Opening Bell

Opening Bell: 07.16.14

S&P Weighs Restarting Talks on U.S. Suit (WSJ)
Standard & Poor’s Ratings Services, after more than a year of fighting a crisis-era lawsuit, is willing to reopen discussions with the Justice Department to settle the case, according to people familiar with the matter. The company isn’t in active talks with the Justice Department and no deal is imminent, these people said. And while no penalties have been discussed, negotiations would likely focus on a range of several hundred million dollars to around $1 billion, these people said. The firm also doesn’t want to admit wrongdoing, the people said, fearing such an admission would leave it vulnerable to further litigation. However, it is unclear whether the Justice Department would accept such terms. The government had previously demanded more than $1 billion before talks broke down. It then filed a lawsuit in February 2013 seeking $5 billion. S&P’s apparent strategy shift is in part tied to a new general counsel taking over at S&P’s parent company, McGraw Hill Financial Inc. The company also has generally grown more willing to resolve the lawsuit instead of fighting, according to the people familiar with the matter. S&P has previously called the lawsuit “meritless” and alleged it was retaliation for its 2011 downgrade of U.S. sovereign debt, which the government denied.

Bank Earnings Surprise on Pickup in Trading (WSJ)
“It’s not something we should do cartwheels over, but something we can stand up and cheer” about, said Tom Jalics, a senior investment analyst for Cleveland-based Key Private Bank, which manages J.P. Morgan and Goldman shares. “We should take note today but should be cautious about trading results going forward as well.”

Yahoo to Keep More of Alibaba After IPO, Return Cash (Bloomberg)
Yahoo! Inc will return at least half of the cash it reaps from Alibaba (BABA) Group Holding Ltd.’s initial public offering to shareholders, providing solace to investors who’ve hung on as Chief Executive Officer Marissa Mayer struggles to revive sales. The U.S. Web portal is also keeping a bigger stake in the Chinese e-commerce company, ensuring that Yahoo continues to benefit from its investment in the world’s largest Internet market. The plans for Alibaba were a bright spot in a report yesterday that showed Yahoo’s sales fell last quarter, missing analysts’ projections.

Ex-CalPERS CEO admits he’s a crook (Fortune)
When former CalPERS CEO Fred Buenrostro was charged more than a year ago by both federal and state officials with fraud and obstruction of justice charges, something didn’t seem right. The allegations focused on how Buenrostro had forged documents to help placement agent pal Alfred Villalobos get paid by some of his private equity clients, but there was no mention of Buenrostro personally benefiting (beyond a $300k per year job with Villalobos upon retirement from CalPERS). Not was there any evidence that Buenrostro improperly influenced investment decisions at CalPERS. But it seems he did both things, according to his guilty plea last Friday in a San Francisco courthouse. Buenrostro’s attorney had previously suggested that his client was prepared to roll over on Villalobos, who continues to insist that he did nothing wrong. And roll over he did, acknowledging not only the fraud, but also: The receipt of $200,000 in cash from Villalobos — stuffed into shoe boxes and paper bags over a series of three meetings – in exchange for confidential CalPERS information and influence in directing CalPERS to invest in Villalobos’ clients…[also] Villalobos paid for Buenrostro’s 2004 wedding.

Jamie Dimon: Companies should feel free to bail on the U.S. (Fortune)
Dimon’s public thumbs up for inversions—the growing practice where American companies buy smaller foreign companies to relocate overseas and avoid paying U.S. taxes—came in response to a question from Fortune on a media conference call after JPMorgan released its second quarter results. He said the real problem was the tax code, not CEOs trying to shirk their responsibilities. “You want the choice to be able to go to Wal-Mart to get the lowest prices,” Dimon said on a conference call with reporters on Tuesday morning. “Companies should be able to make that choice as well.” Dimon did not elaborate on the difference between choosing where to buy your underwear and where a corporations calls home. In a recent cover story for Fortune, Allan Sloan argued that U.S. companies are “positively unpatriotic” when they move their corporate headquarters overseas to pay lower taxes because of the benefits they receive by being (except for tax purposes) American companies. What’s more, Sloan argued undermining the U.S. tax base will be bad for all shareholders in the long run.

