Rupert Murdoch's bid for Dow Jones & Company is heating up again.

The family that controls Dow Jones agreed to meet with News Corporation, the media company headed by Murdoch . News Corp made an unsolicited bid for Dow Jones earlier this month. Until now the Bancroft family, which controls 64% of the voting power of Dow Jones largely through its super-voting class B shares, had refused to meet with Murdoch or representatives of Dow Jones to discuss the offer.

"Since first receiving the News Corporation proposal, the Family has carefully considered and discussed among ourselves and with our advisors how best to achieve that overarching objective, while serving the best interests of the Company's various constituencies,” the family said in a preliminary statement first reported by the Wall Street Journal, which is owned by Dow Jones.

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation,” the statement says.

In early May, News Corp offered $5 billion for Dow Jones, a sixty-seven percent premium over where the stock price trading before the bid. Through representatives on the board of directors of Dow Jones, members of the Bancroft family representing a majority of the voting power declined the offer. The board of directors has officially take no action on the offer. Since making the bid Murdoch has attempted to win support from the Bancroft family, but he has not increased his offer. In recent weeks some analysts began predicting that Murdoch would withdraw the offer if the family continued to refuse to negotiate.

The Wall Street Journal said the statement would be finalized after the conclusion of a meeting of the board of directors, which was underway tonight. At the time this was posted, no statement had been filed with the Securities and Exchange Commission on behalf of Dow Jones or the Bancrofts.

The statement may mean that the Bancrofts are willing to accept an offer from Rupert Murdoch. But by indicating a willingness to sell, they may also be hoping to attract other bidders. Tonight’s statement affirms that the family will also consider other bids.

Bancroft Family Plans to Discuss Dow Jones Bid With News Corp. [Wall Street Journal]
Bancrofts' Statement on Dow Jones Bid [Wall Street Journal]

The extreme hours and often menial work that characterize the lives of many junior investment bankers were on display last night in an exchange between a first-year analyst and a more senior associate at a middle market investment bank. It all began with a note at 6:04 PM. Although the original back-and-forth was strictly between two colleagues, the emails were forwarded outside the firm by a later recipient. As these things are wont to do, the mêlée very quickly spread through investment banking circles.

The spat began after Roger asked Billy (we’re changing the names because we have been unable to reach the people involved) to put together a working group list for him within an hour. Working group lists are used by investment bankers and law firms to collect and disseminate the contact information of professionals working on a transaction. Putting the lists together is not difficult but it is notoriously boring work. Although Roger’s request is rather straight-forward, Billy objected to the request and told Roger he thought it sounded “testy.”

“There is really no reason to get testy, Roger,” Billy said. “I was here all night, you know that, and I am curious as to why you are passing this off to me. I am aware that it takes 5 minutes to do, but you should know there is a difference between ‘pushing back’ and wondering why (for the 2nd time this week) you are giving me in particular a WGL. I thought that’s what staffing is for.”

[The rest of the exchange, after the jump]

$$$ Mark Cuban doesn't think it's crazy to compete with the NFL [Blog Maverick]

$$$ Vegetable Arbitrage [Long or Short Capital]

$$$ Husky and handsome banker looking for stylish, fashionable female. [Craigslist]

What better way to celebrate summer (or at least the first day muggy enough for New Yorkers to complain about where spring went) than with the emergence of only slightly obstructed ladyparts? Now that winter coats have been shed and even the most melanin deficient specimens have been reversed bleached a bit, DealBreaker presents the first installment of our new PartPuzzler feature.

Over the next several weeks, the crack DealBreaker field & graphics team (the stream guys went on strike) will be compiling imagery of the most important anatomical features (and accessories that adorn them) of the financial world – the most bulging (er…brackets?) bulges, the loveliest pantsuits, the most aggressively holstered Blackberries...

The first PartPuzzler segment is a good old fashioned game of “Misaligned Mammaries” (“Whose Boobs?” to the layperson), courtesy of our new Senior Functioning Mammary Gland Research Analyst (ie – intern), Scott Bressler, who has had the arduous task of staring at baby feeders for the past two days. The category is Billionaire Heiresses, or “Billionairesses,” as we like to call them. After the jump there are twelve pairs of extremely valuable steamed milk dispensers – your job is to match them with one of the Billionairesses listed below. To throw you off the trail, one of the semi and sometimes artificially busty beauties is pictured twice.

Post your answers or send them to tips at dealbreaker dot com. We’re still figuring out a prize for the first set of correct answers, but rest assured there will be one (probably…).

Hedge funds are often touted as “early adopters” of new investment methods and developing strategies for doing this super cool thing called making money. Algorithmic trading, long short (cutting edge when Alfred Jones did it), the free gift-with proxy battle giveaway. All started at hedge funds. So it stands to reason that HFs will probably be ahead of the curve when they fire all of their equity analysts, as Tanya Beder, quant industry vet and noted hater of equity analysts, thinks they ought to do. She thinks computers should replace the EAs who, through her hate-tinted glasses, aren’t pulling their weight, not to mention not doing anything that couldn’t be done by a computer.

“Given the same set of factors, it will always produce the same result,” Beder hissed today. “Its signals are pure and systematic.” She argues that the next logical step is to supplant equity analysts with machines, and soon. Beder didn’t get her all-star returns at Caxton by tying a bunch of dead weights to her payroll.

Sandy Gross is gentler with regard to the unnecessary leaches whose services are no longer required at their companies. It’s not that hedge funds necessarily want to gather up their non-performing flock, take them around back and fire a few rounds off, they have to, in order to make room for the quant “rocket scientists” for which there is a “great demand.” (Here’s a good example of the difference between hedge funds and Dealbreaker: we demand mediocrity at best.)

[Insert obligatory Ren Tech/DE Shaw chest bump here, which symbolizes the proven success of quants].

