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Opening Bell: 07.23.13

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SAC to Employees: Cohen Didn't Read Dell Email at Heart of SEC's Case (WSJ)
Remember this is a failure to supervise case.

A Legal Bane of Wall Street Switches Sides (DealBook)
When he left his role as Wall Street’s top federal enforcer, Robert S. Khuzami began a long courtship with a who’s who of the legal world. ... Six months later, lawyers briefed on the matter say, Mr. Khuzami has accepted a job that pays more than $5 million a year at Kirkland & Ellis, one of the nation’s biggest corporate law firms. In doing so, he is following the quintessential Washington script: an influential government insider becoming a paid advocate for industries he once policed.

In Washington's glare, Wall Street commodity trade falls under a shadow (Reuters)
Wall Street's multibillion-dollar commodity trading operations will be put under the political spotlight on Tuesday as a powerful U.S. Senate committee questions whether commercial banks should control oil pipelines, power plants and metals warehouses. The Senate Banking Committee hearing comes as Goldman Sachs, Morgan Stanley and JPMorgan Chase - which generated an estimated $4 billion in commodity revenues last year - face growing pressure from a number of investigations into their operations, and as the Federal Reserve reviews Wall Street's right to operate in raw material markets.

As Banks Retreat, Hedge Funds Smell Profit (WSJ)
Private investment funds, facing diminished returns in some other areas, have piled into the business of lending to struggling companies, part of a so-called shadow-lending system that operates under different rules than commercial banks. Hedge funds D.E. Shaw Group and Oaktree Capital Management, for example, recently set up funds to lend to small and midsize businesses, including distressed ones. ... "If you have a covenant hiccup, you're going to feel just like a tied-up goat pleading for mercy," says Michael Madden, a veteran deal maker and co-founder of private-equity firm BlackEagle Partners, which isn't involved in such lending.

'I've taken her for a McFlurry loads of times,' says horse-rider who took pony into McDonald's (Telegraph)
Christine McGrail and her daughter Olivia were told to tie up their horses after trying to use the drive-through service at the fast-food restaurant in Whitefield. Managers at the franchise told Ms McGrail, 33, who was riding stallion Dancer, and her nine-year-old girl, on pony Minnie, they weren't allowed to queue with waiting cars. The mother said she took managers "literally" when they suggested the pair dismount and enter the store - letting Olivia lead her six-year-old pony into the restaurant to the amazement of customers. Ms McGrail - who remained outside with Dancer, 24 - admits she acted "rashly" after the pony opened its bowels in front of stunned diners but claimed the treatment of horse riders was inconsistent.

Telefonica to Buy KPN’s German Unit for $10.7 Billion (Bloomberg)
Telefonica SA agreed to buy the E-Plus German wireless unit of KPN NV in a cash-and-stock deal valuing the unit at 8.1 billion euros ($10.7 billion) to become the country’s biggest mobile-phone operator by customers. The Dutch phone company will get 5 billion euros in cash and a 17.6 percent stake in the combination of E-Plus and Telefonica Deutschland Holding AG, the Spanish carrier’s German unit, which uses the O2 brand, KPN said today. The purchase would let Telefonica’s O2 surpass Deutsche Telekom AG and Vodafone Group Plc as stiffening competition in the German wireless market forces carriers to cut prices and seek mergers. Still, the elimination of a carrier by combining the third- and fourth-largest operators will face scrutiny from antitrust regulators.

Thai Billionaire Plans $2.3 Billion Infrastructure Fund I.P.O. (DealBook)
The True Corporation, the telecommunications company controlled by the Thai billionaire Dhanin Chearavanont, said on Tuesday that it would spin off 3G and broadband networks into an infrastructure fund in an initial public offering worth at least 70 billion baht — a potential record for a Thai company. True, which operates fixed-line and mobile communications networks and a pay television business in Thailand, said it planned to use the proceeds from the $2.26 billion I.P.O. to reduce debt.

Singapore funds benefit from Asian wealth (FT)
Singapore’s position as one of the world’s fastest-growing wealth management hubs was highlighted on Tuesday when it said assets under management rose more than a fifth over the past year. The Monetary Authority of Singapore, the central bank, said funds managed in the city state had risen 22 per cent to a record S$1.63tn ($1.29tn), from S$1.34tn a year previously.

India clamps down on gold imports (FT)
The Reserve Bank of India has enforced new limits on gold imports in an attempt to control the country’s current account deficit and ease pressure on the depreciating rupee. The central bank announced late on Monday that 20 per cent of imported gold must be set aside for export with the remainder going to the jewellery industry. The new restrictions come into force with immediate effect and require that 20 per cent of imported gold is held in customs bonded warehouses – overseen by the customs authority like a deposit scheme – and only when 75 per cent of that stock has been exported can a further round of imports take place.

Prices Fuel Outrage in Brazil, Home of the $30 Cheese Pizza (NYT)
For Brazilians seething with resentment over wasteful spending by the country’s political elite, the high prices they must pay for just about everything — a large cheese pizza can cost almost $30 — only fuel their ire. “People get angry because we know there are ways to get things cheaper; we see it elsewhere, so we know there must be something wrong here,” said Luana Medeiros, 28, who works in the Education Ministry. ... But economists say much of the blame for the stunningly high prices can be placed on a dysfunctional tax system that prioritizes consumption taxes, which are relatively easy to collect, over income taxes.

