soon with G.E.’s president to explain its concerns.

There were numerous reports that Alstom’s board was meeting Friday afternoon to consider its options. Alstom declined to comment. G.E. did not immediately respond to a request for comment.

Shares of Alstom, which is based in Levallois-Perret, near Paris, soared 11 percent on Thursday, giving it a market value of about 8.3 billion euros, or $11.5 billion, after Bloomberg News reported that the company was in talks with G.E.

The market regulator, the Autorité des marchés financiers, is “awaiting a statement from Alstom,” Stéfanie Duschenes, a spokeswoman for the regulator, said in explaining the trading halt on Friday. “I can’t tell you any more than that.”

G.E. shares were little changed in New York on Thursday. The company, based in Fairfield, Conn., has a market value of about $265 billion.

If G.E. is seeking a deal with one of France’s biggest industrial companies, it would be stepping straight into the heart of two of France’s biggest national preoccupations, the loss of industrial competitiveness and a poor labor market.

Alstom’s energy businesses makes a range of energy infrastructure products, including gas, nuclear and coal-fired power plants, wind turbines and the electrical grid used to deliver electricity from power station to users. If sold, that would leave Alstom with its competitive transport business, which makes trams, subway cars and high-speed trains, as well as rail infrastructure.

In any case, Alstom is in need of some kind of help. Standard & Poor’s on Thursday cut its credit rating by one notch to BBB-, and said the company faced a “significant” financial risk amid weak demand that will weigh on its profit over the next two to three years.

Sotheby’s Battle Heats Up

BARE KNUCKLES AT SOTHEBY’S  |  The battle between Sotheby’s and Daniel S. Loeb, the outspoken hedge fund mogul and the auction house’s biggest shareholder, is heading to its final stages, Alexandra Stevenson and Michael J. de la Merced write in DealBook. On Thursday, Mr. Loeb gained an advantage in the standoff as the proxy advisory firm Institutional Shareholder Services recommended that shareholders vote for two of the three board nominees he has proposed.

Mr. Loeb is no stranger to no-holds-barred corporate battles, but this one is a bit different. For one, Ms. Stevenson and Mr. de la Merced write, “It is almost as much a test of his reputation as an art aficionado as it is of his skills as an investor.” The battle is not only making waves among investors but also in the art world, where some are wondering whether Mr. Loeb is doing what is best for the business of art.

Sotheby’s, hard hit in the financial crisis, has been a target of activist investors, who anticipate a shake-up of the art market. To Mr. Loeb, Sotheby’s has not adapted quickly enough, making it a prime target for the sort of corporate agitation that has made billions for himself and his hedge fund, Third Point. Ms. Stevenson and Mr. de la Merced write: “To some outsiders, Sotheby’s seems to be receptive to some of its critics’ recommendations. The question is whether its executives are making certain changes fast enough.”

JUSTICE DEPT. TO BANK OF AMERICA: LET’S MAKE A DEAL  |  Bolstered by its multibillion-dollar mortgage settlement with JPMorgan Chase last year, the Justice Department has now set its sights on a deal with Bank of America, Ben Protess and Jessica Silver-Greenberg write in DealBook. The Justice Department is said to have made Bank of America an opening settlement offer of roughly $20 billion several weeks ago, a move that raised the stakes for the government’s crackdown on banks that sold the troubled mortgage investments during the financial crisis.

But that amount is a somewhat inflated starting point for negotiations, they write. What’s more, Bank of America has not yet made a counteroffer. By one measure, Bank of America will ultimately pay about $16 billion to settle every investigation into its sale of mortgage securities before the 2008 financial crisis, they add. The settlement negotiations with Bank of America come as the government is under pressure to extract enormous penalties from Wall Street for its role in the financial crisis.

LOOSENING INSIDER TRADING RULES  |  Insider trading laws used to be for amateurs. Then prosecutors changed the rules, putting wiretaps on traders’ phones. But now, an appellate court â€" which heard arguments this week on whether to reverse the convictions of two hedge fund managers, Todd Newman and Anthony Chiasson â€" appears inclined to change the rules again, Floyd Norris writes in the High & Low Finance column. If the court does so, it will make it easier for professional traders to escape liability.

The managers, in the words of one of their lawyers, were “remote tippees,” having heard the information on which they used to trade from analysts rather than from the original sources themselves, or even from the first people tipped by those insiders. This was enough for a conviction in the managers’ first trial, but they received a sympathetic hearing from at least two of the three judges on the appellate panel, who focused on Supreme Court rulings that have said that trading on inside information is legal unless it is obtained from someone who violates a duty to keep it secret and receives something of value.

“If the defendants prevail, hedge fund managers will be given a road map to evading the insider trading law. It won’t matter whether the government can prove the information came from an insider who was paid off and that the trader knew an insider was the source as long as there is no evidence the trader knew about the payoff,” Mr. Norris writes. “Hedge fund managers will be careful not to ask about such things. After all, there is no reason for them to want to know. What they want to know is whether the information is reliable.”

