Reminder: Dealbreaker Trivia Night Is Just Two Days Away

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Can you tell Noah Freeman from Donald Longueuil? Do you know Wilbur Falcone’s memoirs by heart? Do you just like being right about things and everyone else knowing it? Then don’t miss out on your chance to put your knowledge of all things Dealbreaker to the test at the first ever Dealbreaker Trivia Night, this Thursday, May 23rd.

Doors open at 7pm, start time is at 7:30pm, at a bar in midtown. Tickets are still available, so get yours by signing up below. Valuable prizes include the must-have a Dealbreaker banker bag (first place), a different thing (second place), and an I Violently Heart Dealbreaker button (third place). Read more »

Write-Offs: 05.21.13

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$$$ The Nightmare for SAC’s Steven Cohen Won’t End Any Time Soon [BusinessWeek / Sheelah Kolhatkar]

$$$ SAC Investors Fleeing As Cohen Faces Prosecutors [NYP]

$$$ For Anthony Scaramucci, chief executive of the hedge fund firm SkyBridge Capital and a friend of Mr. Cohen’s, sticking with SAC has as much to do with friendship and loyalty as it does its superior performance. “A lot of guys, when bombs are going off, you figure out very quickly who your friends are in the trenches,” Mr. Scaramucci said. “Most friends run from bullets, but your best friends run toward them. I have enormous amount of respect for the guy, and I think he’s misunderstood.” [Dealbook]

$$$ Fed officials dampen talk of imminent bond buying cutback [Reuters]

$$$ He walked into a strip club, waved an invalid police badge and they waived the cover charge for him and a friend. Police say Darren Philip Walker, 24, came into Bare Assets on West New Haven Avenue in Melbourne with an Ammomack County Sheriff’s Office badge he bought off the internet while he was employed with the agency. The club’s manager told Brevard County Sheriff’s Deputies that Walker claimed to be an undercover federal agent and wanted to question and arrest a woman named “Mason.” When confronted, Walker said he had not been employed by any law enforcement agency since 2011. [Florida Today] Read more »

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  • 21 May 2013 at 6:30 PM

Blow-Up Jamie Dimon Recieved An Ass Kicking Today

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The real JD ended up faring pretty well for himself; the inflatable one, pictured above with noted Bank Reform Bitch,* who gathered outside 270 Park with other other activists today to protest Dimon keeping the his chairman title, can’t say the same thing! Read more »

  • 21 May 2013 at 6:25 PM

Charlie Gasparino Isn’t Saying He Was Responsible For The Marathon Being Canceled But They Probably Would Have Run It If He Kept Quiet

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It may not be light beach reading, but Charlie didn’t earn his place on the Wall Street by writing children’s stories. “I pissed off a lot of Manhattanites when I said the marathon needed to be canceled before everybody realized how things were in Staten Island and Jersey,” he says. “The next day they called it off. Not because of me, but the racket I made didn’t hurt.” [DMNYC; Earlier: What Fate Awaits The Next People To Question Charlie Gasparino's Reporting?]

  • 21 May 2013 at 5:41 PM

The Hong Kong Mercantile Exchange Ceases To Be

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Maybe the occasional unscheduled four-hour break isn’t the worst thing that can happen to a commodities exchange. Read more »

  • 21 May 2013 at 5:40 PM

Herbalife Passes Over Deloitte, E&Y

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After an exhaustive six-week long search, during which time it went without audited financial statements, nutritional supplements company and alleged pyramid scheme Herbalife has picked one of the three remaining options for the job. Read more »

Lucchese, Bonanno, Gambino, Genovese, Colombo…Cohen?

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Earlier today, the Wall Street Journal reported that federal prosecutors are considering charging SAC Capital as “a criminal enterprise, using a powerful legal tool employed against the mafia and drug gangs,” i.e. the Racketeer Influenced and Corrupt Organizations Act. The use of RICO would give the government considerably more time to make a case against SAC, as it means prosecutors could “file charges in connection with crimes committed over the past decade, as long as any act that is part of the alleged enterprise occurred within the past five years,” whereas this July marks the deadline for bringing securities fraud charges involving July 2008 trading in Elan and Wyeth by the fund.