Massachusetts Taco Bell employee shoots customer with BB gun (NYDN)
A Massachusetts Taco Bell employee allegedly shot a customer with a BB gun after the diner grew angry because no one would take his order. Springfield Police arrested 26-year-old Steven Noska on assault and battery charges for the Sunday morning incident, WWLP reported. Around 4 a.m., the customer, also 26, pulled into the drive-thru at the Springfield, Mass., Taco Bell, police said in a statement. He was hungry and wanted tacos, he told officers. The restaurant was open, but no one came to the window, he claimed. After waiting for a while, the customer started banging on the glass. When that didn’t getthe employees’ attention, the man parked his car and went to the restaurant’s door. He banged on that, too. Finally, Noska came to the door to confront the fuming would-be diner. The two men started arguing, police said. Then, it got violent. Noska allegedly shoved the customer, walked to his car and grabbed a BB gun. Police said Noska shot the man several times before hitting him with the pistol. Read more »

Opening Bell: 07.15.14

Barclays Dark Pool Volume Fell 37% in Week of Lawsuit (Bloomberg)
Barclays saw a 37 percent decline in the number of U.S. shares that traded in its dark pool during the week that it was sued by New York for allegedly lying to customers of that venue. About 197 million shares were traded in the dark pool during the week of June 23, down from 312 million the previous week, according to data from the Financial Industry Regulatory Authority. Three of the London-based bank’s largest rivals — Credit Suisse Group AG, UBS AG and Deutsche Bank AG — saw increases during the week, the Finra data show. Barclays lied to customers and masked the role of high-frequency traders as it sought to boost revenue at one of Wall Street’s largest private trading venues, New York Attorney General Eric Schneiderman said in a complaint filed June 25. He cited a pattern of misleading and false representations that went on as recently as April.

Citigroup to Get Tax Silver Lining in $7 Billion Settlement (MoneyBeat)
Citigroup will get a tax break on at least part of its $7 billion settlement with the government over its mortgage securities that went bad. The costs incurs in providing $2.5 billion in assistance to distressed homeowners and other consumer relief – will be tax deductible, the bank and outside experts said Monday. So will the $500 million Citigroup is paying to state attorneys general and the Federal Deposit Insurance Corp. The $4 billion fine the bank is paying to the Justice Department will not be deductible, however. Under the law, fines and similar penalties imposed on companies as part of a settlement can’t be deducted on a company’s tax return, but other amounts paid can be deducted, as ordinary business expenses.

Draghi Says Banks Shouldn’t Count on Another Carry Trade (Bloomberg)
“The convenience to use the ECB cheap money to buy government bonds is much less” than in a previous funding round which started in 2011, the ECB president said in testimony to the European Parliament in Strasbourg, France yesterday. “The general situation is such that these carry trades are going to be much less profitable.”

Allan Mayer Helped Take Down American Apparel Founder Dov Charney (BusinessWeek)
Allan Mayer, a member of American Apparel’s (APP) board of directors, helped oust Dov Charney from the company a month ago. Charney, of course, founded American Apparel and was its chairman, chief executive officer, president, public face (and oh, so much more). But who is Allan Mayer Mayer first met Charney in 2004, after the publication of the now notorious article in Jane magazine—the one where Charney masturbated in front of the reporter, with her consent and while talking about business. Mayer was a crisis manager; Charney, a perennial candidate for crisis management. After American Apparel went public in 2007, Charney invited Mayer to join the board. He’s now co-chairman and one of only two board members to keep their seats after a deal with hedge fund Standard General on July 9 to rescue the company.

A Goldman World Cup Streak Weighs on Brazil (Dealbook)
Soccer fans in Brazil might be forgiven if they asked Goldman Sachs to back another team. Despite predicting a World Cup victory for Brazil for the third-consecutive time, Goldman was off the mark again. In a pre-tournament analysis, the bank forecast that the host nation would defeat Argentina in the final, 3-1…Notable was how heavy a favorite the bank made the host nation. It gave Brazil a 48.5 percent probability of winning the title, a figure that it noted was almost twice the 25 percent probability that Ladbrokes bookmakers had. It wrote in its report that “the most striking aspect of our model is how heavily it favors Brazil to win the World Cup.” No other team came anywhere close. Argentina was second, with a 14.1 percent probability, and Germany third with a 11.4 percent probability. Goldman trumpeted in its report that “we have invested much more intensively this year in a model of the probability of success in a match between any two given teams, based on their track record and characteristics.”

