multibillion dollar

Few Suitors to Build a New Marine One

July 28, 2013 by NewsMaker

But to the administration’s surprise, a new competition to build the helicopters much more cheaply is also running into trouble. Industry officials said that only one company, Sikorsky Aircraft, was likely to bid on the multibillion-dollar contract this week. And some of Sikorsky’s rivals are voicing an increasingly common complaint — that bid specifications are being written so narrowly they are driving away potential competitors.

Given the budget crisis, the White House has reiterated the call for sharper competition in all areas of contracting, to lower costs. But the bidding for Marine One, the helicopter that sweeps away presidents from the White House lawn, suggests that goal is hard to achieve, as have other recent contract troubles. By putting more emphasis on price and being more precise in what it wants, the government could end up with cheaper bids, but could also be excluding equipment that might be more flexible or less expensive in the long run, experts in government contracting said.

“The question is not whether the president can get the cheapest helicopter, but the best one that’s affordable to buy,” said Jacques S. Gansler, who was the top Pentagon acquisition official in the Clinton administration. “It’s like when you buy a car. Do you drive a Yugo? Or is the best buy the cheapest one that meets your needs?”

Such questions have simmered for months among military and information-technology companies, which are feeling the pinch as opportunities to win large federal contracts dwindle. But the issues could attract wider attention now that the president’s own helicopter is back in the spotlight.

Mr. Obama first expressed concerns about the cost of the new helicopters shortly after he took office in 2009, when Senator John McCain of Arizona, who had been his Republican opponent in the presidential race, confronted him at a conference on fiscal responsibility. At the time, the projected price for 28 futuristic helicopters, to be designed to fend off terrorist attacks and resist the electromagnetic effects of a nuclear blast, had nearly doubled, to $13 billion.

Mr. Obama responded by saying that the existing fleet of white-topped helicopters, which are now 35 to 40 years old, seemed “perfectly adequate to me.” He also promised to fix the procurement process.

Since then, the White House Military Office, which sets the requirements for the helicopters, and the Navy, which buys them because the Marines fly them, pared back some of the demands that had contributed to the cost overruns, like how fast the helicopters must fly and how far they can go without refueling. The Navy also decided that it would supply the sensitive communications gear using existing technology rather than asking the contractors to create something new.

The latest plan is to buy 21 helicopters — at a much lower but unspecified cost — that would begin to enter service in 2020. Congressional auditors have praised the plan as more sensible, and the Navy had said it expected “a full and open competition.”

But with the bids due on Thursday, officials at three companies that had considered bidding — Boeing, Bell Helicopter and Europe’s AgustaWestland — all said in interviews that they had decided not to.

AgustaWestland, which was expected to be Sikorsky’s biggest rival, said in a statement that several aspects of the bid process “inhibit our ability to submit a competitive offering” and “provide a significant advantage to our likely competitor.”

Under the deal that the Obama administration scrapped, AgustaWestland had supplied the helicopters to Lockheed Martin, the prime contractor. (The Navy later sold the nine basic helicopters they produced to Canada for $164 million to use for spare parts.) AgustaWestland teamed with Northrop Grumman in preparing for the new competition, while Lockheed Martin is now working for Sikorsky.

Article source: http://www.nytimes.com/2013/07/29/business/few-suitors-to-build-a-new-marine-one.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: federal contracts, multibillion dollar, senator john mccain

DealBook: JPMorgan Vote Is Said to Favor Dimon Keeping 2 Top Jobs

May 21, 2013 by NewsMaker Leave a Comment

Haraz N. Ghanbari/Associated PressJamie Dimon, the chief executive and chairman of JPMorgan Chase.

12:01 p.m. | Updated

TAMPA, Fla. — Jamie Dimon, the nation’s most powerful banker, can hold onto his title of chairman after JPMorgan Chase’s shareholders decisively defeated a proposal to split the two top jobs.

The vote to split the roles of chairman and chief executive — both of which have been held by Mr. Dimon since 2006 — received only 32.2 percent of shares voted. That is down from a vote of roughly 40 percent in support of a similar proposal last year.

All 11 directors of the bank’s board were also re-elected.

Shares of JPMorgan were up more than 2 percent in midday trading.

The votes were a convincing show of shareholder support for Mr. Dimon and the board even amid persistent questions about the bank’s controls and its dealings with regulators. Those questions have emerged after a multibillion-dollar trading loss in the bank’s chief investment office in London surprised investors last year.

