July 10, 2020

Comcast Ordered to Place Bloomberg With TV Peers

The ruling, released late Thursday, asserted that Comcast must include Bloomberg TV in so-called news neighborhoods, a term for locations on a channel lineup with four or more news channels.

It requires Comcast to bring Bloomberg into standard-definition versions of those neighborhoods within 60 days, at least in the biggest cities served by the company.

The F.C.C. decision is a long-sought triumph for Bloomberg, a somewhat obscure business news channel that is owned by Bloomberg L.P., and a setback for Comcast, which owns (through its NBCUniversal division) one of Bloomberg’s more popular competitors, the business news channel CNBC.

It is also a reminder of how much power cable companies have. In Washington, for example, Comcast carries CNBC in standard-definition on channel 39, relatively low on the dial, and Bloomberg on channel 103, where viewers are less likely to stumble upon it. This sort of placement, Bloomberg says, is inhibiting its growth — a common complaint among channel owners.

When Comcast took control of NBCUniversal in early 2011, the government imposed a condition — put forward by Bloomberg lobbyists — that strove to prohibit Comcast from favoring its own news channels over others. Ever since, Bloomberg has been prodding the F.C.C. to force its insertion into news neighborhoods.

Comcast has been pushing back, asserting, among other things, that such a move by the F.C.C. would infringe on its First Amendment rights.

The media bureau of the F.C.C. supported Bloomberg last year, but Comcast appealed to the full commission, prompting Thursday’s affirmation of the original ruling.

Greg Babyak, the head of government affairs for Bloomberg L.P., said the ruling promoted “the availability to the public of diverse sources of news.”

Comcast said it was evaluating its options. Sena Fitzmaurice, the company’s vice president for government communications, said the 2011 condition was being misinterpreted, and “very likely will lead to significant and unwarranted burdens on us, our customers and other programming networks.”

Analysts have said that the F.C.C.’s support of Bloomberg could embolden other news channel owners, like the new Al Jazeera America cable channel, to similarly challenge cable companies.

But it remains unclear how much Bloomberg will actually benefit: one F.C.C. commissioner, Ajit Pai, who dissented in part from the ruling, said “the cure may be worse than the disease” for Bloomberg, because “Comcast may create news neighborhoods consisting entirely of independent news channels,” like C-Span’s trio of channels, and still comply with the condition.

Article source: http://www.nytimes.com/2013/09/28/business/media/comcast-ordered-to-place-bloomberg-with-tv-peers.html?partner=rss&emc=rss

Case Study: A Bakery Is Relieved to Have the Employer Mandate Delayed

Rachel Shein: Courtesy of Baked in the Sun Rachel Shein: “I think most of my young and healthy workers won’t buy any insurance.”

Case Study

What would you do with this business?

With President Obama pushing back an important start date for the Affordable Care Act, giving companies with 50 or more full-time employees an extra year before they are required to offer health insurance to their workers, we decided to check in with Rachel Shein and her wholesale bakery, Baked in the Sun.

In March, Ms. Shein and her bakery, based near San Diego, were featured in a case study that looked at what she would have to do to comply with the new health care law. With insurance companies still developing their offerings for businesses like hers, Ms Shein was delighted to learn that the employer mandate was being delayed. “I was thrilled when I heard we had the extra time to watch and wait,” she said.

At the time the case study was written, Ms. Shein had been quite concerned about the potential effects of the law’s implementation. “We saw it as a significant cost to our business, one we hadn’t built into our business model,” she said. Her participation in the case study led to appearances on several TV news programs, including on Fox Business and CNBC.

Initially, Ms. Shein estimated that she would have to pay $108,000 a year to include the 90 employees who are not currently covered by her company’s health insurance. Her insurance broker now believes that when the final rates are published for next year, the cost will be higher than that.