‘Til Big Mac do us part: McDonald’s hosts weddings (CNBC)
Nothing spells eternity like a McDonald’s white balloon wedding gown or a crystal McDonald’s house wedding gift for some couples tying the knot in Hong Kong. These are just two of the items available as part of the fast food giant’s wedding party program, which launched in 2011 in the region to meet customer demand. Since then, McDonald’s has hosted about a couple dozen wedding parties and expanded the service from three restaurants to 15, wrote McDonald’s spokeswoman Jessica Lee in an email. The fast-food giant also hosts engagement, anniversary and bridal shower parties. “We started the program because many customers tell us that McDonald’s is where they first started dating…McDonald’s is where their love stories grew,” Lee added. “This connection is exactly why they want to hold their wedding parties and even anniversary parties at McDonald’s—to relive sweet beginnings and bring their romantic story full circle.” The company offers four separate wedding packages for the betrothed, topping out at HK$9,999 or about US $1,290. The bargain party option clocks in at about HK$2,888 or US$373…The deluxe version includes a 2-hour venue rental, McDonaldland character gifts for 50 guests, 50 invites, wedding gifts, a pair of McD’s balloon wedding rings, bridal bouquet, apple pie cake display, Crystal McDonald’s house, decorations, a MC and more. Read more »

Opening Bell: 07.14.14

Bitcoin by Bitcoin, the Winklevii ETF Inches Closer to Reality (Bloomberg)
It looks increasingly like the Winklevoss Bitcoin Trust (COIN) will actually launch. If it hits the market later this year, it will come a decade after the inception of the world’s largest gold fund, SPDR Gold Shares (GLD). COIN was modeled on GLD and in some ways is trying to be a new generation’s version of gold. The cyptocurrency would move closer to the mainstream in an exchange-traded fund wrapper. There’s still no guarantee COIN will be approved by the Securities and Exchange Commission. There are more than a thousand prospectuses for ETFs sitting with the SEC, and hundreds of reserved tickers sitting with stock exchanges. And this approval would be the first of its kind — a virtual asset.

Investigators Probe the Ways a Swiss Broker Courted Libyan Business (WSJ)
At a luxury villa in the Moroccan desert, an international brokerage firm hosted getaways for Libyans connected to the country’s oil-rich sovereign-wealth funds. The men spent their days lounging poolside and nights partying at clubs in Marrakesh. The jaunts were part of a campaign by Tradition Financial Services of Switzerland to win business in Moammar Gadhafi’s Libya, an effort that included hiring relatives of senior Libyan officials, according to people who attended and to former employees of the firm. The tactics evidently worked. Tradition for years handled investments for the Libyan funds, earning millions of dollars in commissions. Now its efforts are under scrutiny in wide-ranging U.S. and British corruption probes that are examining the lengths to which some Western financial firms went to gain a piece of Libya’s oil wealth.

Behind the Scenes of Citigroup’s $7 Billion Settlement (WSJ)
The negotiations are stoking banks’ fears that the Justice Department is getting increasingly heavy-handed against the industry, while investors are worried that bank penalties will be decided not by a formula but by the subjective measures of the government. The deal also could be seen as a key test for Citigroup CEO Michael Corbat, who was given the top job in 2012 with a mandate to improve the bank’s relationship with the government. Meanwhile, Mr. Holder has faced constant criticism from Congress and elsewhere that his Justice Department has been too soft on financial institutions.

Bankrupt Crumbs Might Be Saved (NYP)
Crumbs Bake Shop has a deal, which if approved by a bankruptcy judge, could reopen the cupcake maker, according to a court filing on Friday.
Crumbs, which specialized in oversized cupcakes and went public in 2011, shuttered its nearly 50 locations in 10 states on Monday. It filed for Chapter 11 bankruptcy on Friday. The new ownership comprises Marcus Lemonis, star of the reality show “The Profit” and known as the “business turnaround king” and Fischer Enterprise, the owner of Dippin Dots. The two would provide debtor-in-possession financing and subsequently buy the cupcake chain through a joint venture called Lemonis Fischer Acquisition Co, according to the filing. They would take Crumbs private and reopen its stores and resume operations.