The few notes of disapproval by shareholders came in the weak vote totals for the three directors who serve on the board’s risk policy committee. One of them, Ellen V. Futter, who was the only director not to attend the meeting in Tampa, barely eked out a majority, receiving about 53 percent of voting shares.

The two other directors on the committee did just a little better: James S. Crown received about 57 percent of the vote; David M. Cote got 59 percent.

The three directors had been singled out for criticism by the influential shareholder advisory firm, Institutional Shareholder Services.

In comparison, Mr. Dimon received 98 percent of the vote for the board, while Lee R. Raymond, the lead director on the board, received 95 percent.

The shareholder vote on the proposal for an independent chairman was closely watched and provided some uncomfortable scrutiny of Mr. Dimon’s leadership.

Yet some industry analysts have said that a vote in support of Mr. Dimon was assured by the complexity of JPMorgan Chase. A vote to divest Mr. Dimon of the chairman title might have prompted him to walk away, threatening to disrupt the rosy stream of profits the bank has earned for three years.

JPMorgan’s Trading Loss

Tuesday’s meeting caps an exceptionally tumultuous year that saw Mr. Dimon and his top executives working to contain the damage from the botched credit bet.

JPMorgan first announced the losses from a soured bet made by traders in the bank’s chief investment office in London last May. Since then, Ina R. Drew, who headed the unit, resigned, JPMorgan’s board clawed back more than $100 million in compensation from the traders at the center of the botched bets and
Mr. Dimon testified before Congress to account for the mishap.

The trading loss and a series of run-ins with regulators fueled a campaign to have an independent chairman to bolster oversight of the bank’s controls and to provide a strong counterweight to Mr. Dimon.

Adding to the momentum to split the roles, some shareholders said, was the fear that Mr. Dimon, known for his forceful personality, did not have enough people at the bank that could rein him in. Mr. Dimon’s confidantes who helped him navigate through the financial crisis have left the bank, including James E. Staley, a former head of the investment bank. Those who remain at the bank are mostly younger executives, many of whom are in their 40s.

The shareholder vote is a setback for investor groups who have long argued that by separating the role of chairman and chief executive, investors are better served in the boardroom. The move, shareholders argue, is aimed at creating stronger, independent boards, to keep management in check. Amid rising shareholder clout, some companies have been moving to split the role of chairman and chief executive.

JPMorgan and board members had run an unusually proactive campaign to avert the split. To help bolster its credibility, JPMorgan’s board, led by Mr. Raymond, a former chief executive of Exxon Mobil, reduced Mr. Dimon’s pay by more than 50 percent in January, to $11.5 million.

In March, the directors redoubled their support for Mr. Dimon, indicating in a proxy filing that he should keep the chairman and C.E.O. titles, and urging shareholders to vote against the proposal to split them. “The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both,” the board said in the proxy filing.

The strategy helped to head off a showdown in Tampa. Still, a number of Wall Street insiders have suggested the board could have undercut the momentum to split the roles by giving more power to Mr. Raymond, the board’s lead director, while shaking up the board’s risk policy committee, which has been criticized for a lack of oversight. Instead, the board continued to support the risk policy members even over cries from shareholders to oust some directors.

JPMorgan, some industry observers argue, could have taken a page from Goldman Sachs’s playbook, which successfully scuttled a similar proposal this year by working behind the scenes to reach a deal with certain shareholders.

Under the agreement, Goldman enhanced the powers of James J. Schiro, its lead director. Mr. Schiro will set the agenda for the board, instead of merely approving it, and he will write his own letter to shareholders in the proxy statement.

In addition, Goldman’s board will increase the number of meetings of the independent directors. Those meetings would exclude Goldman’s chief executive, Lloyd C. Blankfein, and other firm executives.

As the vote fast approached, Mr. Dimon told some shareholders that he would consider leaving the bank, according to various attendees who spoke on the condition of anonymity. That admission was a central factor in some investors’ decision since it raised the possibility that the bank would reel in Mr. Dimon’s absence.

Now newly reaffirmed at the helm of JPMorgan Chase, Mr. Dimon faces a range of challenges. The bank’s relationships with regulators, once the best on Wall Street, have frayed amid concerns about faulty risk controls and oversight. At least eight federal agencies are investigating the bank.

In the latest salvo, the Federal Energy Regulatory Commission is weighing a crackdown against the bank for its energy trading activities, according to company filings.

