September 16, 2021

Opening Bell: 02.10.14

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SAC’s Martoma Faces Up to 20 Years at June 10 Sentencing (Bloomberg)
Martoma, 39, was convicted of two counts of securities fraud, which carries a maximum 20 year term, and one count of conspiracy, which has a maximum five year term. U.S. District Judge Paul Gardephe may make each term concurrent, and has latitude to impose a significantly shorter sentence. The longest insider-trading term of 12 years was given to attorney Matthew Kluger in 2012 for a $37 million scheme. The second-longest of 11 years was imposed upon Galleon Group LLC co-founder Raj Rajaratnam for a $72 million scheme.

Hedge Funds Clash Over Argentina Debt (WSJ)
The two firms, Gramercy Funds Management LLC and Elliott Management Corp., have hundreds of millions of dollars at stake as Argentina tries to wrap up a saga that dates back to its decision to give up on its debt payments in December 2001. But the firms have taken conflicting tacks in trying to get their money back. Gramercy, which manages $3.9 billion, has been advising Argentina behind the scenes on how to restore its reputation with the international community and regain access to capital markets. In doing so, Gramercy has antagonized Elliott, a bigger firm that has been doing battle with Argentina for years. Famous for its bare-knuckled tactics with debtors, Elliott once tried to seize the plane of Argentina's President Cristina Fernandez de Kirchner during a fueling stop and impounded an Argentine Navy vessel.

AOL Chief Apologizes for ’Distressed Babies’ Comment (Bloomberg)
AOL’s chief executive officer had to backtrack on a 401(k) policy change, after his comments defending the idea fueled an employee outcry. Armstrong last week said AOL needed the retirement-plan tweak to help offset health-care costs, such as two employee pregnancies that resulted in “distressed babies” with more than $1 million each in medical expenses. Over the weekend, he reversed the 401(k) decision in a memo to employees. “We heard you on this topic,” Armstrong, 43, said in the memo. “I made a mistake and I apologize for my comments.” The mea culpa was Armstrong’s second in about six months for a public controversy. In August, he sent a memo to workers saying he was wrong for firing a creative director in front of a room full of employees, as well as a thousand others who were listening on a conference call.

ISS recommends Apple board votes no to Icahn plan (CNBC)
Apple shareholders should vote against a proposal by activist investor Carl Icahn for the tech giant to aggressively expand its stock repurchase, proxy advisory firm ISS said in a report released on Sunday. "(The Apple board) has returned the bulk of its U.S.-generated cash to shareholders via aggressive stock buybacks and dividends payouts," ISS said in the report. "In light of these good-faith efforts and its past stewardship, the board's latitude should not be constricted by a shareholder resolution that would micromanage the company's capital allocation process." [...] The activist investor has been gradually building up shares in Apple and late last month picked up another $500 million. "Mr. Icahn has no comment at this time, but plans to issue something before the market opens tomorrow [Monday]," a spokesperson for Ichan said in an email to CNBC.

Berlin: Shia LaBeouf Wears Paper Bag on Head to 'Nymphomaniac' Premiere (THR)
Shia LaBeouf topped off his headline-making day with a peculiar fashion statement on the red carpet at the Berlin Film Festival gala premiere for Lars von Trier's Nymphomaniac, Volume I Sunday night. The actor accessorized his black tuxedo with a black bow tie and a paper bag with the words "I am not famous anymore" written in black paint on it. LaBeouf, 27, has been using the catchphrase repeatedly on his Twitter account for several weeks...Earlier in the day, LaBeouf abruptly walked out of a press conference after responding to just one question about being in a film with so many sex scenes. He slowly and deliberately said: "When the seagulls follow the trawler, it's because they think sardines will be thrown into the sea. Thank you very much.” Then, he got up and left the room. The quote is from French soccer legend Eric Cantona, who said it at a press conference in 1995.