Brad Hintz, financial services analyst at AllianceBernstein, noted that “there are lots of arguments as to why equity analysts are doomed,” and even rambled off a few ("regulatory investigations into analyst conflicts, the technology stock crash.") But you probably know something that Brad doesn't. Feel free--dare we say encouraged-- to share it with us now.

Equity analysts facing new quant challenge [Reuters]

Good news for the self consciously pudgy - now ice cream, cereals and granola may be able to give you cancer. Coca-Cola and Cargill are ready to release lines of products sweetened with rebiana, the latest low-calorie sweetener pending regulatory approval. The marketing rationale here is that as long as that calorie number on the package goes down, all is permitted (next up – low calorie bleach, low calorie gasoline). Now you can dip your trans-fat free french fries in that vanilla cookie dough blend without gaining a pound!

Coca-Cola also plans to make the obvious switch to rebiana in its soft drinks, in attempts to assuage the guilt of people who feel they need 200% of the recommended daily dose of B12 from sugar water (a market Coca-Cola now has covered courtesy of Glaceau).

Despite recent market share losses from the happy magic water and happy magic energy drink beverage categories, carbonated soft-drinks are the second most consumed food & drink item in the universe next to sandwiches, according to food industry analyst Harry Balzer at the NPD group (watch his MarketWatch commentary here).

Rebiana comes from a natural herb (the cyclohexatriene herb) and doesn’t add any calories – making it the presumed “holy grail” of sweeteners (or just the lowest calorie most sugary tasting of sweeteners).

Word on the Sweet [MarketWatch]

First entry: "Never have I ever tipped my friends off to a forthcoming deal and then charged 5 and 44 on the return."

Second entry: "Never have I ever used Mergers and Acquisitions for clean up." (These men are unconscionable liars.)

Commuters’ Cocktail Hour Likely to Keep Rolling [NYT]

Finally, the financial journalism community (yes, it’s a community) offers us something more than meaningless commentary. David Weidner, who we love, gets service-y today over at MarketWatch with a nifty how-to guide, re: insider trading. We’ll get right down to it:

Things that work:

+ Be within earshot of the mergers and acquisitions department at your local Wall Street bank

+ Keep it simple; it’s when you start to get too intricate and show-off-y that people get suspicious

+ When emailing conspirators about the insider trading you’re doing together, speak in code, but not in tongue. Say things like "Let the fun begin,” and not “ǂʼaama nǃei zhu”

+ Stay modest: pull a fast one on the Securities and Exchange Commission 10, maybe 20 times. 9 times is too few (we’re in this to make money, not friends), 25 is too many.

Things that don’t work:

+ Allowing your trade calls to be recorded on your employer's log.

+ Doing it with your wife

+ Recruiting conspirators at Turkish bathhouses

+ Laying out plans in Grand Central Terminal

The insider's path to beating the market [MarketWatch]

China isn’t gobbling up foreign assets at a rate that many expected, with overseas acquisitions this year on pace to reach only about 75% of last year’s volume. China more than doubled overseas M&A volume last year, acquiring over $20bn in foreign assets in 2006, up from $9.6bn in 2005. This year China’s overseas deal volume stands at $6.2bn, and most acquisitions have been attempts to bolster existing energy platforms.

One continuing problem with Chinese companies looking to buy abroad is that pesky disclosure and regulatory requirements often get in the way, forcing acquirers to put on a façade of being legit, or at least solvent (and this is before they even attempt to state a value-adding proposition).

For now, India is still the go-to emerging market for foreign deals in Asia. Last year, India barely edged out China in terms of foreign deal volume, with $21.7bn in deals. This year however, India is on pace to double China’s volume with $14.1bn worth of foreign deals completed so far this year.

One reason for this year's foreign deal lull in China is that Chinese officials are preoccupied with scanning the frescoes of the 1,600 year old Dunhuang caves that served as a religious center and trade hub on the Silk Road during the Sui and Tang dynasties. I don't know, it sounds like a good reason.

Chinese buyers gun-shy on overseas M&A [Reuters]
China's 1,600-Year-Old Dunhuang Frescoes Enter the Digital Age [Bloomberg]

The Shake Shack in Madison Square Park is open for business, and we’ve already heard reports of summer interns at Credit Suisse standing on the long lines to get burgers and fries for lunch.

This reminds us of the perennial question: who has the best lunch time eating options in finance? Credit Suisse’s offices, located on the east side of Madison Square Park, make it a clear nominee simply because the superb shake shack is located there. Please leave your other nominations in comments.

We know the big guns of Wall Street prefer places like Campagnola, Rao's, San Pietro and Four Seasons. We remember the Tom Wolfe essay which asserted that New York City was kept alive by the business lunch. But what we have in mind here is something a little less grand. Not lunch for the generals—lunch for the soliders. The lunch you grab before heading back to the trenches your desk. Lunch for the summers, the analysts, the associates and the newly minted VPs.

And a brief administrative note. Today marks the start of DealBreaker’s Summer Watch. The summer interns have started at the banks, the summer shares in East Egg kicked off this past weekend, Merrill Lynch is firing the sickly, and the market around the corner from DB HQ has peaches. We’ve assigned DealBreaker Associate Editor Bess Levin to the Summer Beat, collecting the best, brightest and most brutal stories of the summer.

She’s assembling information about everything you can imagine. And she needs your help. Email her at tips@dealbreaker.com. How many summers has your shop hired? What are they paid? Where do they go to school? Who has the hottest summers? What events are planned? Are they doing real work or holding your place on line at the Shake Shack?

Also, remember, whatever happens in the Hamptons never stays in the Hamptons. It ends up on DealBreaker. Send your stories of bankers gone wild near the beach to us. Send your stories of never making it out to your share because you’re stuck in the office. We’re here for you. Be there for us.