Ms. Shein, though, will have to pay for only those employees who sign up for the plan she offers, and so far, the plans she has seen have not seemed terribly attractive. One sample plan, she said, included a $4,500 deductible, which Ms. Shein said “is too high for low-wage workers, so my employees may be better off going to the state-run market for individuals, which seems to have more options and better prices.”

Insurance company offerings for businesses like hers are expected to evolve, Ms. Shein said, and she hopes better plans and choices become available, as they have on the individual exchange. Right now, Ms. Shein doesn’t know the final costs or how many of her employees will sign up, so she has not been able to  estimate her expenses with any confidence. “It’s still very messy,” she said.

The delay is an opportunity for both companies and employees, Ms. Shein said, because it gives business owners more time to shop around and workers can take the year to see what is available on the exchange before they decide if they will take company-offered insurance.

Ms. Shein is also interested to see if the managers who are covered by her company’s insurance plan find a better deal on the state-run market. She said she believed all workers should have health insurance, and she and her husband have wrestled with the problem for years. In her experience, she said, many of her employees are resistant to coverage that requires an employee contribution. “They are mostly young and healthy,” she said, also noting that the individual penalty for not carrying insurance is low, “and they would rather have a bit more in their paycheck than health insurance.”

For now, she plans to focus on running her baking company. “The recession has made us more efficient,” she said. “We’ve automated more and focused on the most profitable parts of the business. I can’t control the insurance rates, but I can make a great espresso mocha scone.”

This post has been revised to reflect the following correction:

Correction: July 17, 2013

A previous version of this post reported incorrectly that it was Congress that had delayed the employer mandate.

Article source: http://boss.blogs.nytimes.com/2013/07/16/a-bakery-is-relieved-to-have-the-employer-mandate-delayed/?partner=rss&emc=rss

You’re the Boss Blog: Bakery Owner Talks About Coping With Health Insurance Changes

Rachel Shein, center, is trying to figure out how to comply with the new health insurance law.Sandy Huffaker for The New York Times Rachel Shein, center, is trying to figure out how to comply with the new health insurance law.

Case Study

What would you do with this business?

Last week, we published a case study about Baked in The Sun, a wholesale bakery and distributor that is trying to decide how best to comply with the Affordable Care Act. Starting in January, the new law requires businesses with 50 or more full-time employees to offer health insurance or pay a penalty. Owned by Rachel Shein and Steve Pilarski, husband and wife, the company employs nearly 100 workers to bake and deliver freshly made pastries to coffee shops, hospitals and hotels in Southern California.

Baked in the Sun has offered health insurance to its employees in the past but many are young and healthy and have preferred to keep more money in their paycheck, rather than contribute to a health plan. Soon, though, almost all workers will have to carry health insurance — through their employer, a government exchange or other source — or pay a penalty. And, as the case study discussed, Ms. Shein and Mr. Pilaski are trying to decide whether they will offer health insurance, pay a penalty or outsource enough work that they can reduce their head count below 50 and be exempt from the law.

The article elicited lots of comments and strong opinions, as well as reports in other media outlets, including CNBC, which included Ms. Shein in a panel discussion about her company’s situation. Some readers argued that Baked in the Sun has a moral obligation to offer coverage. Others argued for a single-payer system that would allow owners to stop worrying about health insurance and focus on running their businesses.

Andrew Greenblatt, a senior vice president at Benestream, which helps low wage employees apply for government benefits, pointed out that under the Affordable Care Act, Medicaid has been expanded to cover families earning up to 138 percent of the poverty level, which means that workers who make minimum wage, especially single parents, may qualify.

And Alan Cohen, chief strategy officer for Liazon, a private insurance exchange for companies, suggested in a comment that many employees will be better off if the bakery chooses not to offer insurance and instead pays the government penalty. That’s because the employees would be likely to qualify for a subsidy at a government exchange that would allow them to insure their whole family — but only if their employer does not offer health insurance.

Of course, because neither the minimum level of coverage, nor the costs to all the insurance options have been finalized, lots of uncertainty remains. We contacted Ms. Shein for a follow-up conversation that has been condensed and edited.