ON THE AGENDA  |  The Thomson Reuters/University of Michigan consumer sentiment index for April is out at 9:55 a.m. Howard Schultz, the chief executive of Starbucks, is on CNBC at 9 a.m. Happy birthday, Richard S. Fuld Jr., the former chief executive of Lehman Brothers, who turns 68 on Saturday.

ZIMMER JUMPS INTO DEAL FRAY  |  The merger spree in the pharmaceutical and medical technology sectors continued on Thursday, as Zimmer Holdings agreed to acquire Biomet Inc. in a cash-and-stock deal valued at $13.35 billion, including debt, David Gelles and William Alden write in DealBook. The deal will bring together two big providers of orthopedic, surgical and dental products.

The deal is the latest health care industry megadeal announced this week. Already, Novartis and GlaxoSmithKline announced $20 billion in asset-swapping deals between the two firms, and Valeant Pharmaceuticals made a $45 billion hostile takeover bid for Allergan. Because Zimmer’s deal for Biomet essentially eliminates a top five competitor, Zimmer and its remaining rivals may all have the opportunity to raise prices. The deal could also put pressure on the remaining companies to grow, leading to more mergers.

Mergers & Acquisitions »

Investors Enthusiastic About Zimmer’s Deal for Rival  |  Zimmer’s stock value soared after it announced that it would acquire Biomet as shareholders bet on growth in the market for medical devices, Robert Cyran writes in Reuters Breakingviews.
DealBook »

Digital Mapping May Be Nokia’s Hidden Jewel  |  Though a laggard in smartphone location apps, Nokia’s Here mapping system is a leader in car navigation and might be a tantalizing takeover target, The New York Times writes.
NEW YORK TIMES

Alstom Denies Report of G.E. Takeover Bid, but Its Shares Surge  |  Shares of the French industrial conglomerate Alstom soared after a news report said General Electric was seeking to buy the company for about $13 billion. Alstom said it was not aware of any takeover bid.
DealBook »

Michael Dell May Sell Gardening Firm  |  Michael Dell, the chief executive of Dell, is likely to sell ValleyCrest, his corporate gardening company, to Brickman, a rival backed by the private equity firm Kohlberg Kravis Roberts, The Financial Times writes.
FINANCIAL TIMES

INVESTMENT BANKING »

R.B.S. to Drop Bonus Plan After British Agency Balks  |  The bank, based in Edinburgh, had sought to pay its bankers bonuses of up to two times their annual salaries, but an agency that manages the British government’s stake in the lender refused to back the proposal.
DealBook »

Barclays Shareholders Vent Frustration Over Bonuses  |  At the Barclays annual meeting on Thursday, shareholders questioned a decision to increase compensation at the bank, which is in the midst of a painful restructuring.
DealBook »

Bank of America Names New Risk Officer  |  Bank of America appointed Geoffrey Greener its new chief risk officer, Reuters writes.
REUTERS

PRIVATE EQUITY »

K.K.R. Profit Falls but Tops Estimates  |  The private equity giant Kohlberg Kravis Roberts reported economic net income of $630 million in the first quarter as it reaped gains from selling some of its investments.
DealBook »

Warburg Pincus to Invest in PayScale, a Compensation Data Firm  |  Warburg Pincus said on Thursday that it would invest up to $100 million for a majority stake in PayScale, a cloud-based software company that collects compensation data and offers the information to businesses.
DealBook »

HEDGE FUNDS »

Legal Memo Defends Ackman’s Actions in Allergan Bid  |  An independently issued memo from Cleary Gottlieb Steen & Hamilton reaffirms how William A. Ackman’s unusual hostile bid was within the legal bounds.
DealBook »

Daley, Former White House Chief of Staff, Joins Hedge Fund  |  William M. Daley, a former JPMorgan Chase executive, has been named a managing partner and the head of United States operations at Argentière Capital, a Swiss hedge fund founded less than a year ago.
DealBook »

A ‘Corporate Raider’ Tries to Correct the Record  |  T. Boone Pickens, in the latest issue of Time magazine, discusses his friend Carl C. Icahn and the labels they have picked up over the years.
DealBook »

Bob Evans Investor Agitates for Change, Again  |  The activist investor Sandell Asset Management nominated eight candidates to the restaurant chain’s board in its push for change at the company.
DealBook »

I.P.O./OFFERINGS »

Alibaba’s I.P.O. Could Set Record  |  Alibaba is said to be considering adding new shares to its initial public offering, which could help make the I.P.O. the largest on record, The Wall Street Journal writes.
WALL STREET JOURNAL

Canada’s Kinaxis Plans I.P.O.  |  Kinaxis, a Canadian software company, is said to be preparing an initial public offering that could raise more than $90 million, The Wall Street Journal writes, citing unidentified people familiar with the situation. The move could signal a resurgence in Canada’s I.P.O. market.
WALL STREET JOURNAL