The best part of this story, naturally, involves Charlie Gasparino, first to report the RICO angle yesterday, despite, he says, the denials of a SAC representative, whose legs CG is currently threatening to break, via Twitter. Read more »

  • 21 May 2013 at 3:47 PM

JPMorgan Shareholders Fond Of This Dimon Guy, Would Like To See More Of Him

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Jamie Dimon’s continuing employment as chairman and CEO of JPMorgan Chase may or may not be an interesting case study in shareholder rights and corporate governance, but the most interesting question in bank governance is really “who cares what shareholders think?” Like: a bank is a bunch of depositor and creditor money, largely backed by explicit and implicit government guarantees, topped with a thin layer of shareholder-capital icing, and run for the benefit of that layer of icing. The shareholders are in charge because that’s how it’s done in every other sort of company, and because they bear the riskiest risk, but they certainly don’t bear the most risk on a sheer notional basis. And, since their shares are an almost at-the-money option on a vast pile of assets, they tend to have a fondness for volatility that other stakeholders might find disconcerting.1

Here’s The Epicurean Dealmaker on chairmanshipery:

The CEO is supposed to be the chief employee, leading his or her organization to deliver on the agenda and objectives the Board of Directors has set. The CEO is an operating executive.

The Chairman, on the other hand, is supposed to lead the Board of Directors in setting the agenda, strategy, and objectives of the corporation, in response to its employers, the shareholders, and all the other myriad stakeholders (employees, regulators, government officials, vendors, community members, and customers) which have a say or a stake in the activity of the firm. The Chairman and other directors of the corporation are stewards. They are not supposed to get down in the weeds, day to day, operating the various parts of the business. That is the CEO’s job. But as stewards they are supposed to think about the what-ifs, the perils and opportunities that may or may not confront the firm in the future, and the problems and threats which may be festering beneath the glittering surface of excellent corporate performance.

One way of reading that is that the CEO goes to work every day to make money for the shareholders: his job is to increase net income. Read more »

  • 21 May 2013 at 12:34 PM

Jamie Dimon Pretty Happy He Didn’t Fire Off That Resignation Letter Last Night After His Second Bottle Of Wine

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He said he was going to quit if stripped of the chairman role, and god damn it, he meant it but luckily: 1. It did not come to that and 2. He got distracted watching that Harlem Shake video Lloyd sent him and fell down a rabbit’s hole of different versions on YouTube, waking up this morning with his face on the keyboard and an email that began “I believe it was John Pierpont Morgan who famously said, ‘You can all go fuck yourselves’” saved to drafts. Read more »

  • 21 May 2013 at 11:06 AM

Senate Discovers There’s A Tax Code

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Here’s a math problem: what does this sentence, from John McCain, tell you?

“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” he said in Monday’s pre-hearing comments.

The answer, of course, is that Apple is among the most profitable companies in America.1 If you have a lot of profits, you can not pay taxes on a lot of them, and still pay lots of taxes on a different lot of them. There much focus on the exceptions, but for the most part I’d guess that “biggest taxpayers” and “biggest tax avoiders” are both highly correlated to “biggest profits.” Warren Buffett pays more taxes than his secretary, but at a lower rate.

The Senate, not being known for its quickness with math, is holding hearings today on the avoiding part; here you can read (pdf) the committee’s report. Apple does two main things to avoid taxes that the committee doesn’t like:

  • It incorporated two of its main foreign subsidiaries, Apple Operations International (AOI) and Apple Sales International (ASI), in Ireland. Those subsidiaries are, however, managed and controlled in the U.S. by their California-based directors. The U.S. taxes corporate income based on place of incorporation; Ireland taxes corporate income based on place of management and control. So if you’re incorporated in Ireland and managed and controlled in the U.S. you pay taxes nowhere, as AOI does and ASI more or less does. This is … honestly isn’t the surprise that everyone doesn’t do this?2 I’m incorporating myself in Ireland as we speak.
  • It entered a cost sharing agreement that gave ASI the economic rights to Apple intellectual property outside of America, in exchange for ASI funding a share of Apple’s California-based R&D proportional to its share of Apple’s total sales. Apple is in the business of manufacturing cheap electronic components in China, slapping expensive cool on them in California, and selling the package for $500. ASI effectively got the California cool at cost, rather than paying retail, which means that the international share (some 60%) of the profits of that cool are, for tax purposes, “earned” abroad (in a zero-tax subsidiary!) rather than in California.