A number of readers suspect that you are underestimating how much it would actually cost to insure your employees. Have you taken another look?

The insurance plans are still under development. My broker recently found one that was less than what I had found, but I’m not sure anyone knows what the final rules and prices will be.

Have you thought any further about how many of your employees will actually sign up for insurance if you offer it?

In the short run, when the individual penalty is low, there might not be much participation. We plan to have a meeting with our employees to see what kind of insurance they might want and which of them might be covered elsewhere.

Did this discussion have any impact on your thinking about whether you will pay the penalty or offer insurance?

The employees will all have access to health insurance whether we provide it, or we pay the penalty and they purchase it using a subsidy on the government exchange. We need to look at all the costs and tax implications and do whichever is least expensive for the business.

Are there any reader questions you want to answer?

Some readers claimed it was a moral imperative to provide insurance — but all employees will have insurance under the law.

Some readers thought your profit margin was too low and questioned how well your business was doing. What was your reaction?

Like many entrepreneurs we have great years where we can take vacations and put money into our kids’ college funds. Some years are leaner.

Do you think your customers would pay a few more cents for your baked goods — especially if it allows you to offer your employees health insurance?

Our products are unbranded and sold in hundreds of outlets so it would be hard to educate consumers about our employment practices. And the popularity of Wal-Mart shows that most consumers just want the best price.

You suggested in the article that you might have to raise your prices 4 percent to cover the cost of providing health insurance. But 4 percent of $8 million — your annual revenue — is $320,000. That’s a lot more than you estimated the cost of insurance. Couldn’t you just raise your prices 2 percent?

Yes, a 2- to 3-percent increase could cover the costs, but it’s a low margin business and pennies matter so we like to build in some buffer.

Would you favor a single-payer system?

I am in favor of a system that doesn’t penalize a business for being successful and able to hire more than 50 people and doesn’t deter us from wanting to grow. I am in favor of a system where everyone pays in, and everyone is covered. If that is a single-payer system, I’m for that.

Article source: http://boss.blogs.nytimes.com/2013/03/26/bakery-owner-talks-about-coping-with-health-insurance-changes/?partner=rss&emc=rss

Media Decoder Blog: Comcast Buying G.E.’s Stake in NBCUniversal for $16.7 Billion

6:03 p.m. | Updated Comcast said Tuesday that it has agreed to acquire General Electric’s remaining 49 percent stake in NBCUniversal for approximately $16.7 billion, completing a sale process that was expected to take several more years.

The acquisition will wrap up by the end of March, Comcast said in a news release. The move reflects Comcast’s optimism about NBCUniversal going forward, from its highly profitable cable channels to its theme parks and Web sites and the flagship NBC broadcast network.

Comcast also said that NBCUniversal would buy the NBC studios and offices at 30 Rockefeller Plaza, as well as the CNBC headquarters in Englewood Cliffs, N.J. Those transactions will cost about $1.4 billion. With the office space comes naming rights for the General Electric building, according to a GE spokeswoman. So it is possible that the giant red “GE” sign atop 30 Rockefeller Center could be replaced by a Comcast sign.

“This is an exciting day for Comcast as we have agreed to accelerate the purchase of NBCUniversal,” Comcast’s chief executive, Brian Roberts, said in a statement. “The management team at GE has been a wonderful partner during the past two years and their support has been very valuable. Our decision to acquire GE’s ownership is driven by our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders.”

Comcast took control of NBCUniversal in early 2011 by acquiring 51 percent of the media company from General Electric.

At the time, Comcast committed to paying about $6.5 billion in cash and contributed all of its cable channels, including E! and some regional sports networks, to the newly established NBCUniversal joint venture. Those channels were valued at $7.25 billion.

The transaction made Comcast, the single biggest cable provider in the United States, one of the biggest owners of cable channels, too. NBCUniversal operates the NBC broadcast network, 10 local NBC stations, USA, Bravo, Syfy, E!, MSNBC, CNBC, the NBC Sports Network, Telemundo, Universal Pictures, Universal Studios, and a long list of other media brands.

