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Dec 22, 2014

DealBook A.M. and P.M. Editions - December 22, 2014:: Top Story:P.M: Foreign Bribery Cases That Can Drag On and On An and A.M. Edition Headlines: Fresh Doubt Over A.I.G.'s Bailout | Ocwen Chairman to Resign in Settlement | Another Victory for Banks in Volcker Rule Delay | An Insider Trading Morass



MONDAY, DECEMBER 22, 2014
TOP STORY
After a six-year federal investigation, Avon agreed to pay $135 million to settle charges that it violated the Foreign Corrupt Practices Act.
Foreign Bribery Cases That Can Drag On and On An overseas bribery inquiry involving Avon shows how long winding such cases can be, and how the costs of dealing with potential corrupt payments can exceed the punishment, Peter J. Henning writes in White Collar Watch.
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  • DEALBOOK HIGHLIGHTS
    Caesars Entertainment in Deal to Shore Up Finances The all-stock deal to acquire a publicly traded affiliate will leave Caesars Entertainment with $1.7 billion in cash.
    As Caesars Deals, a Showdown in Las Vegas Awaits Some senior bondholders in the casino company's biggest unit back a bankruptcy that its parent's merger with an affiliate could fund. Others may want to wait, says Quentin Webb of Reuters Breakingviews.
    William C. Erbey has agreed to step down from his position as chairman of Ocwen and four other related companies.
    Ocwen Chairman to Step Down in Settlement With New York Regulator After an investigation into conflicts of interest, William C. Erbey has agreed to step down from his position as chairman of Ocwen and four other related companies.
    A Trust Bank branch in Moscow, with an ad for the bank featuring Bruce Willis.
    Russia Bails Out a Failing Lender, Trust Bank The country's central bank said it would inject $530 million into Trust Bank, and analysts predict more bailouts could follow.
    Sale of Morgan Stanley Oil Trading Business to Rosneft Is Aborted The collapse of the sale of the trading unit is the latest energy-related deal to encounter difficulties after tensions arose between the West and Russia over Ukraine.
    Credit Rating Agency DBRS to Be Sold to 2 Private Equity FirmsWalter Schroeder, the founder and controlling shareholder of DBRS, will retain a stake in the Toronto-based company.
    American Apparel Confirms Buyout Offer Shares of the company surge after it said it had received an overture to buy the company for $1.30 to $1.40 a share.
    British Regulator to Oversee 7 Additional Financial BenchmarksThe move to oversee a benchmark rates for currencies as well as other rates follows the taking over last year of regulation of the London interbank offered rate, or Libor.
    Investment Firm F-Squared to Pay $35 Million in Penalties Over Inaccurate Data The Securities and Exchange Commission says the returns used in the firm's marketing effort of a new strategy were hypothetical and inflated, in some cases by 350 percent.
    Corporate Governance Watchdog to Examine Barclays' AuditorThe Financial Reporting Council said that it would review PricewaterhouseCoopers' role in reporting to British regulators on the bank's compliance with client asset rules after Barclays was fined $58.9 million in September for failing to properly segregate client assets.
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For the latest updates, go to dealbook.nytimes.com »
MONDAY, DECEMBER 22, 2014
TODAY'S TOP HEADLINES

M & A Caesars Entertainment Is Said to Plan to Acquire Affiliate

INVESTMENT BANKING Top Finance Employees in London Expect Bonuses to be 21% Bigger This Year

PRIVATE EQUITY With Oil Falling, Howard Marks Says Oaktree May Shed Some Caution

HEDGE FUNDS Turmoil for Meredith Whitney's Hedge Fund

OFFERINGS I.P.O. of Juno Therapeutics, Developer of a Cancer Treatment, Excites Investors

VENTURE CAPITAL Xiaomi of China Said to Be Valued Above $45 Billion

LEGAL/REGULATORY Whistle-Blower Payouts Approach $170 Million in Bank of America Case


BY WILLIAM ALDEN
FRESH DOUBT OVER A.I.G.'S BAILOUT Documents produced after a trial over the 2008 bailout of the American International Group raise troubling new issues about the government's actions in the rescue of the insurance giant, Gretchen Morgenson writes in the Fair Game column in The New York Times. The trove of material stems from a lawsuit brought by Maurice R. Greenberg, the former chief executive of A.I.G., who contends the bailout amounted to an improper seizure of private property under the Fifth Amendment. While Mr. Greenberg is not the most sympathetic figure, his fight has unearthed significant information, Ms. Morgenson writes.