Article source: http://dealbook.nytimes.com/2013/05/21/jpmorgan-seen-to-defeat-effort-to-split-top-2-jobs-at-bank/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: ghanbari, multibillion dollar, shareholder vote

DealBook: Small Firm Could Turn the Vote on Dimon

May 7, 2013 by NewsMaker Leave a Comment

Greg Scaffidi for The New York TimesJamie Dimon, the chief executive of JPMorgan Chase, which has been quietly working to shore up support for his dual role as chairman and C.E.O.

The fate of Jamie Dimon of JPMorgan Chase could hinge on a small, London-based firm that is virtually unknown, even on Wall Street.

The firm, Governance for Owners, has been tasked with voting the shares of the bank’s largest shareholder — the asset management behemoth BlackRock — on the question of whether to split the jobs of chairman and chief executive. Mr. Dimon been chairman since 2006 and chief executive since 2005.

The shareholder vote on May 21 has emerged as a referendum on the leadership of Mr. Dimon after a multibillion-dollar trading loss last year and dust-ups with regulators. While not binding, a majority vote to have a separate chairman and chief executive would be a heavy blow to the influential banker.

It is not known how Governance for Owners will vote BlackRock’s approximately 6.5 percent stake, but a few influential shareholders could tip the outcome. Last year, some 40 percent of JPMorgan’s shares supported dividing the top jobs, although BlackRock did not.

Another call for a split came on Tuesday from Glass, Lewis, a shareholder advisory firm, which also urged investors to withhold support for six of the bank’s 11 directors. Its larger rival, Institutional Shareholder Services, on Friday supported a split and recommended against voting for three directors. Both reports also raised questions about the independence and qualifications of several board members.

“JPMorgan Chase strongly endorses the re-election of its current directors. This is the same board, risk committee and audit committee that helped guide the company through the financial crisis without a single losing quarter and has led the company through three years of record performance,” said Kristin Lemkau, a JPMorgan spokeswoman.

In deciding how to vote, some JPMorgan shareholders are weighing whether the board’s lead director, Lee Raymond, the no-nonsense former chief executive of Exxon Mobil, is a strong enough counterbalance to Mr. Dimon. Some question whether Mr. Raymond has pushed back enough on decisions made by Mr. Dimon, saying he and the board appear to have been largely reactive. His defenders point out that he is a strong personality and was instrumental in the decision earlier this year to slash Mr. Dimon’s compensation by more than 50 percent, to $11.5 million.

Having a strong lead director has been important to BlackRock. The firm has previously said that it supports companies that do not have an independent chairman if the lead director is a strong figure and has, for example, the power to set board meetings and call meetings where management is not present.

In voting, Governance for Owners does not have to follow BlackRock’s corporate governance philosophy, but will take it into account, according to people briefed on the matter. Governance for Owners, which advises shareholders on how to vote and also runs a small shareholder activism fund, did not respond to requests for comment.

JPMorgan’s Trading Loss

BlackRock outsourced its voting because of a provision in the Bank Holding Company Act. Because of its ties to the PNC Financial Services Group, BlackRock is required to outsource its votes to independent third parties when ownership exceeds a certain threshold. This provision is aimed at stopping any one company from having inordinate influence over the banking industry. BlackRock appears to be the only major JPMorgan shareholder to be affected this way.

Behind the scenes, JPMorgan has been aggressively working to persuade shareholders to support having Mr. Dimon hold both the chairman and chief executive titles. Most shareholders will not vote until the week before the May 21 meeting and in the leadup, board members are sitting down with some of JPMorgan’s biggest shareholders to make their case.

“There’s a fundamental conflict in combining the roles of chairman and C.E.O.,” Anne Simpson, the director of corporate governance at Calpers, the big California public pension fund that is the bank’s 50th-biggest shareholder. “It’s all thrown into stark relief when you’re dealing with a company that’s too big to fail.” The pension fund plans to vote for a split.

Some directors and top bank executives say privately that it should be up to the board, not shareholders, to make the decision to sever the two roles.

They also contend that shareholders need to put the trading loss by the bank’s chief investment office in London in context. While the loss was damaging, they note it was an isolated incident and in some ways things have never been better at the bank. Last month, the bank reported its 12th consecutive quarterly profit, aided by strong revenue gains from investment banking and mortgage-related activity.

Still there is some concern that investors are unhappy with the fallout from the trading losses and persistent regulatory issues, wondering whether a board shake-up is needed to rein in Mr. Dimon.

The report by I.S.S. cites “material failures of stewardship and risk oversight” by the bank’s board after a multibillion-dollar trading loss last year. (Both I.S.S. and Glass, Lewis do not actually vote shares, but many investors follow their recommendations, or use them as a basis on how to vote.)

