Opening Bell

Opening Bell: 07.17.14

Morgan Stanley Beats Analysts’ Estimates on Fixed Income (Bloomberg)
Morgan Stanley, the best-performing stock this year among the five largest Wall Street banks, reported profit that beat estimates on a smaller drop in fixed-income trading revenue than analysts projected. Second-quarter net income rose to $1.94 billion, or 94 cents a share, from $980 million, or 41 cents, a year earlier, the New York-based company said today in a statement. Excluding an accounting adjustment tied to the firm’s own debt and a tax benefit, profit was 60 cents a share, topping the 56-cent average estimate of 24 analysts surveyed by Bloomberg. Morgan Stanley posted an 8 percent decrease in fixed-income trading, while larger rivals Citigroup Inc. and JPMorgan Chase & Co. (JPM) saw declines of 12 percent and 15 percent, respectively.

Barclays, Deutsche Bank Said to Face U.S. Senate Hearing (Bloomberg)
Barclays Plc and Deutsche Bank AG face scrutiny over their sale of products to a hedge-fund firm that allowed it to skirt borrowing limits and avoid taxes, according to people with knowledge of the matter. The U.S. Senate Permanent Subcommittee on Investigations plans a hearing next week on what it calls abusive transactions by financial institutions, according to a notice from the panel. The companies, which aren’t named in the notice, are Barclays, Deutsche Bank and hedge-fund manager Renaissance Technologies LLC, the people said. Representatives for each of the firms plan to testify at the July 22 hearing, the people said.

Wall Street Techs Take Secrets to Next Job at Their Peril (Bloomberg)
The plan was for Kang Gao to do his exit interview with Two Sigma Investments LLC, a $21 billion quantitative hedge fund in New York, and jump to Citadel LLC, a rival firm in Chicago. Gao never got that chance. Unbeknown to him, that final meeting had been recorded for investigators at the Manhattan District Attorney’s Office, and instead, the 29-year-old native of China found himself sitting in a New York City jail. He’s accused of stealing Two Sigma secrets and faces a potential four-year prison term. Gao is the fourth Wall Street analyst or programmer to be ensnared in a crackdown by the D.A.,Cyrus Vance Jr., on intellectual property theft from financial firms. His decision to charge Gao, former Goldman Sachs Group Inc. programmer Sergey Aleynikov and ex-employees of the Dutch firm Flow Traders BV, signals a willingness to criminalize financial industry disputes formerly relegated to contract litigation.

Icahn and Ackman share reconciliatory hug (NYP)
Carl Icahn and Bill Ackman on Wednesday were back in each other’s arms — literally.
Ackman, unveiled as the “mystery” guest at the CNBC/Institutional Investor Delivering Alpha conference, walked onto the stage as Icahn was finishing an interview and gave his fellow activist investor a bear hug. The men received “Bill & Carl Reunited” T-shirts — a reference to the much-watched live TV debate-cum-battle the two had in 2013. They made up months ago after Ackman called Icahn to “forgive him” — although they remain on opposite sides of the Herbalife battle. “He was thoughtful and supportive of what we’re working on with Valeant,” said Ackman, regarding his latest activist campaign to take over Allergan. “I was thinking, it’s almost crazy that we’re at loggerheads.” Icahn said. “What the hell are we fighting about?”

Taco stand owner claims ex-business partner stole his idea for Pinterest (NYDN)
A Manhattan judge has given the green light to a lawsuit by an Ivy League-educated lawyer who says his former big shot business partner stole the idea for Pinterest out from under him. Theodore Schroeder, 37, can now proceed with his claim Brian Cohen “misappropriated” his idea for a virtual bulletin-board social network. In a court battle similar to the Facebook fight between the Winklevoss twins and Mark Zuckerberg that inspired the movie “The Social Network,” Schroeder says he spent “thousands of hours” developing what became Pinterest, and never got paid a dime. In court papers, Schroeder says he was going to Columbia Law School in 2004 when he and classmate Brandon Stroy “worked together to develop an idea for a socially networked bulletin board.” Schroeder, owner of a gluten-free taco stand in Atlantic City, says he taught himself “the necessary computer and programming skills” to develop the site Rendezvoo in 2006. Schroeder then convinced his partners that the site’s “social networked bulletin boards” should be able to “share any interest” users have, the court papers say.