The sale ends a long relationship between General Electric and NBC that goes back to before the founding days of television. In 1926, the Radio Corporation of America created the NBC network. General Electric owned R.C.A. until 1930. It regained control of R.C.A., including NBC, in 1986, in a deal worth $6.4 billion at the time.

Comcast had another five years to buy out General Electric’s interest in NBCUniversal, according to the terms of the original deal.

“We didn’t have to do it; GE didn’t have to sell now,” Mr. Roberts noted in an interview on CNBC on Tuesday. “But we came to an understanding that I think works out well for everybody. They get a lot of cash … and our shareholders have 100 percent of the upside here.”

Asked about a possible logo swap on the building, Mr. Roberts said, that’s “not something we’re focused on talking about today.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/12/comcast-buying-g-e-s-stake-in-nbcuniversal-for-16-7-billion/?partner=rss&emc=rss

DealBook: Why A.I.G. May Not Be Able to Avoid the Volcker Rule

Robert H. Benmosche, chief of the American International Group.Yuri Gripas/ReutersRobert H. Benmosche, chief executive of the American International Group.

The American International Group, of all companies, wants to avoid a rule designed to stop risky trading.

A.I.G.’s chief executive, Robert H. Benmosche, said on CNBC on Tuesday afternoon that the company was thinking of taking steps that could shield it from the Volcker Rule. Part of the Dodd-Frank financial overhaul legislation, the rule is intended to stop speculative trading at financial firms that enjoy federal support.

Mr. Benmosche’s remarks came a day after the Treasury Department sold a large amount of shares to bring its stake in A.I.G. well below 50 percent. The sale was seen as an important milestone. The Treasury Department originally poured tens of billions of dollars into A.I.G. after its enormous speculative bets soured in 2008 and threatened the standing of the financial system.

At first glance, it might not seem right for a company that made cataclysmically dangerous trades to now elude curbs on risky wagers.

Mr. Benmosche has a reasonable sounding justification for not wanting A.I.G. to be subject to the rule. He says it does not really fit insurance companies, which take long-term positions in securities to match the long-term nature of their obligations to holders of their insurance policies. And Volcker may undermine A.I.G.’s ability to take such positions.

“The Volcker Rule, as a rule, doesn’t really work for insurance companies as it does for banks,” Mr. Benmosche said on CNBC. “Some of the investments they want to prohibit, an insurance company has to make because of long liabilities.”

In theory, A.I.G. can get out of the Volcker Rule simply by selling a small bank it owns. On Tuesday, Mr. Benmosche said A.I.G. was planning to do just that.

Only it is not so simple. Even if A.I.G. sells the bank, it could still be subject to Volcker-like limitations on proprietary trading.

Here is why: A.I.G., because of its large size and its activities, is almost certainly going to classified by regulators as a “systemically important” financial institution. It would then become subject to oversight by the Federal Reserve. And the Volcker section of Dodd-Frank clearly says that systemic firms could also be subject to curbs on proprietary trading – even if, like A.I.G., they are not banks or do not have bank subsidiaries.

That catchall feature of the Volcker Rule was recognized by MetLife in its latest quarterly filing of financial results with the Securities and Exchange Commission. MetLife also wants to sell its bank to sidestep the Volcker Rule. But in the filing it said the rule “nevertheless imposes additional capital requirements and quantitative limits” on trading done by nonbank firms deemed to be systemically important.

So why would a company go to the length of selling a bank to avoid the Volcker Rule if it would probably be subject to something very much like Volcker anyway?

One reason may be that it buys some time. MetLife’s filing says that it does not become subject to trading curbs until two years from the date at which it becomes designated as a systemically important firm. That designation could occur this year.

Another reason may be that selling a bank puts an insurance company in a position of relative strength when negotiating with a regulator over trading positions.