I.S.S.’s pointed criticism of JPMorgan directors and its recommendation that shareholders withhold support for three who serve on the board’s risk policy committee — David M. Cote, James S. Crown and Ellen V. Futter — was a rare move for the organization, which noted that its recommendation was usually only under “extraordinary circumstances.”

In its report, Glass, Lewis echoed the criticism of directors on the risk policy committee and recommended votes against three additional directors: Crandall C. Bowles, James A. Bell and Laban P. Jackson, who are members of the board’s audit committee.

“We believe that shareholders may justifiably expect that the audit committee of one of the nation’s largest banks, and one of the largest participants in the global capital and derivative markets, should act to ensure that the bank’s traders cannot obfuscate the values of their positions with as much ease as evidently occurred in the London Whale matter,” Glass, Lewis wrote.

Both the Glass, Lewis and I.S.S. reports raise questions about the independence of several board members.

The directors, the reports note, have business relationships with JPMorgan. Crandall C. Bowles, for example, as chairman of the board of Springs Industries, has a financial relationship with JPMorgan. The bank, according to I.S.S., is currently “acting as financial adviser” to Springs Industries and could participate “in financing” for a possible acquisition.

The financial relationships are transparent and fully disclosed to regulators and investors, a person close to the bank noted.

Michael J. de la Merced contributed reporting.

Article source: http://dealbook.nytimes.com/2013/05/07/small-firm-could-turn-the-vote-on-dimon/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: dual role, majority vote, multibillion dollar

For Homesick Russian Tycoon, Instant of Ruin Came in Court

March 25, 2013 by NewsMaker Leave a Comment

It came instead in an unremarkable courtroom in London last August, when a judge told him exactly why his $5.1 billion lawsuit against Roman A. Abramovich, a former business associate, had failed so badly.

As Mr. Berezovsky — a man once so powerful he brokered national elections and treated multibillion-dollar companies as personal cash machines — looked on, stunned, the judge called him “dishonest,” “unimpressive” and “inherently unreliable.”

She said he had invented evidence, contradicted himself and made up his story as he went along. And, perhaps most devastating to a man whose inflated self-belief was nearly all he had left, she said he had “deluded himself into believing his own version of events.”

It is still unclear how Mr. Berezovsky, 67, died. The police said Sunday that they were treating his death as “unexplained.” But what is certain is that the humiliating court ruling, the rapid dissolution of his once-vast fortune, and a dawning realization that he would never see his homeland again had driven Mr. Berezovsky into despair. He had lived large for so long, it seemed, he did not know how to live small.

“He was so much distressed and depressed, and in so much trouble, as a result of that court ruling,” Alex Goldfarb, a longtime associate and former employee, said in an interview. “He thought this verdict had destroyed him, effectively.”

Mr. Berezovsky’s body was found, the police said, by an employee on Saturday afternoon on the floor of a bathroom at the house where he was living in Ascot, an upscale London suburb. The door had been locked from the inside, and the police said they were withholding “some details” until after the post-mortem, to give the family “time to speak to younger family members,” including, presumably, the last two of the six children he had with two successive wives and one longtime girlfriend.

According to a person with knowledge of the details, Mr. Berezovsky left no suicide note. But because nothing to do with him was ever simple, elaborate theories are being circulated. That the stress of the last few months had brought on a fatal heart attack. That, despondent over the loss of his money, prestige and homeland, Mr. Berezovsky had killed himself. That he had been murdered, just as his friend and fellow exile Alexander V. Litvinenko had been (in his case, by polonium poisoning) in 2006. Police officers trained in radiological forensics even searched the house and surroundings for evidence of chemical, radiological or biological material, but came up with nothing.

On Sunday afternoon, the police said they had found no evidence “to suggest third-party involvement,” but The Guardian quoted a friend of Mr. Berezovsky’s as saying that a scarf had been found near his body and speculating that he had been strangled.

Adding to the confusion, a spokesman for the Russian president, Vladimir V. Putin, said Saturday night that several months ago, Mr. Berezovsky had sent the president a letter in which he “admitted that he made a lot of mistakes” and begged for permission to return home. The Kremlin has produced no evidence of such a letter, but Mr. Berezovsky, one of Mr. Putin’s bitterest critics-in-exile, had certainly begun to speak in recent days of a deep homesickness.

“The last time I spoke with him, I was amazed: it was as if life had left him,” Mikhail Kozyrev, a television reporter who had worked with Mr. Berezovsky for years and talked with him a few weeks ago, said on the Russian channel Dozhd on Saturday. He said Mr. Berezovsky quizzed him about what had changed in stylish parts of Moscow, even asking what restaurants had opened.

