Ed. note: This is a new weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.
Issue #1: How can you get a permit to do a damned illegal thing?
Bitcoins are a “real” commodity, so says the Commodity Futures Trading Commission. Commissioner Mark Wetjen “I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity, “I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity.”
Well maybe if Wetjen wishes really, really hard, Tinkerbell will spring to life and sprinkle enough regulatory pixie dust to give the CFTC the authority it believes it should have. Read more »
Lavish Perks Spawn New Job Category (WSJ)
The nine employees at Pinterest Inc. who report to Jen Nguyen had a busy week in August. One taught a company-only class in muay thai, a martial-arts style with kicks and punches. They put dried mango and fresh towels throughout the online scrapbook service’s new office. There was a postmortem of why a Japanese-themed lunch ran out of rice. (The reason? The rice was tasty.) “We are just providing basic standards,” says Ms. Nguyen, 40 years old, whose title is head of workplace. Free lunch, dinner, snacks and events like a Jell-O shot-making “studio night” are a big part of what it takes to keep Pinterest’s roughly 450 employees productive and happy, she adds. In the 1980s, technology companies helped pioneer creation of the chief information officer to straddle the worlds of general management and tech. Now, competition among technology companies to outdo each other’s extraordinary perks has grown so fierce that it is spawning another new job category…As perks get bigger and better, some employees figure they can ask for anything. One worker at Pinterest recently wanted the company to build a zip line to a nearby bar, while an Adobe employee asked the maker of Photoshop and Illustrator design software to buy a Slip ’N Slide for workday use.
Fed Faces Pressure to Rein in Wall Street Commodity Businesses (Bloomberg)
“You’ve got to restore the separation,” U.S. Senator Carl Levin, said in an interview yesterday after he grilled executives from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley (MS) at a hearing in Washington. “It’s gone way too far this integration. I don’t like the idea, frankly, of these banks being in physical commodities.” This week, a Senate panel Levin chairs released findings from a two-year investigation that concluded Wall Street’s role in owning commodities provided unfair trading advantages and could threaten the financial system if a bank’s business suffered an industrial catastrophe. A Fed official will face questions today over why the central bank allowed lenders to erode what was once a strict line separating banking from commercial activities. The Fed has drawn criticism from senators who allege it engaged in weak oversight over the last decade as banks expanded into new businesses involving aluminum warehouses, coal mines and trading in electricity and uranium. The central bank said in January that it was reviewing whether to stiffen rules.
Alibaba Becomes Wall Street’s Favorite Customer (WSJ)
The Chinese e-commerce company has emerged as this year’s biggest source of fees for banks working on capital-markets deals. After its $25 billion initial public offering in September, the largest in history, the Chinese Internet company on Thursday sold $8 billion in bonds, one of the largest corporate-bond deals of the year.
SEC director with big stock holdings stirs debate (Reuters)
Keith Higgins, who runs the office that reviews public companies’ books at the U.S. Securities and Exchange Commission, reported stock holdings worth between about $2 million and $6 million last year and the sale of stocks throughout 2014, according to SEC disclosures viewed by Reuters. Higgins disclosed holdings in about 90 public companies during his SEC tenure in 2013, making him the biggest investor in individual stocks among the agency’s top officials last year. Since the beginning of the year, he has reported about 60 transactions involving sales of stocks such as Dollar Tree (DLTR.O), Apple (AAPL.O), Abbott Laboratories (ABT.N) and Raytheon (RTN.N), with about two-thirds of those occurring in late September in a flurry of sales. Higgins may no longer be the biggest stock holder among the top SEC officials Reuters reviewed because of these sales. Such stock holdings are permitted by federal and SEC ethics laws and regulations. The law already protects against conflicts by prohibiting government officials from working on matters that could benefit them financially. But Higgins’ large holdings, and the volume of trading he reported during 2013 and 2014, may stoke debate about whether it’s proper for the Director of Corporation Finance or other top SEC officials to be active stock market participants and whether the SEC needs to tighten its ethics policies to further reduce the appearance of potential conflicts.
Alaska troopers bag ‘underwear bandit’ suspect (UPI)
Alaska State Troopers said they have arrested an 18-year-old suspected of being the “underwear bandit” responsible for a series of burglaries. Investigators said troopers responding to a report of a home invasion about 11:18 a.m. Monday in Kodiak found Ryan Cornelio fleeing the scene. Cornelio was identified as a suspect in a string of seven burglaries in the area stretching back months. The burglaries led troopers to warn residents “various items such as women’s underwear” had been “stolen or rifled through” in the area. Cornelio, who troopers said is also suspected of being behind three attempted break-ins in the area, was charged with three counts of first-degree burglary. Investigators said more charges are likely as the investigation continues. The culprit was nicknamed the “underwear bandit” by one victim. Read more »
Goldman fires staff for NY Fed breach (FT)
Goldman Sachs has fired an investment banker who allegedly accessed confidential information from the Federal Reserve Bank of New York, his former employer. Goldman said it had fired Rohit Bansal, a junior employee, in September and then fired his supervisor Joe Jiampietro, a better-known senior banker in the financial institutions group, which advises other banks. Mr Jiampietro was himself a former government official – a top adviser to Sheila Bair when she was chairman of the Federal Deposit Insurance Corporation. The New York Fed said: “As soon as we learned that Goldman Sachs suspected one of its employees may have inappropriately obtained confidential supervisory information, we alerted law enforcement authorities.”