Barry’s Bootcamp Considers Strategic Options Including Sale (WSJ)
Barry’s Bootcamp, a group fitness chain that counts celebrities among its clients, is considering strategic options including a sale or capital raise, according to people familiar with the matter. The company, which offers a bootcamp-style workouts in a nightclub setting, could fetch $100 million in a sale, two people said. One person said that figure would be on the high end and another said even more was possible. Investment bank Moelis & Co. is expected to contact potential buyers or investors in a process that would kick off later this summer or early fall, the people said. Founded in 1998 by fitness instructor Barry Jay, the company is considered fast growing, the people said. It currently operates out of 14 locations, mostly in the U.S. but also including Norway and London. Private-equity firms, which are increasingly investing in the health and wellness sector, are potential suitors for Barry’s, one of the people said.

Guy Who Called LeBron James the ‘Whore of Akron’ Forgives Him Now (NYM)
Esquire‘s Scott Raab, whose book The Whore of Akron is about how much he hated LeBron James for leaving the Cleveland Cavaliers, no longer hates LeBron James. No hard feelings, he says! “Broadway Danny Rose said it best — ‘Acceptance, forgiveness, and love,'” Raab wrote. “As human beings, that’s the only recipe for leading a righteous life in this world. Such words — from the famous and unfamous — come cheap. But you’re living those truths now, walking that walk. Who am I to hold a grudge?” Read more »

Opening Bell: 07.10.14

Fed Sets October End for Bond Buying (WSJ)
Federal Reserve officials agreed at June’s policy meeting to end their bond-buying program in October, putting an explicit end date on the experiment for the first time and closing a controversial chapter in central-banking annals with results still the subject of immense debate. The central bank has reduced bond purchases in $10 billion increments this year, to $35 billion a month from a peak of $85 billion. The tentative plan outlined in minutes of June’s meeting, released Wednesday, is to reduce bond purchases in increments at its next three policy meetings, including a $15 billion reduction in October, leaving it to buy no bonds in November. “If the economy progresses about as the [Fed] expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting,” the Fed said in the minutes.

Argentina and holdout creditors flood papers in ad war (Reuters)
Argentina published legal notices saying it wouldn’t be responsible for a default because it deposited money with Bank of New York Mellon at its central bank. U.S.-based BNY Mellon, the indentured trustee, is seeking Griesa’s guidance on what it should do with the money. Key holdout creditor Jay Newman, portfolio manager at Elliott Management Corp, had an opinion piece published in the Financial Times reiterating a desire to negotiate. This was followed up by an ad from the American Task Force Argentina, a lobbying group supported by Elliott and others that calls for Argentina to abide by the court ruling and pay its debts. “Argentina has been putting out misinformation in lieu of negotiating,” Robert Shapiro, co-director of American Task For Argentina (ATFA), said from Buenos Aires where he plans to hold a press conference with the local media. “We decided to put out ads that set the record straight in case Argentina says it was forced to default.” ATFA placed a full-page ad in the Financial Times on Tuesday, which was repeated in the Wall Street Journal on Wednesday, titled “The Facts of Argentina’s Debt Dispute.” Argentina fired back at the ATFA with another full-page ad on Wednesday titled: “VULTURE FUNDS: FACTS SHOW THAT IT IS NO MYTH THAT THEY ARE VULTURES.” Attempts to reach Argentina’s embassy in Washington, which e-mailed copies to the media, were unsuccessful.

Bank of America Again Requests 5-Cent Dividend (WSJ)
The Charlotte, N.C., lender is asking regulators to reapprove a five-cent-a-share quarterly dividend, according to people familiar with the matter, a test of its ability to please investors and appease the Federal Reserve at the same time. Bank of America received permission from the Fed in March to boost its quarterly payout from one cent a share to five cents. But the bank had to withdraw the plan, which also included a $4 billion share buyback, a month later, after discovering it had miscalculated capital levels. That was especially disappointing to shareholders, because the Fed had rejected a similar dividend increase in 2011. The bank submitted its new plan in May and said the overall request was smaller than the one put forth in March but didn’t provide any details. According to some of the people familiar with the matter, the bank requested a smaller buyback in its new plan. Its latest dividend request, which would cost the bank an extra $1.7 billion a year, hasn’t previously been reported.