[Photo: Curbed.com]

Among the possible insider traders in CNBC’s fake portfolio challenge are an investment manager (with an MBA—from Stanford!), a radiology resident in Detroit (shocker) and a retired chemical engineer from Bollingbrook, Ill. CNBC said yesterday that in order to drum up interest in the network beyond the comings and goings of man meat Charlie Gasparino, it would be looking into unusual trading in the simulated contest. Timothy Sykes, “hedge fund manager and blogger,” told the LA Times yesterday, "There are always going to be cheaters. You can try your best to make it fair for everyone, but sometimes a few people are going to try to find ways around it,” which may or may not explain how he turned $13,000 into a pre-tax sum of just over $2 million. Concidentally, CNBC just happens to be airing a six-episode series next month called “American Greed: Scams, Scoundrels, and Scandals.” The b-roll of the day-trading (with not-real money) cheaters should be incredible.

Earlier: CNBC: THIS Is What We Choose To Take A Stand On

CNBC probes stock-game claims [LA Times]

Bill Hambrecht, founder of I-banking substitute WR Hambrecht & Co. wants to start a football league with Tim Armstrong at Google and Mark Cuban. Aspiring NFL competitors have a history of staying afloat for about as long as the Lusitania at a U-boat party, and Hambrecht has been a proud co-captain of at least one of these sinking ships – as a minority partner in the Oakland Invaders of the USFL (United States Football League), which folded after three years in 1985.

This time, the United Football League (Uniting Football rather than States this time) is bound to be successful, because it plans to focus on non-NFL cities and feature a public ownership structure. Buy your share of the Poughkeepsie Angry Pirates today. Hambrecht’s blistering chain of logic was basically that the Green Bay Packers are publicly owned and have an extremely loyal fan base willing to wear dairy products as accessories (something the 12 NFL championships (9 league championships before Super Bowls started and 3 Super Bowls) clearly have nothing to do with), so public ownership in small places must be an instant key to success. At least part public ownership, as teams will have a tripartite ownership structure between owners, the league and fans. Specifics from the New York Times:

Each owner will put up $30 million, giving him an initial half-interest in the team; the league will own the other half. But eventually the fans themselves will become shareholders — because each team is going to sell shares to the public. Then the owner, the league and the fans will each own a third of every franchise. Hambrecht and his executives believe that the initial public offerings will raise, on average, another $60 million per team, giving it about $90 million in working capital. They also hope that the stock sale will create intense fan loyalty.

So Billy H. has seen Rudy a couple of times and remains optimistic about the ability of guys with “heart” to provide footballtainment. After all, Tom Brady was a sixth rounder and Bill Walsh said the talent levels of the people cut from an NFL roster don’t differ much from the talent levels of the people who just make the team (in that you can say with equal conviction, “He’s no Jerry Rice”). This is actually part of Hambrecht's marketing spiel (or at least the denial portion of his stages of grief).

According to some random guy the New York Times asked (a “sports economist” at Stanford, which must have “sports economics” classes, which must be like the physical kinesiology of the econ department (and I only say this because it sounds cool and I’m jealous)), the real barrier to entry in terms of competing with the NFL is getting stadium deals in larger cities and not providing a watchable game of football with the world’s best players (think he may have over-thought that one).

First and Long — Very Long [New York Times]

Securities regulators will review the $11 billion distribution and service fees charged by many mutual funds. Yesterday the Securities and Exchange Commission said it will hold a roundtable discussion on June 19 to discuss the fees.

Often referred to as “12b-1 fees” after the Investment Company Act rule that allows them, the fees were instituted in 1980 as a temporary measure to compensate fund managers for the costs of marketing the fees and attracting new investment. The idea was that mutual fund investors would benefit from economies of scale if fund managers could use part of the fund assets to build larger funds.

Now the fees have become a regular part of the mutual fund business, with even some closed-end funds—which are closed to new investment dollars—charging 12b-1 fees. SEC Commissioner Chris Cox says that the fees need to be reviewed because their use has departed widely from the original purpose.

"When the Commission adopted Rule 12b-1 more than a quarter century ago, the idea was that 12b-1 fees would be a temporary solution to address specific distribution problems, as they arose. But today's uses of 12b-1 fees have strayed from the original purposes underlying the rule, and it is time for a thorough re-evaluation," said SEC Chairman Christopher Cox.

After the jump, read the full SEC release regarding the fees.

Gates, Jobs Make Joint Appearance (WSJ) Putting on the façade that they don’t both want to see the other one dead, Steve Jobs and Bill Gates made a joint appearance yesterday at a conference sponsored by the Wall Street Journal in Carlsbad, California to discuss—wait for it—the influence of technology on the world. Somehow, talk of computers managed to sneak its way into the conversation. Jobs and Gates balked at the idea that new and revolutionary internet services (like the kind that tell you when to get out of bed and what to do after that) will “obviate the need for advanced software on PCs” and argued that future software will be “a combination of increasingly powerful PC software that works tightly with Internet services, what some industry executives call "software as a service." When asked by a rapscallion of an audience member what qualities them men respected most in each other, Jobs went with “Bill’s philanthropic efforts” which seems like the easy way out. Gates noted wistfully that he’d “give a lot to have Steve’s taste,” which, as ardent lovers of mock turtlenecks, we would have to wholeheartedly agree with. The “I’m a (smug, arrogant) Mac, I’m a PC” commercials were also touched on: Jobs had the gall to comment that “the art of those commercials is not to be mean. It’s for the guys to like each other” to a “disbelieving Mr. Gates who shifted in his chair and scratched his chin.” We guess the whole thing is a bit moot anyway, though, considering that Gates still claims to have never seen the ads (that he can recall with total accuracy).