Nestle Apologizes For ‘Penis’ Shape On Candy Bar (HP)
Robin Jacobs, 31, said he was eating a Milkybar during Sunday’s World Cup final and was stunned to see what he called an “inappropriate” image. “What on earth is a penis doing on a kids’ chocolate bar?” he asked, per Metro. “There’s no point denying what it looks like. It is obvious –- we can all see it.” Jacobs reportedly griped he will now remember the 2014 World Cup for the “Milkybar penis.” He said he ate the candy anyway, outlets noted. Nestle sent the following statement to The Huffington Post: “Nestlé is surprised and sorry to hear that Mr. Jacobs thought the picture on the Milkybar resembles male genitalia, it is in fact an image of a horse’s head, the Milkybar Kid’s horse. There was no intention to mislead or depict anything offensive on our product and we apologise for any confusion or embarrassment this may have caused.” Read more »

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: 07.11.14

Cynk Suspended by SEC After No-Member Network’s Surge (Bloomberg)
Cynk Technology Corp., the supposed operator of a social network that caught the attention of the financial world with its skyrocketing stock price, was suspended from trading by the U.S. Securities and Exchange Commission. The halt is because of “concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK’s common stock,” the SEC said today on its website. Judith Burns, a spokeswoman for the agency, declined to comment further. Cynk’s social network appears to have no members, no revenue, no assets and only one employee. The stock-price chart has been the talk of all manner of business blogs and Twitter pundits, from Business Insider to the Wall Street Journal and Zero Hedge, which has called Cynk’s moves “pure madness.”

Wells Fargo’s Profit Edges Up (WSJ)
Wells Fargo reported net income of $5.73 billion, compared with $5.52 billion a year earlier. Per-share earnings, reflecting the payment of preferred dividends, were $1.01 versus 98 cents a year earlier. Revenue slipped 1.5% to $21.07 billion. Analysts polled by Thomson Reuters expected per-share earnings of $1.01 on revenue of $20.84 billion.

Ex-Merrill Lynch Banker Uses Big Data to Save U.K. Pubs (Bloomberg)
The Oxford-educated Bulkin, 37, spent 15 years cutting deals as a mergers & acquisitions banker for Merrill Lynch and Lazard Ltd. before leaving last year to start his own pub company, Hawthorn Leisure Ltd. He’s acquired hundreds of struggling pubs and plans to turn them around by tracking everything from the price charged for beer to daily sales fluctuations to customers’ drink preferences. “Understanding pricing and the mix of drinks is incredibly important,” Bulkin says in an office overlooking Hyde Park in London’s upscale Mayfair district. “A lot of pubs don’t have that data. If you can make them the core of your business, there’s a fantastic opportunity.”

London Seeks New Spenders as Russians Skip $719 Champagne (Bloomberg)
To gauge London’s place in the global economy, you could examine World Bank statistics, canvass investors and analyze trade volumes. Or you could visit Mahiki, a Polynesian-themed nightclub in upmarket Mayfair where a bottle of Cristal Champagne goes for $719 — and Russian customers are being supplanted by revelers from countries including China and Nigeria. “We’re seeing a lot less Russian surnames on the booking sheet,” said Michael Evans, the creative director of the club, where the likes of Rihanna and Prince Harry have been spotted after dark. “It’s very easy to see what’s going on in the world from the markets we attract.”

Rajaratnam acquittal shows indirect insider trading case challenge (Reuters)
The acquittal on Tuesday of the younger brother of convicted hedge fund titan Raj Rajaratnam suggests prosecutors will have a tougher time pursuing people accused of trading on inside information they received indirectly. Roughly a third of the insider trader defendants charged by Manhattan U.S. Attorney Preet Bharara since 2009 are alleged so-called “remote tippees”. According to prosecutors, in such cases the defendant, or “tippee,” never directly talks to the insider, instead getting information from an intermediary. After the case of former Galleon Group fund manager Rengan Rajaratnam, prosecutors may reevaluate how they build similar cases, said James Cox, a law professor at Duke University.

Gym Teacher, Suspended For Twerking With Students (HP)
Courtney Spruill, who teaches history and PE at Kernan Middle School in Jacksonville was suspended for 15 days without pay on July 1. The tush-shaking tips allegedly occurred in May during a party for the girls’ soccer team that took place at the house of one of the players. Spruill is the team coach. Witnesses at the party told Duval County School Board investigators they saw Spruill drinking vodka and twerking on the players. Investigators also say they reviewed a cellphone video of Spruill getting a lap dance from a student at the party, WPTV TV reports. 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 »