The documents, including emails written by lawyers for the Federal Reserve Bank of New York during 2008 and 2009 that were not produced during the trial, cast doubt on testimony by some of the government's witnesses. The problem the government faced at the time was that Mr. Greenberg, voting his sizable stake in A.I.G., could have thwarted the bailout. At trial, the government argued that it had not tried to circumvent the A.I.G. shareholder vote. But the documents appear to show the government's lawyers discussing how to do just that.

"Ideally we should have the pref issued before they realize that we are going to do it w/out a SH vote," a government lawyer wrote on Sept. 19, 2008, referring to preferred stock that the government's bailout vehicle would receive. Three days later, a lawyer for the New York Fed wrote, "I would give a lot to find a way to take the stock before the shareholder war machine moves."
OCWEN CHAIRMAN TO RESIGN IN SETTLEMENT William C. Erbey, the executive chairman of Ocwen Financial, will step down in January as part of a legal settlement with the New York State Department of Financial Services over the mortgage company's handling of distressed homeowners, The Wall Street Journal reports, citing unidentified people familiar with the matter. Ocwen, a giant in the business of collecting mortgage payments and running foreclosures, which has battled accusations that it mishandled foreclosures and abused borrowers, will also pay $150 million toward housing programs and assistance for troubled homeowners, as well as appoint two outside directors with consultation from the state, according to The Journal. The state will also appoint an outside monitor to ensure the company's operations are improved. The deal could be signed as soon as Monday, the newspaper says.
ANOTHER VICTORY FOR BANKS IN VOLCKER RULE DELAYJust days after Congress passed legislation that gutted a derivatives regulation, Wall Street scored another victory on Thursday when the Federal Reserve agreed to delay putting in place a core part of the Volcker Rule, which bans federally insured banks from engaging in speculative trading, DealBook's Peter Eavis writes. The Fed said it would give banks two more years to sell their investments in private equity funds and hedge funds, after the banks had claimed they could suffer big losses if they had to sell the stakes.

Paul A. Volcker, the former Fed chairman for whom the trading rule was named, has rarely commented publicly on the regulation. But the Fed's move on Thursday prompted him to release a statement that questioned the banks' claims that they weren't able to sell their investments before the July 2015 deadline, which has now been extended.

"It is striking that the world's leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries however complicated, apparently can't manage the orderly reorganization of their own activities in more than five years," Mr. Volcker said, "Or, do I understand that lobbying is eternal, and by 2017 or beyond, the expectation can be fostered that the law itself can be changed?"
ON THE AGENDA Data on sales of existing homes in November is released at 10 a.m. by the National Association of Realtors. The DealBook newsletter will go dark on Wednesday for the Christmas holiday, to resume in the new year.
A LAW WOULD CLEAR UP AN INSIDER TRADING MORASS"We need an insider trading statute," James B. Stewart writes in the Common Sense column in The New York Times. "With simmering resentments nearing the boiling point among federal courts of appeals, district court judges and law enforcement officials after an appeals court decision, the time seems to have come for a clear-cut law.