That’s the main stuff; there’s some stupid stuff too.3 Apple’s response is a lot of blather that boils down to: Read more »

Opening Bell: 05.21.13

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Apple’s Web of Tax Shelters Saved It Billions, Panel Finds (NYT)
Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue. … “There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

JPMorgan investors on edge over vote on Dimon; what if they win? (Reuters)
Investors say that while Dimon, 57, may need more oversight after the bank posted $6.2 billion in losses from failed derivative trades last year, they do not want him to quit. Among big bank CEOs, Dimon ranks first for stock returns and has been praised for leading the bank through the financial crisis with no quarterly losses and a strong balance sheet. If Dimon were to leave, the bank’s shares could fall as much as 10 percent and erase about $20 billion of market value, according to Mike Mayo, a bank analyst with brokerage CLSA. JPMorgan also has no ready replacement for Dimon, Mayo wrote in a research note, adding that the two lieutenants best positioned to succeed him – Matt Zames, 42, and Mike Cavanagh, 47 – seem to be about three years short of being ready for the job.

SAC Capital Aims to Stem Withdrawal Requests (DealBook)
“I’m very comfortable and confident having my money with him,” said Ed Butowsky, managing partner of Chapwood Investments in Dallas, a firm that invests client money in SAC. “All I know is that the returns are coming in nice, and my clients are happy.”

Funds Get Active Over Director Pay (WSJ)
Current pay structures don’t give directors enough of a stake in making sure the company does well, and boards need to be more creative about tying their compensation to performance, said John Wakeman, a vice president and portfolio manager at mutual-fund giant T. Rowe Price Group Inc. “If bad people are going to be on these boards, we’ve got to stop it,” said Mr. Wakeman. “We owe it to our fund holders.”

Buffett Jets Chief Says U.S. Leads Private-Flight Rebound (Bloomberg)
The U.S. is leading a recovery in demand for private flights while Europe remains weighed down by economic weakness, the head of billionaire Warren Buffett’s jet-management company said. “The U.S. from our perspective is coming back and doing relatively well,” Jordan Hansell, chief executive officer of Berkshire Hathaway Inc.’s NetJets, said by phone yesterday from Geneva, where he is attending the European Business Aviation Convention & Exhibition. “Europe has remained difficult.”

Poor li’l rich kids: Posh schools scold parents who send nannies (NYP)
Wealthy New Yorkers are shunning their parental duties — choosing instead to send nannies to their children’s private schools to take part in everything from “safety patrol” to accompanying the kids on their entrance interviews. … “Now the schools are getting angry — and other parents are getting angry. They don’t want to work the school bake sale with someone’s paid employee,” Uhry said. … But one Upper East Side mom whose daughter attends The Birch Wathen Lenox School sniffed that she pays the school $40,000 a year — and can’t be bothered with such menial duties. “These schools are exorbitantly expensive, they hit you up for school fees, donations, and then they want your time?” she huffed. “I have three kids at three different schools. If I can send my nanny, I’m happy to do it.”
Former Horace Mann admissions director Dana Haddad said schools now accept nannies at admissions interviews because kids tend to perform better in front of them. “When I was a director of admissions and children would act up, I would tell parents, ‘Don’t worry, send them back with the nanny,’ ” said Haddad.
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Write-Offs: 05.20.13

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$$$ JPMorgan, under pressure, gives polling information to investors [Reuters]

$$$ Ergen Bids $2 Billion for LightSquared Spectrum [WSJ]

$$$ Prosecutors’ subpoena of SAC’s Cohen puzzles defense lawyers [Reuters]

$$$ Financial Firms Said to Be Seeking Bloomberg Alternative [Dealbook]

$$$ Laura Fernee says her good looks are so powerful they are ruining her life – and have forced her to quit her job. [DM] Read more »

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