Justice Dept. Sets Record in Penalties for Fraud (NYT)
The Justice Department collected a record $24.7 billion in penalties from fraud and other cases in the 2014 fiscal year, the agency said on Wednesday, as fines against banks for financial misconduct soared. Collections from civil and criminal actions, including money collected on behalf of other agencies, was $8 billion in 2013, and $13 billion in 2012. Collections in 2014 were bolstered by multibillion-dollar payouts from JPMorgan Chase and Citigroup to resolve claims they misled investors about the quality of mortgage bonds in the run-up to the financial crisis, and include $11 billion in payments made to federal agencies or states. Payouts in the 2014 fiscal year, which ended Sept. 30, also include hundreds of millions of dollars in fines levied on UBS and Royal Bank of Scotland.
Ex-Chief of Iceland Bank Sentenced to Jail for Role in 2008 Crisis (Dealbook)
The former chief executive of Landsbanki of Iceland was sentenced to prison on Wednesday, the third of the top executives of the country’s three largest banks that the government has successfully prosecuted and jailed for misconduct during the financial crisis. Sigurjon Arnason was ordered jailed for a year at a hearing at the Reykjavik District Court on Wednesday, but nine months of his sentence were suspended and will be served as probation. Mr. Arnason couldn’t be located for comment on Wednesday. Iceland was one of the countries hardest hit by the financial crisis and was forced to nationalize its three largest lenders in 2008.
Uber May Need Adult Supervision as Controversy Builds (Bloomberg)
Chief Executive Officer Travis Kalanick, 38, is dealing with a wave of criticism this week from remarks that one of his top lieutenants, Emil Michael, made about snooping on journalists. The situation took another turn yesterday when online publication BuzzFeed said one of its reporters was tracked by an Uber Technologies Inc. executive without her permission. Uber is now investigating that manager, a person with knowledge of the matter has said. Uber in August hired David Plouffe, a former adviser to President Barack Obama, who now directs communications at the startup. The deepening debate suggests that Kalanick might need even more experienced hands to guide him and the San Francisco-based company, which is the most highly valued technology startup in the U.S. “Uber has earned some frat culture publicity, and could benefit from hiring a woman on the board or an Eric Schmidt-type of executive,” said Brian Solis, an analyst at technology research firm Altimeter Group, referring to the former Google Inc. CEO who was brought in to aid founders Larry Page and Sergey Brin in the search company’s early years.
GoDaddy seeks nearly $4.5B IPO valuation, talks diversifying (NYP)
GoDaddy.com is pushing ahead with an initial public offering early next year that would value the world’s biggest domain registration service at roughly $4.5 billion, The Post has learned. CFO Scott Wagner met last week with analysts to give an update on GoDaddy since it first filed paperwork to go public in June, a source said. The company, backed by buyout giants KKR and Silver Lake, is trying to woo investors even as the 800-pound gorilla moves into its territory. Just a few weeks after GoDaddy filed for an IPO, Google began testing a domain registration service. In its meeting with the Street, GoDaddy stressed its desire to diversify — building Web sites for customers and helping them to process transactions on their sites, for example — before Google or another rival makes a more serious push.
Loud Rooster Might Cost Owners $3,000 In Fines (AP)
It was just the first of Mr. Rooster’s problems that he was first believed to be a Ms. His crowing has given him away, though, and his owners in Cornelius, Oregon, have been dinged six times in five months for violating city ordinances. At a hearing scheduled for Wednesday, Dan and Megan Keller could be fined as much as $3,000. Megan Keller told The Oregonian (http://bit.ly/1yTecdO) that she thought she was buying two females at Easter time in 2012 for her granddaughters to show at 4-H. But there was a shipping mix-up that became evident as Mr. Rooster grew up. Keller said, though, that the birds had arrived during a tough patch in her life, and “those two brought me a lot of comfort.” Cornelius is a western Portland suburb of about 12,000 people proclaimed on its website as “an agricultural paradise, where rolling hillsides, vineyards and farms abound.” The town doesn’t, as other cities do, ban roosters outright. But it has an ordinance against animals that annoy or disturb neighbors. In June, a neighbor complained about Mr. Rooster. In August, a judge handed down a $250 fine and ordered that the bird get a new home. Keller sent Mr. Rooster to a farm owned by friends. Along went the other bird from the 2012 shipment, known as Mrs. Rooster. Megan Keller said that didn’t go well: The birds lost their feathers, and then a hawk attack left Mrs. Rooster dead and Mr. Rooster injured. So she retrieved Mr. Rooster. As the injured bird rested his head calmly on her shoulder recently, Keller said she’s sure she did the right thing: “Who would I be if I would have left him up there?” Read more »
Goldman Hits The Mother Lode On Deals (WSJ)
Goldman Sachs Group Inc. has cemented its position as the top Wall Street bank for mergers and acquisitions in one of the busiest years in the business. The New York bank, whose name is synonymous with deal making, this week landed roles on two big acquisitions worth a combined $100 billion: Actavis PLC’s $66 billion agreement to buy Allergan Inc. and Halliburton Co. ’s $34.6 billion planned purchase of Baker Hughes Inc.