“He had suddenly lost hope that he would at some point see again the homeland he loved,” Mr. Kozyrev said.

Mr. Berezovsky’s reputation for extravagance started after the Soviet Union fell and all of Russia seemed up for grabs. Backed by the Russian president at the time, Boris N. Yeltsin — whom he in turn helped prop up — Mr. Berezovsky began a series of investments and maneuvers in businesses involving cars, oil, media and airplanes. Court papers in his case with Mr. Abramovich, who remained in good favor with the Kremlin even as Mr. Berezovsky fell out with it later on, showed how both played fast and loose with money, cutting under-the-table deals, paying bribes and protection money, blackmailing and bullying their way into new ventures.

Most Russian oligarchs tend to end up acquiescing to the Kremlin, or else are killed, jailed, or exiled into oblivion. But Mr. Berezovsky’s life simply unraveled.

Reporting was contributed by Stephen Castle from Ascot, England; Alan Cowell from Venice; David M. Herszenhorn and Andrew Roth from Moscow; and Michael Schwirtz from New York.

Article source: http://www.nytimes.com/2013/03/25/world/europe/for-homesick-russian-tycoon-instant-of-ruin-came-in-court.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: alex goldfarb, dissolution, multibillion dollar

DealBook: R.B.S. Stock Drops Amid Concerns of Potential Guilty Plea in Libor Case

January 29, 2013 by NewsMaker Leave a Comment

Shares of the Royal Bank of Scotland stumbled on Tuesday after it emerged that federal authorities are pursuing a guilty plea against an Asian subsidiary at the center of an interest rate manipulation scandal.

Following a template developed in last year’s rare-rigging case against UBS, the Justice Department is pushing for the criminal action against the Royal Bank of Scotland, along with fines and penalties, according to two people with knowledge of the matter. The case could come as soon as next week.

The R.B.S. settlement is likely to include more than $650 million in fines levied by the American and British authorities, according to two other people with direct knowledge of the matter. At that level, the penalties would be the second largest settlement in the rate manipulation case after a $1.5 billion agreement with the Swiss bank UBS last month. Barclays paid $450 million last summer.

The Justice Department’s criminal division, which is pushing for a guilty plea with the Asian subsidiary of the Royal Bank of Scotland, could also strike a nonprosecution agreement with the parent company.

The threat of charges against the subsidiary weighed on the stock. After The Wall Street Journal reported on the potential guilty plea, the bank’s stock dropped 6 percent by the close of trading in London on Tuesday.

The settlement terms are not yet final. In particular, the Royal Bank of Scotland — which is 82 percent owned by British taxpayers after receiving a multibillion-dollar government bailout during the financial crisis — is resisting the guilty plea for the Asian subsidiary, fearful of the potential fallout. The bank, however, lacks leverage with the Justice Department, which can indict the subsidiary if it resists the guilty plea. An indictment would deliver a harsher blow to the bank and potentially set up a protracted legal battle.

“Discussions with various authorities” in the case “are ongoing,” said an RBS spokesman, adding that “we continue to cooperate fully with their investigations.”

The bank, which is based in Edinburgh, is also expected to cut its bonus pool by up to one third, or around $240 million, as it claws back funds to pay for the pending Libor settlement, according to a person with direct knowledge of the matter. A decision on bonuses has not been made, and the final figure will be released on Feb. 28 when the bank reports its next earnings.

“There is a legitimate concern that British taxpayers, who already have bailed out the bank, will be asked to pay for past mistakes at R.B.S.,” said Pat McFadden, a British politician who is a member of the British parliament’s treasury select committee that oversees the country’s finance industry. “Steps should be taken to minimize the exposure for taxpayers.”

Several senior RBS executives, including John Hourican, who runs the firm’s investment banking unit where the alleged illegal activity took place, are expected to step down amid the Libor scandal, though they have not been directly implicated in the matter, according to another person with direct knowledge of the matter.

The negotiations between R.B.S. and the regulators reflect the Justice Department’s aggressive new posture, as they look to hold banks responsible for wrongdoing in the rate rigging case. The wave of action has centered on the London interbank offered rate, or Libor, and other key international benchmark rates, which are central to determining the borrowing costs for trillions of dollars of financial products like corporate loans and credit cards. Banks are suspected of reporting false rates to squeeze out an extra profit and, in some cases, to deflect concerns about their financial health during the financial crisis.