Scottish Banks Brace for Independence Vote (WSJ)
Visitors arriving at Edinburgh airport are greeted with a large Royal Bank of Scotland Group advert stating “This Is Home.” The bank’s management isn’t sure for how long. In September, Scotland will vote whether to become independent from the rest of the U.K. after more than three centuries of union. “Like many other companies we are having to consider the possible business implications of a Yes vote and our response,” says RBS Chairman Philip Hampton, adding, “There is a great deal of uncertainty.” Adding to the complexity: RBS is controlled by the British government following a bailout. Polls suggest the independence campaign may fall short in September’s referendum. But there still remains a large swath of undecided voters and lots of unanswered questions. With only a few weeks to go until the vote, it is unclear whether an independent Scotland would retain European Union membership; what currency it would use; how much of the U.K.’s debt it would assume; and how bond markets would rate its debt. Banks and other lenders may have to revisit credit decisions on millions of customers and rethink pension plans for thousands of staff, for instance.

Corrupt Politicians Sent Each Other Sexy Valentine’s Day Texts (About Money) (Daily Intel)
We already knew former Queens city councilman Dan Halloran had a lot of love to spread around — he had sexual relationships with at least two young staffers — but testimony in White Plains federal court yesterday revealed he didn’t reserve his romance for the young women working beneath him. “Tell me you love me,” read the text message he sent to former Bronx County Republican Party Chairman Joseph Savino after helping him secure a $15,000 bribe on Valentine’s Day in 2013. Read more »

Opening Bell: 07.09.14

UBS Says Brazil’s 7-1 Trouncing Is Bearish for Stocks (Bloomberg)
Conventional wisdom has been that a Brazil loss at home in the World Cup would be a positive for the country’s financial markets. A defeat, the argument went, would sour the national mood and prompt voters to oust President Dilma Rousseff, who has sunk the economy into stagflation. Yesterday’s 7-1 loss to Germany, though, was so crushing that it upends that theory, according to Geoffrey Dennis, the head of emerging-market strategy at UBS AG, who’s been covering Brazil since the early 1990s. Yes, the defeat will hurt Rousseff’s chances at re-election in October, but the lopsided outcome at the same time could deal a blow to investor and consumer confidence in a country that obsesses about its national pastime, he said. “It is such a humiliating defeat that you wonder whether it will have a negative impact on Brazilians’ psyche,” Dennis said in a telephone interview from Boston yesterday. “It’s going to confirm to the people that ‘Look, our economy is struggling, we cannot get any growth, now we don’t even have a decent football team either.’”

Citigroup Nears Deal to Resolve Mortgage Probe (WSJ)
The Justice Department and Citigroup Inc are close to a deal for the bank to pay about $7 billion to settle allegations it sold shoddy mortgages in the run-up to the financial crisis, according to people familiar with the matter. The two sides, which had been far apart just weeks ago, are ironing out details of an agreement that would avert a federal lawsuit over the mortgages, these people said. A settlement could be announced as early as next week. The potential settlement marks a reversal from mid-June, when the Justice Department had warned that it planned to file a lawsuit unless Citigroup significantly raised its settlement offer.

The Magic Fades for Gowex’s Jenaro García (WSJ)
When Jenaro García’s tech company Let’s Gowex SA won the top prize from Spain’s marketing association in May, the presenter hailed him as an innovator who was making wireless Internet ubiquitous, “a magician who converted Wi-Fi into water.” Mr. García, outfitted in an Indiana Jones-style jacket, appeared before the appreciative crowd alongside Wi-Fi Man, a masked, caped superhero figure. The cheering for Mr. García stopped this month as Gowex’s success story abruptly unraveled. U.S. investment firmGotham City Research LLC on July 1 posted a takedown of the company, asserting that its stellar financial results were largely fabricated and its highflying stock worthless. With investors jumping ship, Mr. García gave one last defiant performance on Friday. At a meeting of employees, the 46-year-old chairman and chief executive vowed to bring “Wi-Fi to Gotham.” To demonstrate his resilience, he brandished metal pins that he said had been used to set 24 broken bones he had suffered in an accident years before. The next day, though, he told Gowex’s board that the financial results had been fabricated for at least four years. Gowex filed for bankruptcy, and Mr. García sent a tweet asking forgiveness from those he had harmed.

Emerging Markets’ Chocolate Lovers Boost Cocoa Prices (WSJ)
More than a decade ago, Anupama Amarnath learned how to make chocolate candy for her husband, who had a hard time finding enough of the rare treat in Bangalore to satisfy his cravings. But demand for her chocolate, which is tempered and molded into various shapes, grew far beyond her household. Fifty-year-old Ms. Amarnath now operates a chain of 11 retail outlets under the Chocolate Junction brand in and around the Indian city and owns a 10,000-square-foot chocolate factory. Years of rapid growth in chocolate consumption have given India and other developing markets unprecedented sway in the global market for cocoa. These countries’ share of global chocolate sales is pegged at 45% this year, according to data from market-research firm Euromonitor International. That is up from 33% a decade ago.