U.S. buyout firm interested in BCE not a 'barbarian': Henry Kravis (CBC News) Henry Kravis would like you to know two things: 1. He’s not a “barbarian.” 2. He loves Canada. During the annual Canadian Venture Capital and Private Equity Association meeting yesterday, Kravis, who’s been criticized for foreign takeovers of Canadian “business icons” (sidebar: what’s a Canadian business icon? Best answer in the comments wins a date with Carney), confirmed that his firm is a minority partner in the Canada Pension Plan Investment Board, the Caisse de depot et placement du Quebec and the federal Public Sector Pension Investment Board, and is interested in buying telecom goliath BCE Inc. Kravis also went on at length over the hurt feelings he and other private equity guys experience when they hear themselves and their work discussed using terms of aggression and noted that he’d rather be viewed “as a capitalist who repairs underperforming companies and listens to labor unions.” (“I’m just a regular guy! A Joe-Schmo! Your buddy, your pal! I’m not the enemy!”) Naturally, the K-man still reminded the crowd that there are important long-term benefits to debt-supported takeovers and delivered a somewhat precious line about his Montreal-born wife being “the best asset I’ve ever gotten" out of the Cannucks.

Wachovia buying A.G. Edwards for $6.8 bln (MarketWatch) Wachovia acquired A.G. Edwards yesterday for $6.8 billion, in a deal creating the nation’s second largest retail brokerage. A.G. Edwards stock was valued at a 16% premium to its Wednesday closing price. Wachovia will pay $89.50/share (in a mix of cash and stocks). The merger is expected to close in the fourth quarter, when the brokerage will have a combined $1.1 trillion in client assets.

Hedge Funds: With More Money Comes More Post-Nups (DealBook) Not at all breaking news: there is a Venn Diagram overlap between some hedge fund guys who like to horde money and get married several times. Apparently now de rigueur with that set is the “postnup,” which, like the pre-nup, divides the marital assets, only this time, as the name would suggest, it’s signed after the marriage. One US hedge fund (we’re looking at you, Third Point) is refusing to take on new partners until they agree to sign postnups that bar their spouses from making claims on the fund.

SEC Settles With Brocade Over Options Backdating, People Say (Bloomberg)
Brocade Communications systems has agreed to pay approximately $7 million to “resolve allegations that is improperly issued stock options to employees.” This is the first fine against a company for backdating stock options, and, according to federal prosecutor William Portanova, “will set the standard” and will be “a signal to the world exactly how bad their punishment is going to be.” The people who care about this decision are a. Steve Jobs (but not really) b. the smaller peons who backdated who might actually get in trouble for it and c. John Carney.

Saudi prince backs Citi's CEO (CNN Money) Alwaleed bin Talal, the Saudi Prince and Citigroup’s largest individual shareholder, said that he has “confidence” in Chief Executive Charles Prince. So he’s the one.

$$$The Backdoor into Stanford [Banker’s Ball]

$$$Wall Street Maverick Tilts at Football Giant [DealBook]

$$$A little about me: Blond hair (most of the time), blue eyes, 5’10. I recently turned 29 and work as an investment banker here in the city. In my spare time I love yoga, running, gourmet cooking and playing pool (see pic). The thing I hate most is sushi (sorry I just prefer steak). Let’s go nuts. [Craigslist]

...one of our favorite readers (and there are so many to choose from!) asks, and continues:

Because from this chart, that was the time to do it, as we limped across the finish line to reach a fresh record today on the SPX ... a mere 7 1/4 years after its last close at these levels. From here, I'll just remind you of that old adage: "The market climbs a wall of worry" --> and the NYSE reported that a record 11.76 BN shares (3.1%) of the total listed shares were sold short by mid-May, with the NASDAQ reporting similar record figures for May.

Some will pooh-pooh this indicator since there is such a high level of risk-arb activity (traders short the acquiring company, buy the acquiree) and HFs that engage in pairs trading, HOWEVER I think that's wishful thinking... short interst being artificially high or not, a lot of real money appears to be sitting on cash (waiting for that proverbial "other" shoe to drop after the Feb swoon) and the amount of cash that goes back to equity investors EVERYDAY in the form of PE/M&A activity ($2.3 TRILLION global volume YTD) dwarfs the amount of new supply...even though I got C's in both Econ 201 and 202 (weeder classes at U of M), I did remember that supply/demand thing...

So buckle up, keep your cool and buy stocks...k?

Four Ernst & Young partners were indicted today for allegedly creating illegal tax shelters for the firms wealthiest clients. At the same time prosecutors announced it would not bring charges against the accounting firm.

The four worked in a group Ernst & Young set up in 1998 to create tax shelters for clients making more than $10 million per year. At first it sported the color name Viper, which officially stood for Value Ideas Produce Extraordinary Results. At some point someone seems to have thought snakes in the accounting firm was not the best idea and the name was changed. But the goal of helping clients minimize taxes remained.

The accounting firm may have helped its clients create more than $7.56 billion in tax deductions, according to the business reporters at ABC News. The firm collected a fee of between 1.25% and 2% for ever dollar of tax deduction created, for a total of more than $115.7 million, according to the indictment.

The indictments come after a long investigation that stems back to the plethora of tax shelters that were big business for the accounting firms during the stock market rally of the late nineties. The decision not to charge Ernst & Young will likely be taken as a signal that the Justice Department is ratcheting down the investigations into the tax shelters of the last stock market boom. At one point it looked like law firms and investment banks might also be indicted. Declining to indict Ernst & Young may be a sign that the Justice Department is now aiming at the individuals involved with the allegedly abusive tax shelters rather than their employers.

At least one of those indicted today is not going quietly. A lawyer for Ernst & Young tax partner Richard Shapiro said today that his client was “disappointed that the Department of Justice and the United States Attorney’s Office have decided to go forward with the prosecution of an innocent man.” He went on to describe the charges against Shapiro as “baseless.”

Shapiro is a well known figure in tax circles. His views have been quoted widely in the press, and he has authored a booklet on taxes and investing.

How the Super Rich Avoided Taxes; Despite Making Millions [ABC News]

Ernst & Young Partners Charged in Tax Fraud [SmartMoney.com]

We’re told by a trader at a New York investment boutique that Google will split 10-to-1. There have been many rumors of splits in the past but our source claims that this time it’s for real.