Last month, the Justice Department secured a guilty plea against the Japanese subsidiary of UBS in a rate manipulation case. UBS also paid $1.5 billion in fines to the Justice Department, the Commodity Futures Trading Commission, the Financial Services Authority, the British regulator and Swiss authorities.

The deal with UBS sent a strong signal that authorities wanted to hold banks responsible for their wrongdoing. But it also limited the potential damage to the Swiss bank. By securing a guilty plea against a subsidiary, it sheltered the parent company from losing its charter to operate or other major repercussions.

“We are holding those who did wrong accountable,” Lanny A. Breuer, the head of the Justice Department’s criminal division, said at a news conference in December on the UBS case. “We cannot, and we will not, tolerate misconduct on Wall Street.”

Article source: http://dealbook.nytimes.com/2013/01/29/r-b-s-stock-drops-amid-concerns-of-potential-guilty-plea-in-libor-case/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: dollar government, multibillion dollar

Bankers to Find Atmosphere a Bit More Congenial in Davos

January 20, 2013 by NewsMaker Leave a Comment

FRANKFURT — Two years ago, Jamie Dimon, chief executive of JPMorgan Chase, told an audience in Davos that people should stop picking on bankers. Mr. Dimon is still waiting for his wish to come true.

Bankers, always a big presence at the World Economic Forum in the Swiss city of Davos, arrive this year under less regulatory pressure and with better profits than in past years. But they are still on the defensive.

Mr. Dimon, scheduled to appear on one of the first panels when the Davos forum opens Wednesday, is again embroiled in controversy. Last week JPMorgan’s board cut his pay for 2012 in half, to $11.5 million, holding him accountable for a multibillion dollar loss in derivatives trading.

International bankers are under fire from the law enforcement authorities as well, and one does not have to go far from Davos to find examples.

UBS, based in Zurich, agreed to pay a $1.5 billion fine to the global authorities after admitting this month that it had helped manipulate a key benchmark rate used to set mortgage and other interest rates. Wegelin, a private bank based in St. Gallen, Switzerland, shut down earlier this month after admitting it had helped wealthy Americans evade taxes. The bank, founded in 1741, was the oldest in Switzerland.

And at a news conference last week in Washington, the managing director of the International Monetary Fund, Christine Lagarde, lamented a “waning commitment” to tougher financial regulation and called upon the banking authorities to finish the job of fixing the world’s banks.

For all that, though, bankers may find the atmosphere in Davos a bit more congenial than in some recent years. Among the government overseers who will also be flocking to the Swiss town, there seems to be a growing feeling that the banks have taken enough bashing.

Earlier this month, for instance, an international conclave of central bankers and bank supervisors, meeting in Basel, Switzerland, relaxed new rules that were intended to ensure that banks would be able to survive an event like the collapse of Lehman Brothers in 2008.

The rules, which are not binding but serve as a benchmark for national regulators, would require banks to maintain a 30-day supply of cash or liquid assets that are easy to convert into cash. But after the decision in Basel this month banks would have until 2019 to accumulate the additional cash and assets, instead of 2015. The regulators also broadened the kinds of assets that qualify, so that now they can include even some mortgage-backed securities—the same general class of security that was at the heart of the crisis.

Many analysts see the decision as a gift to the banking industry, which had insisted that planned new regulations will force them to curtail lending. Bank stocks in Europe rose after the decision.

“Most bankers I talked to breathed a huge sigh of relief,” said Cornelius Hurley, a professor at the Boston University School of Law and former counsel to the U.S. Federal Reserve board of governors.

Gavan Nolan, a credit analyst at Markit, a data provider in London, agreed that changes in the rules “went further than many had presumed, and in a direction that seems to favor the banks.” Still, in a note to clients he added, “the effects shouldn’t be overstated.” The rules “will still make it more difficult to make money, in comparison to the previous era.”

The discussions at Davos may offer clues about whether the Basel decisions foreshadow other concessions..

There is a risk that efforts to rein in financial risk could lose momentum as the Lehman trauma fades, Mr. Hurley said.

“We said to ourselves back in 2008, a crisis is a terrible thing to waste,” he said. “It seems the farther away we get the evidence is that we are wasting it.”

The World Economic Forum tends to be a place for talk rather than action, but it is one of the few events that reliably brings central bankers, regulators, economists, legislators and bankers under one snow-laden roof.

The discussions sometimes have been contentious, as in 2010 when U.S. policy makers like Representative Barney Frank met behind closed doors with top bankers including Brian T. Moynihan, then the chief executive of Bank of America.