Uber agrees to cap NY pricing during emergencies (AP)
Uber, which uses a mobile application to connect riders with vehicles for hire, has its rates rise and fall with demand, but it has been criticized for “surge pricing” that’s sometimes exponentially higher than base fares. Prices usually increase weekdays during rush hour in New York City, on Saturday nights, special occasions like New Year’s Eve and during bad weather. Under the agreement signed Tuesday, Uber will set a cap during “abnormal disruptions of the market,” limited to the range of prices charged in the preceding 60 days and excluding the three highest prices. Attorney General Eric Schneiderman said the agreement between his office and Uber Technologies Inc. and Uber NYC will apply to UberX, Uber Black and Uber SUV statewide.

Just how bad for you were those cupcakes? (NYDN)
Cupcakes from the now-shuttered bakery chain ranked notoriously high in calorie counts, as their massive desserts were about the size of softballs. According to New Jersey nutritionist Erin Palinski-Wade, calories for one Crumbs cupcake ran anywhere from the high 400s to a whopping 780 calories…Crumbs’ delights were also serious sugar bombs, containing about 50-100 grams of sugar each.

Office Team-Building Exercises Gone Bad (NPR)
Several years ago Ben Johnson worked at a health foods store in Iowa. He remembers store management stringing up a donkey piñata to pump up the workers. “Pinned to its chest was a name tag for a rival store,” Johnson says. “They explained to everyone that this was, in fact, an effigy and that we were going to work together to figuratively, literally destroy the competition.” In lieu of candy, the piñata was filled with dollar coins. An overzealous middle manager with a baseball bat was first up, and he obliterated it. “So when this thing explodes, dozens of the dollar gold Sacagawea coins fly through the air everywhere,” Johnson says. “Someone in the front row takes one in the face and goes down. They ricochet off the walls. And when the coins finally stop, I emerge from underneath the table, there’s just a stunned silence.” The coins are like blood money, and no one picks them up. Johnson thinks of the whole fiasco as an omen since the store eventually fell to the competition…Several years ago, things didn’t go well for Peter Brooks when his former employer bused his division to a suburban Washington, D.C., field. They were divided into teams for a round of paintball. “We were issued safety goggles and paintball guns, one of which immediately misfired. It hit a district manager in the crotch,” Brooks says. He remembers that the game quickly devolved into screaming, pleading and retaliatory rage — the paintballs left large welts. “A lot of people pointed their guns right at their supervisors, me included,” Brooks says. “I shot mine right in the middle of the back, and then when he spun around with revenge in his eyes, I surrendered.” The bus ride home, he says, was dead silent. Read more »

Opening Bell: 07.08.14

At Goldman, Board Samples New Guard (WSJ)
Goldman Sachs Group Inc. has stepped up its efforts to groom a new generation of leaders, as it broadens the list of executives who could eventually run the Wall Street firm. As part of those plans, Lloyd Blankfein, Goldman’s chairman and chief executive, has been arranging private dinner meetings between younger managers and the firm’s directors, according to people familiar with the matter. The gatherings, which began last year, are designed to showcase the executives’ expertise on a variety of topics that fall outside formal reviews of their businesses and share the firm’s views on important issues, the people said…The push comes as Mr. Blankfein, who took over in 2006 when Henry Paulson became Treasury secretary, has shown no interest in stepping down soon. “A job like this is hard to come by,” Mr. Blankfein, 59 years old, said in November at an industry conference. “I’ll be slow to get out of it.” Were Mr. Blankfein to retire suddenly, Gary Cohn, the firm’s 53-year-old president, remains the board’s choice for the top job, people familiar with the matter said. But the open-ended nature of Mr. Blankfein’s commitment increases the chance that Mr. Cohn’s window to run the firm will close before a successor is needed, current and former Goldman executives said…The board dinners thus far have featured leaders of the firm’s major divisions, including Pablo Salame, co-head of Goldman’s securities arm, as well as others such as Paul Russo, co-COO of equities, and Anthony Noto, a technology banker who left the firm in June and was recently named finance chief at Twitter Inc., a former client, the people said.