If he’s right, this would mark a complete about face for Google. At the Google shareholder meeting earlier this month CEO Eric Schmidt told shareholders, “We are not considering splitting and have not for a long time.” That’s about as unequivocal as you can get. So we’re maintaining a skeptical stance about this rumor.

Google’s anti-split stance, however, makes it an anomaly among public tech companies. Yahoo, eBay and Microsoft have all split. And Google’s share price—it’s closing in on $500 and some analysts predict it might go as high as $600—make it a prime candidate for splitting. High share prices are considered by many to be a barrier to investment by ordinary investors, although there doesn’t seem to be having much trouble finding willing buyers for Google shares.

One person who doesn’t seem troubled by the high share price is Eric Schmidt, who exercised options for 57,086 shares of common stock under a prearranged trading plan, according to Securities and Exchange Commission filings on Tuesday.

Google: No Plans for Stock Split [thestreet.com]
Google: Where's the stock split? [cnet.com]
Google CEO Exercises Options [Forbes]

Federal prosecutors yesterday brought criminal charges against Pakistani banker Ajaz Rahim, who they allege traded on inside information leaked to him by a junior Credit Suisse banker. Rahim is a prominent figure in Pakistani investment banking, and until quite recently worked as the country head of investment banking of the Faysal Bank in Karachi.

The picture to the left appears to be of Rahim and Farook Bengali, the chief executive of Faysal. It was prominently placed on the bank's website until recently but has been removed. DealBreaker was not able to confirm that the picture is Rahim.

Earlier this month, federal prosecutors arrested Hafiz Mohammed Zubair Naseem, a junior associate in the energy group at Credit Suisse, on charges that he had leaked information on nine deals which his employer was involved with, including the buyout of Texas energy giant TXU. At the time of the arrest, prosecutors said that Naseem had leaked the information to a banker in Pakistan but did not name him. A little more than a week later, the SEC amended its civil complaint against Naseem and named Rahim as a defendant. The complaint alleges that in at least twenty-five instance, Rahim made trades several minutes after concluding phone calls with Naseem.

An arrest warrant has been issued for Rahim but his whereabouts are currently unknown. After the SEC named him as a defendant, Rahim’s lawyer , Spencer Barasch, had said that his client would not come the US for a deposition in the suit unless he received guarantees that he would not be arrested. Naseem had also said he planned to call Rahim as a witness for the defense in his own trial.

Through his lawyer, Rahim is denying any wrong doing. “Mr. Rahim looks forward to vigorously defending himself against the charges,” Barasch told DealBook yesterday.

U.S. Attorney Charges Pakistani Banker with Insider Trading [DealBook]
Banker faces insider trade charge [BBC]

A reader tipped us off to the following energy market shake up this afternoon regarding oil prices. US crude prices shot up 40 cents when a Tulsa, Oklahoma television station reported on its website that a regional refinery was on fire from a lightning strike. The only problem - there was no fire, save for the pants of the KOTV webmaster (Brain Hunter, as part of Solengo's new macro event-driven strategy).

Web site error rocks global oil markets [Reuters]

It’s refreshing to see, at least for anyone who prefers a little balance in the technological world order, that not everything Apple touches turns to gold, which has been the case since the iPod (although the Power Mac Cube was shelved just as the iPod was launching in 2001). The Apple TV, which is a $300 doorstep, furniture leveler or sushi platter according to Fortune’s Brent Schlender, is Apple’s very own Zune, crammed with features that are unusable because of compatibility issues and lacking common sense controls – like a volume gauge on the remote. Schlender points out that the advertising push for the Apple box in the very medium it’s trying to transform is non-existent and that Steve Jobs would rather talk about his ignorance of options dating practices than the Apple TV.

Although computing giants still pursue the holy grail of Web/TV integration, the real changes in TV have come from complimentary hardware (DVR) or the displacement of content across an already established medium (video sharing with high speed internet connections). This gives Apple a 1-1-1 record when it comes to transforming media platforms, with its overwhelming victory in shaping the way we listen to and store music, a trip back to the drawing board with a clunker of a TV set, and a push when it comes to home-computing (I don’t think OS counts as defining the home computing platform, despite what Apple enthusiasts will tell you).

The debate rages over Apple’s effect on wireless communication with the arrival of the iPhone next month. Will the device be another example of battery gobbling feature creep or compatibility turmoil, or will the iPhone finally integrate music, video and phone in a user-friendly way?

Apple (AAPL) shares are up more than 2% today, shooting past the $115 mark to a new 52-week high.

The trouble with Apple TV [Fortune via CNN]

Finally, something quasi-exciting today (other than the planning of our upcoming "Whose Boobs?" contest, which we'll tell you all about in good time): the Man Group plans to list a hedge fund on the NYSE! Man, one of the largest hedge funds in the world, will be selling a closed-end fund that employs hedge fund strategies. Shares of the Man Dual Absolute Return Fund will be pawned for $20 each, with a minimum order of 100 shares (to maintain
the farce of hedge fund availability only to "accredited investors").

The fund's assets will be invested by two managers: About 80% will be under the watch of quantitative manager Tykhe Capital, using a long/short equity strategy. The rest will by managed by Man's AHL Core program, a mangaged-futures strategy.

Everyone is excited to point out that this move is indicative of a "broader trend of hedge-fund managers boosting their assets through exchange-traded funds that can be bought by both institutional and retail investors" (or something to that effect). We're just psyched to be getting some mileage out of what we'd previously thought was our retired "bukkake party of IPOs" tag.

Man Group to List Hedge Fund on NYSE [Forbes]

Word broke this morning that Last.fm has been acquired by CBS for $280 million. The online music provider has been the subject of acquisition speculation for months. The most persistent rumor had Viacom buying the company for as much as $450 million. We may never know what happened to that deal, if it ever existed outside of the heads of London music fans and market watchers.