New Regulations Leave Buyout Shops Out on Their Own (WSJ)
Losing a bank's financial support presents a challenge for private-equity firms that used to be nestled within financial institutions. Out on their own, they must vie for investors' cash against big firms, such as Apollo Global Management LLC and Warburg Pincus LLC, that are coming off hugely profitable stretches. In general, newly independent firms have raised less on their own than when they had bank backing, even if they are exceeding their own goals, according to securities filings and private-equity executives.

Singapore Long-Only Hedge Funds Defy Capital Rut (Bloomberg)
Managers of long-only funds in Singapore that invest mainly in Asian stocks are winning client money, shrugging off difficulties in raising capital faced by smaller hedge funds in the region. Assets under management of such funds in the city-state that manage less then $500 million surged 410 percent to about $990 million from the end of 2010 through November, according to an estimate by research firm GFIA Pte. That compares with a 72 percent increase for all long-only funds focused on Asia, according to data provider Eurekahedge Pte.

A King Of The 'Rock' (NYP)
Larry Fink will take home in excess of $20 million for his Wall Street work last year.

Miami Bitcoin Arrests May Be First State Prosecution (Bloomberg)
Two South Florida men were arrested last week on what a local prosecutor said may be the first state law charges over the use of Bitcoin virtual currency as part of an alleged money laundering scheme. Pascal Reid, 29, and Michel Abner Espinoza, 30, face two counts of money laundering and one count of engaging in an unlicensed money servicing business, according to court filings in Miami state court. Both men were arrested Feb. 6 and are being held in Miami-Dade County jails. “The use of Bitcoins in the transactions is a new technological flourish to this very old crime,” Miami-Dade State Attorney Katherine Fernandez Rundle said in a statement. The “arrests may be the first state prosecutions involving the use of Bitcoins in money laundering operations.”

Michael Jackson estate embroiled in tax fight with IRS (LA Times)
The agency has told Jackson's executors that the estate owes $505 million in taxes and an additional $197 million in penalties, for a total of more than $702 million. According to documents filed with the U.S. Tax Court in Washington, Jackson's executors placed his net worth at the time of his June 2009 death at slightly more than $7 million. The IRS placed it at $1.125 billion, a difference so vast it looks like a typo. Jackson's return was so inaccurate, the IRS said, that it qualified for a gross valuation misstatement penalty, which would allow the government to double the usual 20% penalty for underpayment.