Returns From Activist Hedge Funds Are Causing a Stir (WSJ)
Activists are once again at the top of the hedge-fund heap, after a profitable stretch of clashes with companies around the world. Activist managers gained 6.5% in the first half of the year, almost double the total for the average hedge fund, according to data to be released this week by research firm eVestment. Activist investing, in which managers buy stakes in companies and then agitate for changes in the form of buybacks, divestitures or management shakeups, was also the top-performing strategy among hedge funds in 2013. The fund managers could earn millions for themselves—and billions for their investors—if the gains stick through the end of the year.

Soros Hedge Fund Sued by Ex-Manager Seeking Back Fees (Bloomberg)
George Soros’s hedge fund was sued by a former portfolio manager who claims the firm wrongfully withheld at least $19.5 million in unpaid fees after firing him without explanation eight months into the job. Aaron Cowen, who joined Soros Fund Management LLC in 2010 after serving as portfolio manager and chief investment officer at SAC Capital Advisors LP, had a “stellar” track record at Soros’s firm before being terminated in November 2011, according to a complaint in Manhattan state Supreme Court. “Shockingly, Cowen’s employment was terminated despite his positive returns, when other Soros portfolio managers were failing,” according to the complaint filed July 3 and made public today. Soros, 83, invited Cowen to his home in South Hampton, New York, days after the termination and told the former employee during a 30-minute conversation that he didn’t know why he’d been fired, according to the complaint.

American Apparel, Charney Sued Over Alleged Misconduct (Bloomberg)
American Apparel Inc. (APP) and ousted Chief Executive Officer Dov Charney were sued by shareholders over claims directors ignored Charney’s misconduct that violated the company’s sexual harassment and discrimination policies. The lawsuit cites a June 18 letter by directors suspending Charney as CEO and describing how he authorized severance packages to former employees, and raises and bonuses for current employees, in exchange for agreements protecting him from personal liability for sexual misconduct. American Apparel, a Los Angeles-based maker of casual clothing, has racked up about $270 million in net losses since 2010 and had to raise capital several times. The removal of Charney, who has grappled with sexual-harassment allegations and drawn flak for suggestive advertising, has added to the turmoil.

The Letters That Warren G. Harding’s Family Didn’t Want You to See (NYT)
in 1964, after the historian Francis Russell gained access to letters from Harding to his longtime mistress, Carrie Fulton Phillips, the Harding family sued to halt their publication. Rumors of the affair were not new, but the letters — written between 1910 and 1920, before Harding assumed the presidency — confirmed the infidelity in startling detail. The Harding family feared that publishing them would further tarnish Harding’s legacy and hurt the entire family…In 106 letters, many written on official Senate stationery, Harding alternates between Victorian declarations of love and unabashedly carnal descriptions. (While Phillips’s notes and some drafts of her letters have been preserved, her actual replies were not.) The president often wrote in code, in case the letters were discovered, referring to his penis as Jerry…Sept. 15, 1913: “Wouldn’t you like to get sopping wet out on Superior — not the lake — for the joy of fevered fondling and melting kisses? Wouldn’t you like to make the suspected occupant of the next room jealous of the joys he could not know, as we did in morning communion at Richmond?…Oh, Carrie mine! You can see I have yielded and written myself into wild desire. I could beg. And Jerry came and will not go, says he loves you, that you are the only, only love worthwhile in all this world, and I must tell you so and a score or more of other fond things he suggests, but I spare you.” Read more »

Opening Bell: 07.07.14

A Mad Scramble for Young Bankers (NYT)
This summer, dozens of junior bankers in their early to mid-20s will start jobs in private equity after spending their first two years out of college working at investment banks. Private-equity firms use billions of dollars of cash and plenty of debt to buy entire companies. They are seen by many young strivers as the next rung on an elite career ladder, promising higher status and more pay — around $300,000 a year, including salary and bonus, roughly double what a second-year banker might earn at Goldman. But for junior bankers, who are known as analysts, securing such a job means stepping into the middle of a Wall Street struggle that has intensified since the financial crisis. The whirlwind process of interviews, which this year started in February, far earlier than many in private equity had expected, requires analysts to sneak around and often miss work. It bears little resemblance to the orderly on-campus career fairs they attended in college. “It is not a normal search process — that, certifiably, everyone would agree with,” said Adam Zoia, the chief executive of Glocap Search, one of the recruiting companies involved.