I said do not disturb! Luv-guv Eliot Spitzer ordered cops to back off on nights he met with call girls (NYP)
The then-governor was so determined to carry out his illicit late-night trysts, he’d try to sneak out undetected by his taxpayer-funded security detail — and even had police bosses issue directives reminding troopers that he prized his privacy on out-of-town sleepovers. “Please inform whoever the [overnight shift] is that they should not be hanging around in the governor’s hallway,” former State Police Capt. Lisa Galbraith wrote in one missive to Spitzer’s minders. ... In February 2008, Galbraith said, she was notified by a trooper that Spitzer had ditched his Washington, DC, hotel room. That same week, Spitzer paid $4,300 for his infamous liaison with Ashley Dupré.

Related

Opening Bell: 08.17.12

Facebook Investors Cash Out (WSJ) Mr. Zuckerberg has long exhorted employees not to pay attention to the stock price, instead pushing them to focus on developing the social network. But in a companywide meeting earlier this month, he conceded that it may be "painful" to watch as investors continue to retreat from Facebook's stock, according to people familiar with the meeting. Facebook Second-Worst IPO Performer After Share Lock-Up (Bloomberg) Facebook's 6.3 percent drop yesterday, after the end of restrictions on share sales by its biggest investors, was the second-largest post-lock-up decline among companies that have gone public since January 2011. Wall Street Bonus Estimates Cut By Pay Consultant Johnson (Bloomberg) Incentive pay for senior management, excluding the executives named on proxy filings, will be unchanged to 10 percent higher, Johnson Associates estimated in an Aug. 14 report. That’s down from May, when the firm predicted senior managers would get bonus boosts of 5 percent to 15 percent. The biggest increases are still likely to come in fixed- income and is now forecast to be 10 percent to 20 percent instead of 15 percent to 25 percent, the new report showed. “They had a terrible 2011, so it’s off of a low base,” Johnson said. “We hoped that that business would have recovered more dramatically, but it hasn’t, so I guess you’d say it’s gone from terrible to so-so.” Executives Say Obama Better For World Economy (Reuters) Twice as many business executives around the world say the global economy will prosper better with President Barack Obama than with Mitt Romney, according to a poll out Friday. Democrat Obama was chosen by 42.7 percent in the 1,700-respondent poll, compared with 20.5 percent for Romney. The rest said "neither." 'Broken' Fund Shifts Blame (WSJ) Nearly four years after the collapse of Lehman Brothers Holdings Inc. "broke the buck" at his money-market mutual fund, Bruce R. Bent is blaming the U.S. government. The 75-year-old Mr. Bent and his son, Bruce Bent II, are set to go on trial in October on civil charges of misleading investors, ratings firms and trustees of the Reserve Primary fund as it wobbled in September 2008. The Securities and Exchange Commission alleges that the two men falsely claimed they would prop up the fund's $1 net asset value even though they "secretly harbored" doubts. The two Bents have denied the allegations in the SEC's civil lawsuit ever since it was filed in U.S. District Court for the Southern District of New York in 2009. Former Spitzer call girl Ashley Dupre is engaged and pregnant (NYP) “On the record, yes, I can confirm I’m almost seven months,” Dupre, 27, enthused when contacted yesterday. “I can’t tell you when the wedding date is just yet.” In four short years, Dupre’s gone from Client No. 9 to Husband No. 1, and now owns Femme by Ashley, a lingerie and swimwear shop in Red Bank, NJ, which she her husband to be, New Jersey asphalt scion Thomas “TJ” Earle, helped her open in May. Ex-MS Banker In China Bribery Case (CNBC) Garth Peterson joined Morgan Stanley in Asia in 2002, just as the Chinese real estate market was taking off. His job would be making real estate deals for the firm, and Peterson seemed the ideal person for the position. A blonde, blue-eyed American raised in Singapore, Peterson — then in his early 30s — was fluent in Mandarin, and in the local culture. “The language is, you know, essential, I would say, being able to speak Mandarin well,” Peterson said. “But beyond that, I worked in the Chinese real estate industry since 1993.” In 2006 alone, according to news reports at the time, Morgan Stanley invested $3 billion in Chinese real estate. Peterson, by then a vice president, was at the forefront. “I was given more and more support, and the business just grew exponentially,” he said. Today, his fortunes have drastically changed. On Thursday, Peterson was sentenced to 9 months in prison and 3 years supervised release after pleading guilty to evading Morgan Stanley’s internal controls — a federal offense. Prosecutors said he engineered a deal that transferred Morgan Stanley’s interest in a multi-million dollar Shanghai real estate development to a shell company secretly controlled by Peterson and a Chinese government official. The official, who was not identified, made an instant paper profit of $2.5 million. Treasury To Amend Terms Of Fannie, Freddie Bailout (WSJ) Under the new arrangement between Treasury and the companies' federal regulator, all the firms' quarterly profits would be turned over to the government as a dividend payment; the government wouldn't require such payments in periods when the firms are unprofitable. Backstop For Futures Trades (WSJ) Support is growing for an insurance fund that would protect customers of futures brokerages that collapse. While numerous hurdles remain, the process took an important step Thursday when futures-exchange operator CME Group met with other industry officials and a customer-advocacy group in Chicago to discuss how to set up a customer-protection fund. It could take months or even longer for a specific plan to emerge, but participants in the meeting said it is increasingly likely that the government, futures industry or both will propose such an insurance fund. "Restoring customer confidence is very important," and "we're looking at all potential solutions, including an insurance fund," said Walt Lukken, president of the Futures Industry Association, a trade group.