Dealbook Today's Top Headlines on June 9, 2016: A Bearish George Soros Trades Again | Puerto Ricans Divided Over Federal Oversight | Lawyers Ordered to Testify on Client's Tax Evasion Case
Thursday, June 9, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
A BEARISH GEORGE SOROS TRADES AGAIN George Soros has returned to trading after a long hiatus,
The Wall Street Journal reports,
citing people close to the matter. The billionaire hedge fund founder
and philanthropist recently directed a series of big, bearish
investments, these people said.
Soros Fund Management manages $30 billion for Mr. Soros and his family. It sold stocks and bought gold and shares of gold miners in anticipation of a weaker global economy.
Mr. Soros earned fame with a bet against the British pound in 1992 that
earned $1 billion in profits but has been more focused on philanthropy
and public policy in recent years. Still, he has continued to monitor
his firm's investments closely, to the chagrin of some senior
executives, people familiar with the matter told The Journal.
He hasn't done much investing of his own, but this year started spending more time in the office directing trades again.
Partly he is filling a void after Scott Bessent, his top investor, left the firm to start his own hedge fund.
Mr. Soros's move reflects a gloomy outlook - he remains skeptical about
the Chinese economy. "China continues to suffer from capital flight and
has been depleting its foreign currency reserves while other Asian
countries have been accumulating foreign currency," Mr. Soros said in an
email to The Journal. "China is facing internal conflict within its
political leadership, and over the coming year this will complicate its
ability to deal with financial issues."
PUERTO RICANS DIVIDED OVER FEDERAL OVERSIGHTAs the House
prepares to take up a contentious White House-backed bill to establish
an independent board that will oversee the reboot of Puerto Rico's
economy, Puerto Ricans remain sharply divided over the legislation,
Lizette Alvarez reports in The New York Times. They are torn between homegrown leaders who have failed them or a federally appointed board that many distrust.
Widespread support for the bill is matched by a strong and vocal
opposition that includes elected officials who will be forced to govern
with the board looking over their shoulders, union officials, young
people, artist and advocates for Puerto Rican independence. Some of these people have threatened civil disobedience if the measure becomes law.
Puerto Rico's leading candidates in this year's race for governor also
oppose the bills. Puerto Rico's nonvoting resident commissioner in
Congress lost his primary, in part because he supported the legislation.
The opposition argues that the bill will benefit the hedge funds that
lent Puerto Rico money and say that the island's fate should not be
swayed by people who, for the most part, will not be Puerto Rican and
will know little about the island. The movement is also frustrated
that the federal government believes Puerto Rico is incapable of fixing
its own problems without paternalistic intervention.
"If the board was coming to put all the politicians who robbed us in
prison, well, let them come," said Janiel González, 33, an artist who
owns a grass-roots gallery in the pedestrian mall, Paseo Gautier
Benítez. "But they are coming to control our money."
Supporters of the bill said that was exactly the point; political leaders had proved themselves unable to handle the job.
President Obama and his administration have emphasized that there was no alternative plan,
but the bill still faces challenges in the House and the Senate.
Democrats want to see more done for working-class Puerto Ricans, while
Republicans are nervous that it does not do enough for creditors.
ON THE AGENDA Philippe Dauman,
the chief of Viacom, will take part in a question-and-answer session at
the Gabelli & Company Movie & Entertainment Conference at 10:30 a.m.
LAWYERS ORDERED TO TESTIFY ON CLIENT'S TAX EVASION CASETwo partners at
Williams & Connolly, the prestigious Washington law firm, who are
representing Morris E. Zukerman, a former Morgan Stanley banker and oil
investor, have been directed to provide documents and testimony about
conversations they had with a wealthy client,
Matthew Goldstein and Alexandra Stevenson report in DealBook.
Mr. Zukerman was accused of failing to pay $45 million in income and
sales taxes on works of art and profits from the sale of an oil company.
The court filings in his pending criminal case shine a light on the
role that lawyers can play in nonpublic tax investigations by the
Internal Revenue Service and federal prosecutors.
The prosecutors had raised the prospect of a potential conflict of
interest for the two lawyers, who are trying to negotiate a plea deal
for Mr. Zukerman.
They contend that Mr. Zukerman failed to report a profit from the sale
of an oil company that would have generated $31 million in income taxes,
misleading his accountants and lawyers during an I.R.S. audit. He also
had expensive paintings shipped to Delaware and New Jersey to avoid
paying sales tax, they say. He is expected to plead guilty this month.