CBS, which was at one time a corporate sibling of Viacom, is comparing the deal to News Corp's acquisition of MySpace.

"We're emulating what Fox did with MySpace. There are a lot of super-cool, whiz-bang applications they have that I can't wait to apply to other parts of the business," CBS digital boss Quincy Smith tells Reuters.

CBS buys online music site Last.fm [Reuters via Dot Music]

CNBC has announced an investigation into “complaints of unusual trading among some of the 20 finalists in the CNBC Million Dollar Portfolio Challlenge [sic],” which was mercifully taken out back and shot on May 25. Ooo, insider trading, how trendy, how scandalous, how very “you are a bad boy,” indeed. While it’s true that we don’t necessarily have any hard evidence that this isn’t a plot by producers to drum up page views (on CNBC.com)/excitement about the Challenge and CNBC in general during this “we haven’t had a reporter go down on a source in a while, we’ve got to come up with something” period, we are allowed to speculate that this is the case, are we not? When John “I Bleed For CNBC” Carney and Tim “Pre-tax Sum of $2 million” Sykes stop taking your calls, you know something’s got to be done.

Earlier: CNBC Continues to Be Nonplussed Over Ethics, Lack Thereof

CNBC Probing Alleged Violations by Finalists in Million Dollar Challenge [CNBC]

Apparently all it takes is a mysterious departure of a CEO to make a company's shares shoot up almost 3.5%, as VeriSign (VRSN) is surging on news of Stratton Sclavos' resignation as CEO after 12 years. No one, aside from a secret cabal of VeriSigners knows why Sclavos bolted, but analysts speculate that the main internal squabbles regarded a lack of new talent and lackluster returns from VeriSign's aggressive acquisition platform. Former Science Applications International Corporation CFO William Roper Jr. was appointed to succeed Sclavos.

VeriSign is restating its financials from 2001-2006 and expected to take at least a $250mm hit from dodgy options dealing, but there is no official word on whether this had anything to do with the CEO shuffle.

VeriSign’s Chief Executive Resigns Abruptly [New York Times]

Robert Zoellick is not afraid of foreign relations, or panda relations, seen here last January with Jing Jing at the Chengdu Giant Panda Breeding Research Base in central China. "You want to know how the panda felt?" Zoellick asked. "Very soft."

U.S. Envoy Engages In Panda Diplomacy [Washington Post]
Zoellick to Be Nominated to World Bank [Forbes]

Former Goldman Sachs Asia investment experts Xiong Xiong and Vincent Ee will be launching Libra Greater China Fund, a long/short strategy, next week. Asian Investor reports that the Greater China strategy will focus on the mainland and will also invest in companies listed in Taiwan and Hong Kong. Libra will target 30-40 long positions and 10-15 shorts, with average exposure at 90-130% long and 50-70% short.

Goldman Sachs portfolio managers start hedge fund [Asian Investor]

This month, the number of shorted shares on the NYSE reached 3.1% of the total number of shares traded on the exchange. This is the highest percentage since 1931 (just to give you a sense of how long ago that is - in May of 1931 the Empire State Building had just finished construction). The bulls may carry the day though, as shares of the S&P 500 are trading at only 17.8x earnings on average, which is a far cry from the 32.8x earnings S&P 500 shares were trading at on average at the end of the last bull market. As short sellers continue to hold firm, they may continue to eat it, according to Bloomberg:

Hedge funds that focus on shorting lost 35 percent from September 2002 through the end of April, according to the Credit Suisse Tremont Hedge Fund Dedicated Short Bias Index. That compared with an 82 percent gain for the S&P 500 in the same period. The funds are the worst performers this year among 10 hedge fund strategies tracked by the Credit Suisse/Tremont Hedge Fund Index, dropping 1.1 percent.

Short Sales Break Record on NYSE; Market Bulls Get More Bullish [Bloomberg]

IntercontinentalExchange poured a little extra honey on its bid for the Chicago Board of Trade today, throwing a settlement over a longstanding dispute with the Chicago Board Options Exchange on top of its bid. ICE has been locked in a bidding war with the Chicago Mercantile Exchange for the Board of Trade.

Since its first days in the Nixon administration, Board of Trade has been battling the CBOE over exchange rights that allow members of the Board of Trade to trade options at the CBOE without having to buy a membership. The CBOE has been threatening to attempt to terminate those rights if the Board of Trade is taken over.

In the settlement announced today, ICE would pay Board of Trade members a total of $666.6 million for the the rights. Needless to say, the settlement offer only applies if ICE succeeds in its bid for the Board of Trade.

ICE and CBOE reach deal on exercise rights [Reuters]

Editor's Note: As Keith Hahn mentioned yesterday, Joe is off all week. Even DealBreakers need vacations. So the rest of the team is filling in for him as best we can.

Goldman's Global Alpha Hedge Fund Falls 3.4% Since Start of '07 (Bloomberg) Frankly, we think the "under-performance" of Goldman's Alpha fund is something of a non-issue. Yes, it is down close to three and a half percent for the first quarter of this year while some hedge fund average is up 4.9 percent. And, sure, it hasn't quite lived up to the "Goldman prints money in its basement" reputation that the fund got after returning 40% in 2005. But Alpha isn't meant to be anyone's primary investment vehicle. It's supposed to operate as a true hedge fund, offering uncorrelated returns. This means that some years will not be boom years. If anything, diverging from the performance of a hedge fund average that someone has cooked up simply means that Alpha isn't playing the same game of shorting volatility that so many so-called hedge funds are playing.

The World Bank and the Goldman Connection {DealBook) Basically, Goldman Sachs just bought the World Bank. Okay. That's not quite right. But it does sometime feel like Goldman is running the world. And this morning it just feels a bit more like that. Now they have the NYSE, the Treasury, the World Bank and have done their best to own China too.