Regular banks simply have to comply with the Volcker Rule; there is no other option for them. But with a nonbank financial firm, regulators would first have to review the firm’s activities, and then make a decision on whether certain trading curbs have to be imposed.

This process might give the insurance company more opportunities to push back than if it were a bank. So if an insurer wanted to conduct proprietary trading under the guise of insurance activities, it might find it easier to shield that activity from regulators.

The fact is, A.I.G. already appears to be acting with more trading freedom than even Wall Street firms. This was seen in sales of toxic assets that used to belong to A.I.G.

The Federal Reserve Bank of New York this year sold all of the securities it acquired from A.I.G. in the bailout, through auctions facilitated by Wall Street banks.

Some of those banks said new bank regulations prevented them from holding the assets for a long period. A.I.G., by contrast, bought $7 billion of its old assets from the New York Fed and now holds them on its balance sheet, potentially for the long-term.

And taxpayers effectively helped finance those trades through the Treasury Department’s large infusion of equity funding into A.I.G.

On Tuesday, Mr. Benmosche said A.I.G. welcomed oversight by the Fed. He said regulation would show A.I.G.’s clients that “somebody’s watching over our shoulder making sure we don’t do what we did before and cause these problems.”

That sounds very noble. But by selling its bank, and trying to avoid the Volcker Rule, A.I.G. may actually end up making it harder for regulators to look over its shoulder.

Article source: http://dealbook.nytimes.com/2012/09/12/why-a-i-g-may-not-be-able-to-avoid-the-volcker-rule/?partner=rss&emc=rss

Economix Blog: Simon Johnson: Huntsman’s Warning on ‘Too Big to Fail’


Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The idea that big banks damage the broader economy has considerable resonance on the intellectual right. Thomas Hoenig, the recently retired president of the Federal Reserve Bank of Kansas City, has been our clearest official voice on this topic. And Eugene Fama, father of the efficient markets view of finance, said on CNBC last year that having banks that are “too big to fail” is “perverting activities and incentives” in financial markets — giving big financial firms “a license to increase risk; where the taxpayers will bear the downside and firms will bear the upside.”

Today’s Economist

Perspectives from expert contributors.

The mainstream political right, however, has been reluctant to take on the issue. This changed on Wednesday, with a very clear statement by Jon Huntsman in The Wall Street Journal on regulatory capture and its consequences. Before the 2008 financial crisis, he wrote, “the largest banks were pushing hard to take more risk at taxpayers’ expense.” And now, he added:

More than three years after the crisis and the accompanying bailouts, the six largest American financial institutions are significantly bigger than they were before the crisis, having been encouraged to snap up Bear Stearns and other competitors at bargain prices. These banks now have assets worth over 66 percent of gross domestic product — at least $9.4 trillion, up from 20 percent of G.D.P. in the 1990s. There is no evidence that institutions of this size add sufficient value to offset the systemic risk they pose.

This message could work politically, for five reasons.

First, for anyone on the right of the political spectrum who thinks at all about the issues, this is a coherent and appealing position. Mr. Fama had it exactly right when he said, in the same interview that “too big to fail” “is not capitalism; capitalism says — you perform poorly, you fail.”

“Too big to fail” is not a market-based concept; it’s a government subsidy scheme — of the most inefficient and dangerous kind.

This is exactly Mr. Huntsman’s theme: “Hedge funds and private equity funds go out of business all the time when they make big mistakes, to the notice of few, because they are not too big to fail. There is no reason why banks cannot live with the same reality.”

Second, serious senior figures within the Republican Party have long been pointing in this direction. In 2009, for example, former Treasury Secretary Nicholas Brady said, “First we should just come out and say it: the financial system that led us to the brink of disaster is broken.” And former Secretary of State George P. Shultz has emphasized that we should “make failure tolerable,” suggesting, for example, “an escalating schedule could be required of necessary capital ratios geared to size and matched with escalating limits on leverage.”