"On Dec. 10, the hostility was all too evident when a three-judge panel of the influential United States Court of Appeals for the Second Circuit swept aside the insider trading convictions of two Wall Street traders, Anthony Chiasson and Todd Newman, and dealt a blow to the successful, multiyear crackdown on corruption on Wall Street by Preet Bharara, the United States attorney in Manhattan," he writes. "The root of the problem is that insider trading is a crime entirely defined by common law - an accumulation of cases and judicial precedents that date from the 1960s. It has been open to interpretation by an ever-changing cast of prosecutors, Securities and Exchange Commission officials and enforcement chiefs, as well as various judges."
Contact: @williamalden | E-mail
MERGERS & ACQUISITIONS »
Caesars Entertainment Is Said to Plan to Acquire Affiliate Caesars Entertainment, the struggling casino owner, plans to acquire an affiliate known as Caesars Acquisition in an all-stock deal, The Wall Street Journal reports, citing unidentified people familiar with the matter. The deal could help Caesars Entertainment restructure some of its huge debt load.
Caesars Palace Hotel & Casino in Las Vegas.
Caesars Unit Takes a Step Toward Chapter 11 Caesars Entertainment Operating Company, which owns or manages 44 casinos and resorts in the United States, will also split itself into several new companies.
Fear Fades as Deal-Making Surges "Chief executives got their deal-making confidence back in 2014, emboldened by a clearer outlook for their businesses to take the global value for mergers and acquisitions to their highest annual level since 2007," Reuters writes.
Instagram, which now has 300 million users, accounts for about 16 percent of Facebook's roughly $221 billion market value.
Citigroup Says Instagram Is Worth $35 BillionFacebook's $1 billion acquisition of the photo-sharing app now looks like quite the bargain, according to a new analysis.
A Food Deal That Swims Against the Tide Thai Union's ' $1.51 billion purchase of Bumble Bee Seafoods shows a focused, low-key approach to acquisitions that has lessons for others, says Una Galani of Reuters Breakingviews.
INVESTMENT BANKING »
Top Finance Employees in London Expect Bonuses to be 21% Bigger This Year More than 80 percent of managing directors and partners at financial firms in London expect their annual bonuses to increase this year, to an average of about $194,749, according to a survey by the recruitment firm Astbury Marsden.
Tankers at a Royal Dutch Shell plant in Torzhok, Russia.
Bond Issues From Russia and Ecuador Serve as Cautionary Tales for Junk-Rated Debt Two fast-imploding bond issues from Ecuador and Russia are leaving prominent creditors, including BlackRock and Franklin Templeton, in their wakes.
Cheaper Oil Is an Immediate Boon for American Consumers "The only big question is whether - during this particular energy cycle - we will devote some of the windfall to items with long-term benefits, like repair and redevelopment of our battered infrastructure and measures to conserve the environment," Jeff Sommer writes in the Strategies column in The New York Times.
1. ___________ Weighs In on Goldman's Crossword Puzzle Hint: The New York Times's master of all words across and down.
Goldman Adds Two Directors to Expanded Board Mark A. Flaherty and Mark O. Winkelman will serve on a board that now has 14 members.
  • DEALBOOK »
  • PRIVATE EQUITY »
    Howard Marks is the chairman of the Oaktree Capital Group.
    With Oil Falling, Howard Marks Says Oaktree May Shed Some Caution Oaktree Capital likes to take advantage of disarray and doubt among other investors, and it's starting to see some.
    Caribbean Resorts Attract Private Equity Firms including Bain Capital and Sam Zell's Equity International have been increasing their investments in Caribbean resorts as the region's banks dial back their business, Bloomberg News reports.
    HEDGE FUNDS »
    Turmoil for Meredith Whitney's Hedge Fund The hedge fund started by the prominent analyst Meredith Whitney "is in turmoil" after her largest investor demanded his money back and senior executives recently left, Bloomberg News reports.
    I.P.O./OFFERINGS »
    I.P.O. of Juno Therapeutics, Developer of a Cancer Treatment, Excites Investors A little-known year-old company, which counts Jeff Bezos as an early investor, pulled off one of the largest initial public stock offerings in the biotechnology sector.
    VENTURE CAPITAL »
    Xiaomi of China Said to Be Valued Above $45 Billion Xiaomi, a fast-growing smartphone maker in China, has become one of the world's most valuable technology start-ups with a $1 billion financing round, The Wall Street Journal reports, citing an unidentified person familiar with the matter.
    Flipkart of India Raises $700 Million Flipkart, the largest online retailer in India, said on Saturday it had raised $700 million from new investors including Baillie Gifford, Greenoaks Capital, Steadview Capital and T. Rowe Price Associates. The financing may help the company compete with Amazon.
    LEGAL/REGULATORY »
    Bank of America reached a $16.65 billion civil settlement with the federal government.
    Whistle-Blower Payouts Approach $170 Million in Bank of America Case The whistle-blowers are collecting payments equal to 16 percent to 17 percent of specific portions of the federal government's $16.65 billion settlement.
    F.T.C. Chairwoman Pushes to Regain Agency's Prominence Efforts by Edith Ramirez, the chairwoman of the Federal Trade Commission, to focus more attention on digital privacy and transactions could lead to more turf battles with other federal agencies, Edward Wyatt reports in The New York Times.
    MetLife opposes its designation as
    Regulators Explain 'Too Big to Fail' Decision on MetLifeThe Financial Stability Oversight Council said it deemed MetLife systemically important because of its size, leverage and interconnectedness with other financial institutions.
    How a 2% Inflation Target Became Economic Gospel Twenty-five years ago, New Zealand became the first country to set a formal target for how much prices should rise each year. It was so successful that a 2 percent inflation target became virtually an economic religion, Neil Irwin writes on The Upshot.