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Moody's Gives EU Warning (WSJ) Moody's Investors Service has put the European Union's triple-A credit rating on a negative outlook in a move that reflects actions the ratings firm has taken on some of the euro-zone's largest members, including Germany and the Netherlands. "Moody's believes that it is reasonable to assume that the EU's credit-worthiness should move in line with the credit-worthiness of its strongest key member states considering the significant linkages between member states and the EU," Moody's said in a release. Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain (NYT) After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Julio Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks. “The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.” In July, Spaniards withdrew a record 75 billion euros, or $94 billion, from their banks — an amount equal to 7 percent of the country’s overall economic output — as doubts grew about the durability of Spain’s financial system. According to official statistics, 30,000 Spaniards registered to work in Britain in the last year, and analysts say that this figure would be many multiples higher if workers without documents were counted. That is a 25 percent increase from a year earlier. Europe Bank Chief Hints At Bond Purchases (WSJ) The comments by Mario Draghi in a closed hearing at the European Parliament on Monday came ahead of the ECB's monthly policy meeting Thursday. That meeting has been keenly awaited in the financial markets for further details of how the bank could help bring down the funding costs of countries such as Spain and Italy to prevent them from having to seek full euro-zone bailouts like Greece, Ireland and Portugal. Switzerland Flirts With Recession (WSJ) "Three months ago, the Swiss economy looked charmingly strong against the backdrop of the euro zone and now it is looking on the brink of recession," said Janwillem Acket, chief economist at Julius Bär in Zurich. Nigeria Uncovers Cocaine-Stuffed Roasted Chicken (AP) The roasted chickens had an unusual stuffing — $150,000 worth of cocaine, according to Nigerian police. A Nigerian mechanic who struggled in Brazil for more than six years had hoped the drugs would buy him a life of luxury in his native land, Nigerian authorities said Monday. "This was like a retirement plan for him," said Mitchell Ofoyeju, spokesman for the National Drug Law Enforcement Agency. The accused was arrested over the weekend at the airport in Lagos after he came in from Sao Paulo with 2.6 kilograms (5.7 pounds) of cocaine, Ofoyeju said. Photos from the agency showed egg-shaped packages wrapped in gold aluminum foil and tucked into the browned chickens. Citibank Hid Firm’s Financial Troubles, Ex-Partner at Dewey & LeBoeuf Says (NYT) In a recent court filing, the former partner, Steven P. Otillar, says Citibank conspired with Dewey's management to hide the law firm's true financial condition in the months before its collapse. Mr. Otillar made the claim in response to a lawsuit brought against him by Citibank seeking repayment of a $210,000 loan. The bank lent Mr. Otillar the money to pay for his capital contribution to Dewey when he joined the partnership in August 2011. (New partners typically must make a financial contribution to a law firm when they join.) The filing said that Citibank had extended Mr. Otillar the loan as part of a fraudulent scheme intended to benefit Citibank and Dewey's management. By recruiting him and other partners to join the financially troubled firm in the months leading up to its demise—and collecting millions of dollars from them—Dewey's partners enriched themselves and kept the firm afloat. Credit Suisse Exec Facing Arrest Order (Reuters) A judge in Argentina has ordered the arrest of Credit Suisse executive and former US Treasury Undersecretary David Mulford because he failed to testify over a 2001 Argentine debt swap, the state news agency reported today. Federal Judge Marcelo Martinez de Giorgi will ask Interpol to issue an international arrest warrant seeking Mulford’s extradition for questioning over the bond exchange carried out by the government in an unsuccessful bid to avoid default. Bernanke Channeling Hatzius Dismissing Gross New Normal (Bloomberg) Federal Reserve Chairman Ben S. Bernanke is betting the new U.S. economy is the same as the old one as he lays out arguments for more stimulus to revive it. He made that diagnosis last week in a rebuttal to those who blame an 8.3 percent unemployment rate on structural shifts in the economy wrought by the financial crisis and who contend joblessness is permanently elevated. “I see little evidence of substantial structural change in recent years,” Bernanke told fellow central bankers and economists at the annual monetary-policy symposium in Jackson Hole, Wyoming. “Following every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level.” Ice Picks Are Still Used As Weapons (NYT) Mann Rosa, 32, who lives on Perry Avenue about a block from the scene of the recent attack, said ice picks were back in vogue among street gangs all across the city. “The ice pick, from what I know, is the new thing,” Mr. Rosa said, noting how easy it was to buy and conceal. “It’s definitely the new wave.” Toward the end of the conversation, almost as if he had an afterthought, Mr. Rosa said he had been stabbed repeatedly with an ice pick about two years ago during a street fight. He rolled up the sleeve of his T-shirt to reveal two dime-size wounds, not unlike scars from a smallpox vaccination, on his shoulder and upper arm. “I was stabbed once in the chest, once in the back and twice in the arm,” Mr. Rosa said; it took 12 stitches to close the wounds. Asked if the police ever caught the perpetrator, Mr. Rosa laughed and shook his head. “We got this thing called street justice. We don’t go to the cops over something like that.”