Article source: http://www.nytimes.com/2013/01/21/business/global/21iht-davosbanks21.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: international monetary fund, multibillion dollar, news conference

DealBook: Citigroup Earnings Plummeted in Quarter on Write-Down

October 16, 2012 by NewsMaker Leave a Comment

Brendan McDermid/ReutersA Citibank branch in New York.

5:18 p.m. | Updated

Citigroup’s wager that international lending will offset a sluggish recovery in the United States started to pay off Monday when the bank reported third-quarter earnings.

Although Citigroup’s quarterly profit plummeted because of a multibillion-dollar loss related to its continued exit from Morgan Stanley Smith Barney, the bank increased its lending, particularly in Latin America, and snagged a larger share of capital markets business.

Citigroup, the nation’s third-largest bank by assets, behind JPMorgan Chase and Bank of America, reported net income of $468 million, or 15 cents a share, on revenue of $14 billion, compared with net income of $3.8 billion, or $1.23 a share, in the quarter a year earlier.

DealBook: At JPMorgan, an Inquiry Built on Tapes

October 11, 2012 by NewsMaker Leave a Comment

Carl Court/Agence France-Presse — Getty ImagesOffices of JPMorgan Chase in London. The trade losses were associated with London workers.

Federal authorities are using taped phone conversations to build criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase, focusing on calls in which employees openly discussed how to value the troubled bets in a favorable way.

Investigators are looking into the actions of four people who previously worked for the team based in London responsible for the $6 billion loss, according to officials briefed on the case. The Federal Bureau of Investigation could make some arrests in the next several months, said one person who spoke on the condition of anonymity because the inquiry was ongoing.

The phone recordings, which were turned over to authorities by JPMorgan, have helped focus the investigation, the officials said. Authorities are poring over thousands of conversations, in English and French. They are also relying on notes that employees took during staff meetings, instant messages circulated among traders and e-mails sent within the group.

Authorities are examining how some traders in the chief investment office influenced market prices as their bets began to sour. Investigators are also looking into whether records were falsified to hide the problems from executives in New York. Based on those records, JPMorgan submitted inaccurate financial statements to regulators, another area of focus for investigators.

The scope of the inquiry suggests that the problems were isolated to a handful of executives and traders in an overseas division, and did not reflect a fundamental weakness with the bank’s culture and leadership. The investigation does not appear to touch the upper echelons of the executive suite, notably Ina Drew who oversaw the chief investment office. The findings could insulate JPMorgan and its chief executive, Jamie Dimon, from further fallout.

Timeline: JPMorgan Trading Loss

Five months into the investigation, attention is centered on four people: Javier Martin-Artajo, a manager who oversaw the trading strategy from the bank’s London offices; Bruno Iksil, the trader known as the London Whale for placing the outsize bet; Achilles Macris, the executive in charge of the international chief investment office; and a low-level trader, Julien Grout, who worked for Mr. Iksil and was responsible for marking the trading book.

The people briefed on the matter said the investigation was in the early stages, and federal prosecutors in Manhattan had not made a decision about whether to file charges. None of the current or former employees have been accused of wrongdoing.

Yuri Gripas/ReutersJamie Dimon, the chief of JPMorgan Chase.

If they decide to bring charges, prosecutors will face significant challenges. Financial cases are notoriously difficult to prove in court. The intricacies of Wall Street, which are often central to such matters, can be difficult to explain to jurors. In the aftermath of the financial crisis, authorities have brought few cases against individual employees.

Complicating matters, some of the JPMorgan employees are from France, which does not extradite its citizens. Mr. Iksil has already returned home to France after leaving the bank, according to a person with knowledge of the matter. Mr. Grout, also a French citizen, has been suspended from the bank but remains in London, said another person briefed on the situation.

Prosecutors would also have to prove that employees intentionally masked losses by mispricing the positions. It is a high bar. In some derivatives markets, traders are allowed to estimate the value of their positions because actual prices may not be readily available.

Some people close to the investigation say the significance of the mismarked positions may be overstated since they represented a tiny fraction of the overall trades. They also cautioned that authorities could easily take an incriminating sentence from a single phone call out of context, and that many conversations took place in person at the London office.

“Mr. Martin-Artajo is confident that when a complete and fair reconstruction of these complex events is completed, he will be cleared of any wrongdoing,” his lawyer, Greg Campbell, said in a statement. “There was no direct or indirect attempt by him at any time to conceal losses.”