ABN Bid: Sweet and Sour (Wall Street Journal) When ABN Amro agreed to sell it's LaSalle division to Bank of America, a lot of people assumed it was part of an attempt to muck-up the takeover bid from the group led by the Royal Bank of Scotland. Well, if that was the plan, it seems to be working. Yesterday the RBS group said the final price paid to ABN Amro shareholder may end being lower because of the cost of litigating the lawsuit that has resulted from their attempt to unwind that deal.

Debt risks grow in private equity boom (Reuters) As it turns out, leveraged finance involves lots of leverage.

My Recommended Federal Reserve Policy (LewRockwell.com) Gary North proposes a provocative policy for the Fed: stop doing anything. More particularly, stop buying or selling assets in an attempt to create a smoothly rotating economy with exactly the right rate of growth, price movements and interest rates. His main point is basically that we wouldn't tolerate a bureaucratic exercise to fix the price of anything else, so we should stop putting up with government meddling in interest rates.

Eurotunnel shares double for second day in a row (Reuters) We never really got the Chunnel. The ferry ride across the English Channel was one of the most pleasant international trips imaginable. You sat down with a bottle of something crisp on a fast boat that whisked you across a beautiful seaway as the Dover Cliffs faded into the background. If you were a literary or historical type you might remember some poem about Dunkirk. Now you cram into a commuter railway that shoves you through an underwater tunnel. Oh yeah, it seems that shares in the company that runs this bad experience are up because someone has figured out a way to let it pay off some of its massive debt load. Hurrah!

$$$ Guess what? Warren Buffett and Jimmy Buffett aren't related. This, and other stuff you never cared about, now brought to you by Sergey Brin's bride. [Fortune]

$$$ Balk vs. Cramer [Gawker]

$$$ I certainly could fill the page with adjectives, but to put it simply...I am fun, funny, not deceitful, a fierce friend, a finance professional by day and a Rocker by night. I am looking for a companion, not to be a cliche like a partner in crime, more like a partner in good times. [Craigslist]

$$$ Hedge Fund Manager’s Comments Irk Macquarie [DealBook]

It is apparently still news to some that the Securities and Exchange commission is very deferential to the securities industry. This morning the Wall Street Journal reported that “the agency has been publicly and noisily pressured by a congressman, a union leader and a Democratic presidential candidate, amid increasing consternation the agency is favoring business interests in its decision making.”

The focal point for the attention is a Supreme Court case that will decide on whether shareholders can sue investment banks for the fraudulent activities of their clients. The question is whether the SEC will file a brief with the court supporting the plaintiffs position that investment banks can be held liable. Prominent (some would say, notorious) plaintiff’s lawyer Bill Lerach is lobbying the SEC to take the side arguing that banks can be sued. Merrill Lynch, which is a defendant in a class-action lawsuit filed by lawyers representing former Enron shareholders, asked the SEC to take the opposite side.

Both sides, of course, claim that their position best protects investors. The plaintiff bar claims that holding banks liable will make banks better police their clients and avoid aiding or even looking the other way when companies engage in fraud. The banks see this opening the flood gates to a torrent of lawsuits.

Who’s right? That’s probably entirely besides the point. These things are rarely, if ever, decided on the basis of wise policy.

[After the jump, we pull back the curtains on what really decides these kind of public policy issues. Hint: it's not a great and all-knowing wizard.]

It’s a little upsetting to find out that one’s publicly professed deity includes the bit “A thief stole my wife's credit card, but I didn't report it. Guess why? The thief spends less than my wife!" in his set of “favorite” jokes. The chafing is slightly salved when reminded that the fallen god has previously told adversaries, “You’ll never work on Wall Street again” and “That’s the dumbest thing I’ve ever heard,” purposely “mangles” people names, and once told Ken Moelis, chief of investment banking at UBS that he was a “Mollusk.” But that’s nothing compared to the sunshine on one’s face that is this:

Investment banks like to make headlines by playing important roles in big deals. But publicity surely wasn’t what Merrill Lynch was after when it made headlines last week with it’s new sick-day policy. An internal memo announced that three sick days per year is acceptable but after that the company will start docking pay. More than eight is “unacceptable.” And nine days out is a firing offense. After it was reported on Gawker and DealBreaker, the memo quickly became a story on which the sun never set, showing up in the UK’s Guardian, the International Herald-Tribune, the Boston Globe, the Fort Wayne Herald Gazette, the Los Angeles Times. It even crossed the Pacific to appear in the Shanghai Daily.

Merrill’s flaks acted quickly to emphasize, well, anything other than the news that it has a policy of firing employees who are sick more than 2.4% of the year. Spokesfolks say the company permits three weeks of vacation time, four “personal days,” thirteen weeks of leave for hatching offspring (but only if you are the primary-care giver). Also, they say the policy is in keeping with policies offered by its rivals. (And, of course, none of the other banks are saying a word in connection with the story).

But there was no getting around the fact that the policy was a drastic change for Merrill employees, who were previously permitted to take as many as 40 sick days (provided they didn’t take more than 4 days in a row). Of course, 40 sick days is an awful lot but its not clear that Merrill’s employees were actually taking anywhere near that many. No doubt some employees abused the policy by “pulling a sicky”—as our Brit friends like to say. But in general, employees of US companies don’t use all the sick days they have available. “The average company offering the benefit provides 8.1 sick days a year. But workers on average only take 5.2, according to a survey by Mercer Human Resources Consulting,” Fort Wayne’s Herald Gazette reported.

So why the crackdown? As is usually the case with anything happening around Memorial Day, the summer beach share is to blame.

[After the jump, the implausible "the Hamptons made us do it" excuse.]

Bloomberg's Matthew Lynn submits:

Why are clever young graduates who have neither the taste nor the aptitude for markets choosing to become bankers?

Let's see: proclivities for ankle-grabbing, a love of Excel, this thing, the bitches, the homoerotic male bonding, the need to prove onself better than Keith Hahn? You would probably know better than us (me). Do tell.