Republicans like to discuss who is and is not a true Republican. How can any true Republican condone the subsidies that underpin our biggest financial companies today?

Third, mainstream financial thinking is in exactly the same place, in terms of asserting that capital requirements for big banks should be much higher. On this issue I refer you, as always, to the work of Anat Admati and her colleagues at Stanford University.

Mr. Huntsman’s position is in alignment with the strongest possible technical thinking, but he has also found a direct and easy way to communicate the right political message. Higher capital requirements for big banks are a great idea; they should help prevent financial disaster. But when such disaster occurs, we need financial institutions that can actually fail — with losses to creditors — without bringing down the entire system. Anything “too big to fail” is simply too big.

Fourth, political Republicans who favor the status quo with regard to megabanks are going to have a hard time justifying that position — including in a confrontational debate format. (Mr. Huntsman declined to participate in this week’s debate among the Republican candidates, but is likely to spread his “too big to fail” message as he campaigns at town hall meetings in New Hampshire.)

In particular, Mitt Romney is very vulnerable on this issue, as he has already lined up so much support from among the biggest banks. Presumably the prospect of Wall Street donations is enough to deter some Republicans (and many Democrats) from confronting the issue of “too big to fail.” But if Mr. Romney is already far ahead is this fund-raising category, there is much less to lose. And his donations must make it harder for him to explain exactly how he would ensure that even one megabank could fail.

It’s not enough just to wish that big banks could fail or to promise not to support them next time. This is not a credible commitment — and the “resolution authority” created under the Dodd-Frank regulatory legislation is a paper tiger with regard to winding down the biggest banks. If the choice is global economic calamity or unsavory bailout, which would you — let alone any Republican president — choose?

Mr. Huntsman has joined the dots. There are various ways to directly address and remove the implicit subsidies that the largest banks receive. Bloated size and excessive leverage can be effectively taxed. As he said:

Eliminating subsidies would encourage the affected institutions to downsize by selling off certain operations or face having to pay the real costs of bailouts. We need banks that are small and simple enough to fail, not financial public utilities.

Fifth, the euro zone is on the verge of calamity in large part because its members built very large banks with huge implicit subsidies, and this facilitated an irresponsible accumulation of public sector debt.

During the Dodd-Frank debate last year, we heard repeatedly from people — including senators on both sides of the aisle — who believed that reducing the size of our largest banks would somehow put the rest of our private sector at a disadvantage.

Who now would like to emulate in any way the disaster that the Europeans have brought upon themselves? Mr. Romney, please explain how you would prevent our largest banks from becoming ever larger and taking on more risk, and, as they did, continuing the reckless buildup of debt throughout the global economy.

Article source: http://feeds.nytimes.com/click.phdo?i=2ec1919a17003a3d928f7995b538e38c

Media Decoder: CNBC Takes a Hollywood Turn

Every few minutes in “Too Big to Fail,” the film about the darkest days of the financial crisis in 2008 that will have its premiere Monday on HBO, something happens that once seemed unbelievable. Banks collapse. Balance sheets crumble. Government officials plot extraordinary interventions to curb the free fall.

And every few minutes, a news clip or a sound bite from CNBC pops up, seemingly as a reminder to the viewer that it all really happened in real time. In a sense, the news became an extra actor in the film.

In the movie, adapted from the book by
Andrew Ross Sorkin of The New York Times, some of the news clips are exactly as heard or shown on CNBC as the crisis unfolded. But other scenes are amalgams of broadcasts from different times in the same week.

CNBC anchors and reporters reread, and in some cases, reshot some of their reports.

Erin Burnett, then a CNBC anchor, said she had “something like five outfits” for the reshoots and was “done in less than half an hour.”

HBO, which is owned by Time Warner, struck a licensing deal with CNBC, which is controlled by Comcast’s NBC Universal division, for the footage.

The film also uses footage from news programs on CNN, which, like HBO, is owned by Time Warner. But CNBC is still the sort of omnipresent narrator, giving a play-by-play about troubled banks and the federal response to the troubles.