Lawyers typically cannot be compelled to testify or produce evidence
against a client in a grand jury investigation, but in rare cases judges
can require it if there is evidence that clients' communication with
their lawyers was done purposely to further a crime or a fraud. This is
known as the crime-fraud exception to the attorney-client privilege.
James A. Bruton III and James T. Fuller III were ordered to appear
before a grand jury that was investigating Mr. Zukerman to determine
whether he had used the lawyers during the course of that I.R.S. audit
and inquiry to conceal his activities.
The prosecutors said Mr. Zukerman instructed the lawyers to prepare "a
tax protest letter" that challenged "certain audit determinations
previously made by an I.R.S. auditor."
There is no suggestion in the court filings that either lawyer did anything wrong, but the events highlight how potential conflicts can occur in tax evasion cases where wealthy individuals rely on a bevy of legal and accounting experts.
Tencent Said to Consider Buying Stake in Supercell Tencent is
discussing buying SoftBank's majority stake in Supercell, a Finnish game
maker, in a deal that values the company at $9 billion, Bloomberg
reports, citing people familiar with the matter.
Health Care Providers Said to Discuss MergerEnvision
Healthcare Holdings is in talks to merge with Amsurg in a deal that
would bring together two providers of health care services with a
combined value of more than $9 billion.
Kite Realty Said to Be in Discussions to Merge With WP GlimcherKite Realty
Group Trust, a shopping center developer and landlord in the United
States, has been in negotiations to merge with its peer, WP Glimcher,
Reuters reports, citing people familiar with the matter.
Airbus Said to Near Sale of Remaining Stake in Dassault AviationAirbus is close
to selling off its remaining holdings in Dassault Aviation, Bloomberg
reports, citing people familiar with the matter. Its holding has a
market value of about $2.4 billion.
Vodafone to Sell New Zealand Unit Vodafone agreed
to sell its New Zealand unit to Sky Network Television, based in
Auckland, for $2.4 billion in shares and cash, in a move that paved the
way for a shift to faster growing markets in Asia.
Ban Big Takeovers to Kick-Start Growth A ban on large
takeovers would reorient the priorities of large companies, forcing them
to expand the the hard way by hiring employees, taking new premises,
advertising and buying equipment, Dan McCrum writes in The Financial
Times Market Insight column.
Negative Rates Stir Bank Mutiny Leaders in
Europe and Japan are rebelling against central banks' negative interest
rate policies, with Commerzbank of Germany going as far as considering
storing excess deposits in vaults.
Credit Suisse and VTB Investigated Over Tuna Bond The British and
Swiss authorities have begun investigating irregularities around
sovereign loans to Mozambique, including a so-called tuna bond arranged
by Credit Suisse and VTB.
Royal Bank of Canada Eyes Silicon Valley Talent Royal Bank of
Canada, the country's biggest lender, has introduced an innovation lab
in Silicon Valley where it will identify and work with local financial
Subprime Loans Helped Save Bank, but Many Borrowers Faced 18% InterestHoward P.
Milstein runs Emigrant Savings Bank, which is accused of illegal lending
practices that were marketed to minority homeowners.
Sorry JPMorgan, Smart Guys Still Wear Suits A suit is a
game of self-expression played with multiple pieces - move to a smaller
set of pieces and you have gone from chess to checkers, Robert Armstrong
writes in The Financial Times.
Walter Curley, Venture Capitalist and U.S. Ambassador, Dies at 93Mr. Curley, the
ambassador to Ireland and France and New York City's official greeter
under two mayors, was a prodigious fund-raiser for President George
Fidelity Snubs Jamie Dimon's 'Code of Best Practice' Group Fidelity, the
$2.2 trillion asset manager, has walked out of a project led by Jamie
Dimon, which aims to create a code of best practice for boardrooms in
the United States.
New York Financial Watchdogs Signals Business-Friendly Approach Maria Vullo,
who was picked by the New York governor Andrew Cuomo to be the state's
top financial regulator, said in a confirmation hearing that she would
take a more business-friendly approach than her predecessor.
The Stock Market Is Optimistic, So What's Your Excuse?Investors have
felt plenty of anxiety about the elections, interest rates, China,
Europe and jobs. But the market has rebounded to near-record heights.
Consumer Watchdog Bars the Door The Consumer
Financial Protection Bureau is rejecting requests under the Freedom of
Information Act using a so-called Glomar response, in which it says it
cannot confirm or deny the existence of a record.