Wall Street `Cubicle Warrior' Gets Even in Cruel Roman a Clef [Bloomberg]

It’s no surprise that Andy Roddick’s arms are not on the latest cover of Men’s Fitness (pictured). The resulting fallout has been plastered all over the internets since the cover came out a couple weeks ago. Roddick even jokes about the cover on his personal blog, exclaiming, “Little did I know I have 22-inch guns and a disappearing birthmark on my right arm.” The magazine insists that they didn’t just paste Roddick’s head on some jacked dude (and that they don’t have a piss poor Photoshop guy who can at least match skin tones), but rather enhanced his existing arms, like Jax, the main guy from I, Robot or at least John McEnroe.

It is only recently, however, that news outlets (or whatever you want to call Page Six) got wind of AMI chief David Pecker’s true fury over the ordeal, as Pecker supposedly went ape on AMI editorial director Bonnie Fuller on Friday. Rumors of Fuller’s departure have circulated pretty much since she was hired at AMI to repair Star, but this may finally signal the end up the Fuller era, as further reports indicate that Bonnie is coming in late to avoid the angry Pecker, among other things.

***UPDATE: Roddick just lost in the first round of the French Open to unseeded Russian Igor Andreev, because he has arms like this.

BONNIE BASHED OVER ARM JOB [Page Six]

Did a love of Parker Brothers board games, Monopoly in particular, get John Mack to return to the Dean Witter-tainted Morgan Stanley in 2005? According to the non-news driven article about the Lebanese Lothario* on Page One of today’s Wall Street Journal: maybe (always so vague, the Journalettes). As you probably know, after the train wreck that was the Morgan Stanley-Dean Witter merger, things got awkward between Mack and DW chief Philip Purcell, who became chairman and chief executive of the new company. So bad that Mack left in January 2001. Retirement (also known as running Credit Suisse Group) was going pretty well, until one day, Mack’s son, always the rabble-rouser, gifted his father with a “custom Monopoly board with a ‘Chance’ card that read: ‘A struggle with Phil Purcell finds you in a dilemma at MSDW. Should you stay or should you Go? You choose Go.” (Yes, let’s all pause to make sure we’ve taken that 72-hour pill within the allotted 72 hours. We’ll wait).

And that’s what it took to get the Mack Man back at helm of a Morgan Stanley whose business was in the toilet. MS had missed the train to private equity town. MS was dragging the dead weight that was (is) Discover. MS was making Merrill Lynch look good. Since sometime after that that fateful day, Mack’s been buying up everything from Tennessee Avenue to Waterworks (not to mention winning $10 after coming in second place in the beauty contest. True story).

As the J notes, “playing catch up” has come at a price. Namely: the $30 million to woo Stephen Trevor from Goldman and the concerns over the high risks of getting so involved in private equity by a staunchly investment banker bank. And they’re nowhere near Blankfein and Co., who have a $20 billion buyout fund/$28 billion in investments versus Morgan Stanley’s (projected to be) $6 billion buyout fund/$8 billion investments.

But Mack lives with the constant pressure of his Monopoly-gifting son breathing down his neck, and is working hard to make things better. He slashed paychecks for last year’s poor performers (a group that did not include John Mack, who got $41.4 million in 2006, a 38% raise). And Morgan Stanley’s share of global M&A deals grew to 39.6% this year, up from 2004’s 17.3% during Phil Purcell’s last full year in charge. And, of course, it landed the role of co-lead on the big Blackstone IPO. Morgan Stanley stock is up some ridiculous percentage too, although so is almost every other Wall Street stock.

A couple of years ago John Mack was telling Morgan Stanley’s bankers that they had lost their “swagger.” But, to judge from today’s Journal, it looks like the swagger is back with the Mack.

At Morgan Stanley, A Game of Catch-Up [WSJ]

*Carney'’s note: Calm down, boys. We’re not talking about Mack’s private life. We assume that the name “Mack the Knife” has nothing at all to do with his after-hours activities. We’re just referring to the fact that after he broke up with Morgan Stanley he certainly managed to get around Wall Street quite bit.

Earlier: Maybe If Dick Fuld Spent As Much Time Working On His Right Hook As He Did Worrying About Earnings, We Wouldn't Be Having This Discussion

Against all odds, the story of Overstock continues to get worse. The company has been a laughing stock to almost anyone who can be bothered to think about it anymore. It’s the focus of an SEC investigation. It is run by a chief executive whose name—Patrick Byrne—long ago became synonymous with wacky conspiracy theories. It regularly deploys nasty tactics to defame reporters who dare mention its deterioration. An it’s bleeding directors.

The latest news hit on Thursday when Ray Groves resigned from the board. Groves, who once ran Ernst & Young, was the head of Overstock’s audit committee. He was, in the eyes of some observers, the last and best hope the company had to maintaining a sense of credibility. His departure comes as only the latest of a series of resignations by board members. The past year has seen also seen departures by directors John Fisher and John Byrne, the CEO’s father. When your father bails on your company, you know you are in trouble. Or rather, you would know. Patrick Byrne seems to think it’s a sign of his company's strength. Or something. We’ve long ago given up trying to figure out anything about what goes on inside of Byrne-the-younger’s brain.

But other’s have not. After we took off for the long-weekend, Gary Weiss, Sam Antar and Herb Greenberg all looked into the latest resignation. What’s behind the latest departure? Well, the same thing that was behind the departure of Fischer and Byrne-the-elder: the CEO’s ridiculous “jihad” against the “sith lords” on Wall Street he claims are behind a naked shorting conspiracy that is depressing his company’s stock price.

“In a letter contained in an SEC filing this morning, Groves told the company, ‘My resignation relates to the company's prime broker suit.’ That's Overstock's suit alleging that prime brokers are somehow involved in a naked shorting conspiracy,” Greenberg reports.

[But is it more than the Overstock's lawsuit against prime brokers? Read more after the jump.]