Michelle Caruso-Cabrera and others from CNBC were among those at a film screening in New York last week. “As it was happening we knew we were on the front lines of something historic, so it makes sense that HBO would use CNBC as the voice, but it was thrilling and gratifying to actually watch it,” Ms. Caruso-Cabrera said in an e-mail.

The film also shows the role that CNBC played in funneling information between the government and Wall Street. In one pivotal scene, Henry Paulson, then the Treasury secretary, directs his staff to leak word that the government will not aid Lehman Brothers; in the next scene, Lehman executives direct their attention to the TV set as CNBC relays Mr. Paulson’s sentiments.

Article source: http://feeds.nytimes.com/click.phdo?i=6a8e438fbe5e1761619d5897908ef0de

DealBook: In Insider Case, a Long-Cold Trail Got Hot

Garrett Bauer in custody in a screen shot from CNBC. The trader is a crucial player in a long-term insider-trading case.CNBCGarrett Bauer, an accused trader, in custody in a screen shot from CNBC.

A decades-long insider trading scheme that was fed by a corporate lawyer who worked at some of the nation’s most prestigious law firms mysteriously came to a halt in 1999 before resuming five years later, the government has said.

The defendants were apparently worried in 1999 that investigators might be on their trail. While the government would not arrest them until more than a decade later, it was no idle fear: The trader who federal prosecutors say turned the lawyer’s tips into $32 million in illicit profits had been accused of insider trading by a brokerage firm that year.

A lawsuit brought by the TFM Investment Group contended that the trader, Garrett Bauer, armed with confidential information, bought loads of options on shares of First Brands just days before it was acquired by Clorox for about $1.8 billion.

Mr. Bauer netted some $350,000 from his trade, court documents say.

Though a judge later dismissed the lawsuit, its details were referred to the Securities and Exchange Commission, which spent years struggling to bring a case against Mr. Bauer, according to people briefed on the investigation.

The same obstacle stymied both the brokerage firm and the S.E.C. — neither could identify the source of Mr. Bauer’s information.

In announcing insider trading charges on Wednesday against Mr. Bauer and Matthew Kluger, the lawyer, federal prosecutors in New Jersey said that Mr. Bauer received his tips from Mr. Kluger. But he did so through an intermediary, whom investigators discovered only last month.

Had authorities known earlier, it might have been easier to identify a critical link back in 1999: the law firm that represented First Brands in the Clorox deal was Skadden, Arps, Slate, Meagher Flom, where Mr. Kluger worked as a deal lawyer. Authorities, however, have not accused Mr. Kluger of leaking information about that deal.

The unnamed intermediary was the linchpin of the government’s case, secretly recording conversations with both men and unraveling the 17-year operation between Mr. Bauer and Mr. Kluger, who otherwise scarcely had a relationship. The criminal complaint does not identify the intermediary, referring to him as only “Co-Conspirator 1.”

But according to public records and people close to the case, the intermediary was Kenneth T. Robinson, a former trader and mortgage broker on Long Island, who worked alongside both Mr. Bauer and Mr. Kluger early in their careers, establishing close personal friendships with them.

In addition to being a trusted friend to both, Mr. Robinson also offered a crucial buffer between the two men, whose care in covering their tracks appears to have masked the scheme for nearly two decades.

How the supposed scheme began — and how few warning flags it raised — is an indication of the care the men took to avoid detection, investigators have said.

Even among other recent insider trading cases brought by the government, which include hedge fund managers captured on wire taps, the case stands out for its attentiveness to caution: using disposable phones to conduct business, depositing small amounts of cash to avoid detection and threatening to burn piles of cash to rid the bills of fingerprints.

The two were so careful, prosecutors say, that they suspended their scheme for five years after the 1999 scare, waiting it out as the journeyman lawyer bounced from job to job and the trader took positions elsewhere, too. They rarely met, choosing instead to have Mr. Robinson shuttle the money and secrets that enriched all three.