Uber Exec Proposes Smearing Female Reporters Who Criticized the App (VallyWag)
Uber’s competitors, regulators, and drivers can take a breath. The company, which believes it is worth $25 billion, has a new nemesis: reporters who don’t follow the puff piece protocol. A top Uber executive suggested hiring opposition researchers “specifically to spread details of the personal life of a female journalist who has criticized the company,” reports Buzzfeed. This vindictive response to aggressive reporting about one of the most high-profile companies in the tech industry was uttered by Emil Michael, Uber’s senior vice president of business. Michael previously held a top role at Klout and recently joined a board that advises the Department of Defense. The remarks were made at a chichi gathering at Waverly Inn, the exclusive Manhattan clubhouse, which was attended by Uber CEO Travis Kalanick, Ed Norton, Arianna Huffingon, and “a Buzzfeed editor.” The evening’s host was Ian Osborne, an Uber consultant who used to advise Prime Minister David Cameron: Over dinner, [Michael] outlined the notion of spending “a million dollars” to hire four top opposition researchers and four journalists. That team could, he said, help Uber fight back against the press — they’d look into “your personal lives, your families,” and give the media a taste of its own medicine.
Uber Executive’s Comments Leave Company Scrambling (Bits)
“The remarks attributed to me at a private dinner — borne out of frustration during an informal debate over what I feel is sensationalistic media coverage of the company I am proud to work for — do not reflect my actual views and have no relation to the company’s views or approach,” Mr. Michael said in a statement. “They were wrong no matter the circumstance and I regret them.” Uber has said that the private dinner was supposed to be considered an off-the-record affair.
Pimco’s October Outflows Set a Record in Europe (MoneyBeat)
Investors pulled €11.2 billion ($14 billion) from Pacific Investment Management Co.’s European funds in September and October on the heels of Bill Gross’s sudden departure, according to new figures from investment research firm Morningstar. Of the total, €8.7 billion flowed out of Pimco’s fund range in Europe during October, the highest ever level of outflows in a one-month period in the region, according to Morningstar.
Batista Insider-Trading Trial Starts in Rio (WSJ)
The insider-trading trial of former Brazilian billionaire Eike Batista began Tuesday with law officials contending it could be a step forward in the country’s efforts to protect shareholders from abusive practices. The entrepreneur is charged with manipulating financial markets by not fulfilling a promise to invest as much as $1 billion in his failed oil company and with using privileged information to dump shares of the company before the stock price plunged.
Watch Out for Elephants and Llamas at the Next Wedding You Attend (WSJ)
The llamas were a wedding day surprise arranged by groom Garette Ziem for his wife to be, Kim Dalton, who finds them entertaining and calming. When the two creatures appeared, she “exploded in happiness and tears,” he said. “It meant so much to me that Garette went above and beyond to create this extra special moment,” she said. Mr. Ziem’s nieces, who escorted the pair up the aisle, were billed as “llama girls.” Guests lined up to take selfies with the tall, woolly duo, who were fully trained and didn’t spit, contrary to common belief. “They were well-behaved, just like any household dog, better probably,” said Mr. Ziem, a sales manager who paid $500 to have them attend. “People will remember the wedding more because the llamas were there,” he said. Having Fido serve as a ring bearer or riding to the ceremony in a horse-drawn carriage have been primary ways of integrating animals into weddings over the years. But these days, in ways big (elephants) and small (butterflies), the species playing a role in nuptials and other momentous life events are often more exotic…Yet the mingling of wildlife and humans can go awry. At a wedding he attended in Illinois last May, Roger Boisen saw that firsthand. After the bride and groom recited their vows, dozens of Monarch butterflies were released from boxes. Fluttering about, they added a fairy-tale touch to the celebration. One of them, however, landed on the lawn, where it soon met its fate beneath a bridesmaid’s pump. “People were yelling, ‘Watch out for the butterfly!’ ” recalls Mr. Boisen of Appleton, Wis. “Definitely I felt bad for it, and I know other people did.” Read more »