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Bill Gross Attacks UK and Euro Zone Austerity (FT) Bill Gross, manager of the world's largest bond fund for Pimco, has launched a stinging attack on efforts by Britain and much of the euro zone to cut debt rapidly with severe austerity measures, warning that such action risks stifling recovery. "The U.K. and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not," Mr Gross told the Financial Times. "You've got to spend money." Argentina's New Debt Offer Rejected by Holdout Creditors (WSJ) Holdout creditors on Friday rejected Argentina's proposal to pay them about 20 cents on every U.S. dollar of bonds they own, leaving a U.S. appeals court to decide how to enforce a ruling that may push Argentina into a new default. "Not only are the details of Argentina's proposal unacceptable and unresponsive; Argentina fails even to provide this court with meaningful 'assurances' that it will actually comply with its own proposal," said Theodore Olson, a lawyer for the holdouts, in a brief filed Friday. Argentina's own math values the offer at $210 million, less than 15% of the $1.47 billion that holdouts were owed on their defaulted bonds as of March 1, according to the brief. Hedge Fund Stars Suit Up At Yankee Stadium To Attract Investors (NYP) Hedge-fund mogul Stevie Cohen will be pitching at Yankee Stadium tomorrow. No, the 56-year-old billionaire is not suiting up for the Bronx Bombers — but he will be hoping the magic of the House that Ruth Built will yield some investment cash. Cohen, whose SAC Capital faces a loss of $1.7 billion from investors who want out of his $15 billion hedge fund, is one of about 70 hedge fund managers who’ll be at the Stadium tomorrow making a pitch to prospective new investors at a day-long event sponsored by Goldman Sachs. Singapore Will Replace Switzerland As Wealth Capital (CNBC) Switzerland has $2.8 trillion in assets under management, with $2.1 trillion of that coming from offshore wealth. Switzerland accounts for 34 percent of the $8.15 trillion in total global wealth. Yet the report said Singapore could overtake Switzerland in offshore assets under management by 2020. It said Swiss offshore assets could fall below $2 trillion by 2016, while Singapore's assets could more than quadruple by then. Somali Banking Starts From Ground Up (WSJ) Abdusalam Omer is a central bank governor without much to govern. The Central Bank of Somalia doesn't hold reserves in the country's currency, the shilling. There are no functioning commercial banks in the strife-torn country for it to regulate. The 75-strong staff that still turns up for work after two decades of civil war is a motley crew of money men and handymen. "I don't know why the central bank employs painters," says the 58-year-old who was named the country's top banker in January. Eventbrite Funding Slows Its IPO Chase (WSJ) Eventbrite Inc., an event ticketing company, has raised $60 million from two investors, making it the latest example of a startup to raise significant private late-stage funding that puts off an initial public offering. San Francisco-based Eventbrite had sparked expectations of an imminent IPO when it said earlier this month that it hired a chief financial officer, Mark Rubash, who previously worked at Yahoo Inc. and eBay Inc. Instead, it joins a growing number of companies that have found plentiful funding in the private markets rather than going public at an early stage. The company has raised the new cash from mutual-fund firm T. Rowe Price Group Inc. and Tiger Global Management LLC, an investment-management firm, said Kevin Hartz, co-founder and chief executive. That brings its total private fundraising to some $135 million since its inception in 2006. "This gives us flexibility in setting the timeline for a later IPO, on our schedule," said Mr. Hartz. Deutsche Bank Margin Call on Vik Sparks $2.5 Billion Dispute (Bloomberg) Alexander Vik went to Deutsche Bank AG’s London office in October 2008 to meet account managers who congratulated the Norwegian entrepreneur on how well his Sebastian Holdings Inc. investment fund was doing. Within a month, as global markets tumbled into crisis, the same bankers demanded about $530 million against the fund’s currency bets and began to liquidate its positions. Vik, 58, will argue at a 12-week trial starting in London today that the bank’s actions resulted in losses and missed profits totaling about $2.5 billion. A judge will have to decide whether Sebastian’s calculation of lost trading gains is accurate, said John Day, a lawyer at London-based litigation firm DaySparkes. Zimbabwe Prepares Law to Seize Company Stakes Without Paying (Bloomberg) Zimbabwe’s government is preparing a law that would allow it to seize controlling stakes in companies without compensation, according to a draft of the legislation obtained by Bloomberg News. The law would be an amendment to a 2007 act that compels foreign and white-owned companies such as Rio Tinto Group, Sinosteel Corp. and Impala Platinum Holding Ltd. to sell or cede 51 percent of their shares to black nationalsor state-approved agencies.