Mr. Robinson, who is in his mid-40s, knew both men from an earlier time. He was employed at a Manhattan real estate company with Mr. Kluger around 1991, and worked alongside Mr. Bauer at the venture capital firm Weiss, Peck Greer shortly thereafter.

Shortly after leaving Weiss, Peck Greer, Mr. Robinson joined Dean Witter in 1996. He was dismissed from that position the following year because he was “unable to perform at acceptable standard for his position,” according to regulatory filings.

The arrangement among the three men, according to the government, was simple but discrete: Mr. Kluger, 50, would pass information about deals that he or his firm worked on to Mr. Robinson, who passed the information to Mr. Bauer, 43. When the trades were done, Mr. Bauer handed thousands in cash to Mr. Robinson, who passed a cut along to Mr. Kluger.

But they made one critical mistake: Mr. Robinson, the longtime middleman, began to trade on those tips himself in the fall of 2009, the criminal complaint says. That led to the downfall of the entire scheme.

In October 2009, Mr. Robinson began buying shares in the 3Com Corporation, which was soon to be acquired by Hewlett-Packard, reaping nearly $200,000 in profits, according to the government. But the gains also alerted the S.E.C. to Mr. Robinson, according to a person with knowledge of the investigation who spoke anonymously because its details are not public.

In early March, federal authorities raided Mr. Robinson’s home in Long Beach, N.Y. One neighbor said on Friday that the search seemed low key, suggesting the agents could have been mistaken for construction workers.

By March 17, Mr. Robinson began recording calls with his friends. Even in these secretly recorded conversations, the lawyer, Mr. Kluger, reflected on how careful the three had been.

“And I don’t think that with what they have, they can go to court and prove stuff beyond a reasonable doubt,” he said in a conversation cited in the complaint. “It may come to the point where they realize that they don’t really have much of anything.”

Mr. Kluger began his career at Cravath, Swaine Moore after graduating from New York University Law School in 1995. Mr. Kluger, a transfer student from the law school at Brooklyn College, was not remembered by many classmates.

He was recalled as relatively quiet in class. But many knew of his father’s fame as a social historian. Richard Kluger, 76, is best known for his book “Ashes to Ashes,” which chronicled the history of the tobacco industry in America and won him the Pulitzer Prize.

Reached by phone Friday, the elder Mr. Kluger said his family was shocked by the accusations, but declined to comment further.

At a brief hearing in the United States District Court in Alexandria, Va., on Friday, Mr. Kluger appeared in a dark green jumpsuit alongside a federal public defender. He will be transferred to New Jersey. Mr. Bauer is scheduled to appear in the United States District Court in Newark on Monday.

During the short appearance before the judge, the public defender noted that Mr. Kluger, a longtime corporate lawyer, was “not necessarily entitled to a court-appointed counsel.”

Mr. Kluger has not asked for bail, and will remain in detention.

After nearly two decades of working for prestigious law firms, the arrest has been a precipitous fall for Mr. Kluger. In addition to Skadden and Cravath, Mr. Kluger worked for the Silicon Valley powerhouse Wilson Sonsini Goodrich Rosati. He also worked for the law firm Fried Frank, and in 2002 sued the firm, contending that he had been discriminated against because he was gay.

Nearly three weeks after Mr. Robinson began taping his two friends, federal authorities arrested both men at their homes on Wednesday.

Recordings cited in the complaint tell how the men tried in the last days to thwart authorities by destroying a computer and cellphones and considering whether to burn cash.

The neighbor of Mr. Robinson described him as a family man. Brightly colored toys were strewn across the backyard of the home.

“He was one of the nicest guys I know,” said Paul, a neighbor who declined to give his last name. “Ken is American pie.”

Mr. Robinson was unavailable for comment, but an elderly woman at his home declined to comment before slamming the door of the two-story stucco home.

Evelyn M. Rusli and Elizabeth Olson contributed reporting.

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