Lion Capital Said to Want Return of American Apparel CEO (Bloomberg)
Lion Capital LLP is threatening to call in a $10 million loan to American Apparel Inc. unless the retailer reinstates ousted Chief Executive Officer Dov Charney, according to a person familiar with the situation. Barring an investigation that finds illegal or immoral activities by Charney, the hedge fund believes his return would be best for American Apparel because it would stabilize the chain in the short term, said the person, who asked not to be named because the matter isn’t public.

IEX Pricing Aims to Drain ‘Dark Pools’ (WSJ)
The upstart firm will allow broker-dealers, including most Wall Street banks, to trade for free when their buy and sell orders match up on the exchange, Chief Executive Brad Katsuyama said in an interview. The desire to avoid trading fees is a primary reason many banks established dark pools in the first place. All other trades at IEX would be charged the same flat fee—nine cents per 100 shares for each buyer and seller—rather than be subject to the complex system of rebates in place at existing exchanges. As part of its “broker priority” pricing system, IEX will let broker-dealers jump to the front of the trading queue. This would put other groups, including retail investors, mutual-fund firms and high-frequency traders, at a disadvantage as it means there will be a greater chance their orders would go unfilled. IEX, which currently operates as a relatively small dark pool, is looking to make a bigger splash in the markets by becoming a stock exchange registered with the Securities and Exchange Commission. Mr. Katsuyama said IEX intends to “imminently” submit its application. With the pricing plan, Mr. Katsuyama—a protagonist of Michael Lewis’s best-selling book “Flash Boys” and a prominent critic of the current U.S. market structure—said he is trying to give the operators of dark pools an incentive to shut those trading venues down. If that happens, he said, most investors would benefit more from the reduced fragmentation in the market than they would lose by ceding the first spot in line to broker-dealers. It isn’t clear if the SEC will approve the company’s pricing structure, or if big banks will abandon their dark pools. The SEC declined to comment.

DoJ vows financial sector crackdown (FT)
The US Department of Justice will be “appropriately aggressive” and seek to bring “timely” cases, including against financial institutions, the chief of its criminal division told the Financial Times. Leslie Caldwell, who was confirmed as chief of the DoJ’s criminal division in May, is returning after a decade spent helping defend corporations against civil and criminal investigations. She said it is no accident that financial institutions are facing inquiries across their business units. “The government has gotten more sophisticated and more willing to investigate complicated fraud. We’ve learned a lot from cases that we’ve done. We have more knowledge in how to do these cases in a more timely way,” Ms Caldwell said. “We’ve seen evidence of criminal activity at a lot of financial institutions. We don’t decide which types of things we investigate. We follow the evidence where it leads.”

France not worried about U.S. probe of other banks: minister (Reuters)
France’s finance minister said on Sunday he was not worried about French banks being investigated by U.S. authorities after a record fine was imposed on BNP Paribas for violating U.S. sanctions against several countries. On Tuesday, BNP pleaded guilty in the United States to two criminal charges and agreed to pay almost $9 billion to settle accusations it violated U.S. sanctions against Sudan, Cuba and Iran. According to U.S. sources, French banks Societe Generale and Credit Agricole and Germany’s Deutsche Bank are being investigated for having potentially violated U.S. economic sanctions. Asked if he was worried about the French banks being probed, Finance Minister Michel Sapin said: “No.”

Finnish Couple Wins Wife-Carrying Race (AP)
A Finnish couple has narrowly won the 19th World Wife Carrying Championships – a quirky competition in which men race to be the fastest while carrying a female teammate. Ville Parviainen and Janette Oksman cleared the grueling 253.5 meter (278-yard) obstacle course in 63.75 seconds on Saturday, less than a second ahead of Britain’s Rich Blake Smith and Anna Marguerite Smith. Thirty-six couples from a dozen countries including Australia, Japan, and the United States took part in the race, which was held in the central Finnish municipality of Sonkajarvi, north of the capital, Helsinki. The rules stipulate that the woman must be over 17 years of age and weigh at least 49 kilograms (108 lb). Despite the event’s name couples don’t have to be married, and organizers say male contestants could “borrow a neighbor’s wife” if they didn’t have a female companion. The men can carry their teammate in various ways, though a popular method is for the woman to hang upside-down with her legs around the male contestant’s shoulders. Read more »