VENTURE CAPITAL »

For Women in Tech, Pay Gap Is Unusually Small  |  Female computer scientists make 89 percent of what men in the same occupation make, a significantly better percentage than in other professions, Claire Cain Miller writes in The Upshot.
NEW YORK TIMES UPSHOT

Square to Open New Office in New York City  |  Square, the digital payments company, announced on Thursday that its employees in New York City will move into a new 40,000-square-foot office this summer in Manhattan’s SoHo neighborhood, ReCode writes.
RECODE

Investors Bet on Virtual Reality Treadmill  |  Virtuix, a start-up based in Houston, closed $3 million from venture investors for its multidirectional treadmill, The Wall Street Journal writes.
WALL STREET JOURNAL

LEGAL/REGULATORY »

Technology Giants Settle Hiring Suit  |  Apple, Google, Intel and Adobe reached an agreement with plaintiffs over accusations that the companies conspired not to hire one another’s employees, The New York Times writes.
NEW YORK TIMES

New Evidence May Reopen Broker Fraud Case  |  A Long Island couple is seeking an appeal in an arbitration hearing involving their stockbroker and his employer, Oppenheimer & Company, because critical evidence was not submitted in the case.
DealBook »

Schwab Agrees to Drop Effort to Prevent Class-Action Lawsuits  |  The Financial Industry Regulatory Authority, Wall Street’s self-regulator, said on Thursday that the discount brokerage firm had also agreed to pay a $500,000 fine.
DealBook »

Lobbying Efforts Intensify After F.C.C. Tries Third Time on Net Neutrality  |  The sparring will be closely watched by every company that depends, even peripherally, on the Internet â€" which is to say, just about every company, The New York Times reports.
NEW YORK TIMES

The Cloud Industry Needs Aereo to Win. But Consumers Need Something Better.  |  The Supreme Court battle over Aereo could cast a pall over the cloud computing industry. For consumers, though, Aereo is too inefficient to become a useful service, Farhad Manjoo writes on the Bits blog.
NEW YORK TIMES BITS

R.B.S. to Drop Bonus Plan After U.K. Agency Balks

LONDON â€" The Royal Bank of Scotland said Friday that it would drop a plan to pay its bankers bonuses of up to two times their annual salaries after an agency that manages the British government’s stake in the lender refused to back the proposal.

The decision by United Kingdom Financial Investments, which oversees the government’s 81 percent stake in the bank, follows a firestorm over pay in Europe.

R.B.S., based in Edinburgh, had hoped to put the plan â€" which would have allowed the maximum bonuses allowed under European rules â€" up for a vote by its shareholders at its annual meeting in June.

But the agency indicated that it would vote against any resolution that included a two-to-one bonus ratio, R.B.S. said on Friday. Given the government’s large holding, the plan would most likely not have passed, the bank said.

The move could potentially put R.B.S. at a disadvantage compared with its rivals in Europe, which are also seeking shareholder approval for changes that would let them pay up to the maximum bonus level in a bid to retain employees.

The bank said that its board wanted the “flexibility on variable to fixed pay ratios that is now emerging as the sector norm” and noted that the compensation would “be subject to performance conditions including claw back for conduct issues that may emerge in future. This position was understood during consultation with institutional shareholders.”

On Thursday, shareholders at the British bank Barclays vented their frustration over rising compensation level during a heated question-and-answer session at the lender’s annual meeting.

Barclays defended the decision to raise the bank’s compensation pool for 2013 despite a loss in the fourth quarter.

David Walker, the Barclays chairman, said the bank faced strong competition to attract and retain employees, particularly in the United States, and that raising pay was necessary. He noted that overall pay at the bank had decreased in the previous two years and remained below 2010 levels.

Pay at R.B.S. has been a politically sensitive issue after the bank received 45 billion pounds, or about $75.6 billion, from the British government during the financial crisis. Lloyds Banking Group also received a bailout at the time.

Prime Minister David Cameron and Edward Miliband, the leader of the Labour Party, have repeatedly sparred over capping bonuses at R.B.S.

Banks across Europe have adopted a variety of measures to sidestep the recently implemented bonus rules, including adopting so-called role-based pay and increasing fixed pay.

R.B.S. said Friday that the decision by United Kingdom Financial Investments “creates a commercial and prudential risk which it must try to mitigate within the framework of a 1:1 fixed to variable compensation ratio.”

The decision is a setback for Ross McEwan, the chief executive of R.B.S., who has been trying to reshape the bank from one with vast international ambitions to a “a smaller, simpler and smarter bank.”

The bank recently announced an £8.2 billion loss in 2013 and said it could be three to five years before it fully recovers.

Mr. McEwan has said that repaying the government the £45 billion it owes and winning back the trust of the British public is a crucial step for the bank’s turnaround.