Lawyers for Mr. Macris and Mr. Grout declined to comment. A lawyer for Mr. Iksil did not respond to requests for comment. Spokesmen for the United States attorney’s office in New York, the F.B.I. in Manhattan and JPMorgan declined to comment.

The trading loss could get further scrutiny on Friday when JPMorgan is set to report third-quarter earnings. Since the blowup was first disclosed in May, the losses have increased to about $6 billion, from $2 billion.

As the bank continues to unwind the bet, investigators have held multiple meetings with lawyers representing people involved in the matter. Authorities plan to interview Mr. Macris this month in his native Greece, according to people briefed on the matter. Such discussions could provide a more detailed account of the employees’ actions and alter the course of the investigation. Some of the former employees could also cooperate with authorities.

While authorities are narrowing the focus of the criminal investigations, JPMorgan and its executives still face scrutiny from civil regulators, including the Securities and Exchange Commission, which is examining whether the bank misled investors about the severity of the losses. British authorities have also recently opened inquiries into the matter, according to the officials.

The trading losses have already prompted a broader management shuffle. Ms. Drew resigned in May. Douglas L. Braunstein, the bank’s chief financial officer, is expected to step down from his post later this year, according to two people with knowledge of the situation.

The investigations center on the chief investment office in London.

The group was created to invest JPMorgan’s own money and offset potential losses across the bank’s disparate businesses. For example, Mr. Iksil bought and sold derivative contracts — financial instruments tied to the value of corporate bonds and other investments — in an effort to protect the bank from market fluctuations.

By early 2012, the London team increased its risk. In response to adverse moves in the markets and regulatory changes, the group made a series of aggressive derivatives trades, betting on the strength of companies like American Airlines.

As these bets started to sour, the London team decided to double down instead of getting out, according to the bank. From late 2011 to March 2012, the bank’s net exposure to such contracts more than doubled to nearly $150 billion. Authorities are examining whether the large positions improperly influenced market prices.

The phone calls, which are taped as a part of JPMorgan’s routine practices, suggest that traders tried to limit the losses, according to people briefed on the matter. In some phone recordings, Mr. Martin-Artajo encouraged Mr. Iksil to record the value of certain trades in an optimistic fashion, the people said. Their boss, Mr. Macris, was also involved in valuation discussions, according to two people with knowledge of the matter.

The chief investment office was also trying to play down the potential risk. Some employees told top JPMorgan executives that the situation was “manageable” and that the position might even produce a slight gain in the second quarter of 2012.

But the estimates proved inaccurate. This summer, JPMorgan restated its first-quarter earnings downward by $459 million, conceding errors in the valuations.

At the time, the bank said that the traders in the chief investment office “generally” valued the holdings within a reasonable range. But JPMorgan also pointed to the potential for deeper problems.

“The restatement is really based upon recent facts that we’ve uncovered regarding the C.I.O. traders’ intent as they were marking the book,” Mr. Braunstein, the bank’s chief financial officer, said at the time, according to a transcript. “As a result, we questioned the integrity of those trader marks.”

Article source: http://dealbook.nytimes.com/2012/10/10/at-jpmorgan-inquiry-built-on-taped-calls/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: federal authorities, investment office, multibillion dollar

DealBook: Trial to Begin for Former UBS Trader Accused of Hiding Huge Loss

September 14, 2012 by NewsMaker Leave a Comment

Simon Dawson/Bloomberg NewsKweku M. Adoboli, a former UBS trader, is charged with fraud and false accounting in connection with a $2.3 billion loss.

LONDON — UBS will face the harsh glare of the spotlight again on Friday, as opening arguments begin in the trial of a former trader accused of hiding a multibillion-dollar loss at the investment bank.

Kweku M. Adoboli, 32, the former trader, faces charges of false accounting and fraud in connection with a $2.3 billion loss at the bank. He has pleaded not guilty.

“As uncomfortable as the entire trial will be for UBS, it will show us what the consequences are when misconduct occurs or when individuals do not take their responsibilities seriously,” the bank’s chief executive, Sergio P. Ermotti, said in an internal memo made public by the firm.

UBS, which has struggled to regain its footing since the financial crisis, has been plagued by a number of scandals in recent years.

In 2009, the investment bank, based in Switzerland, agreed to pay $780 million to settle a tax fraud case with American authorities. Three former UBS executives were convicted earlier this year for rigging bids in the municipal bond market.

The bank has also been ensnared by a global investigation into rate manipulation. UBS, which is one of more than a dozen institutions under investigation, struck an immunity deal with authorities.

The case against Mr. Adoboli has only added to the questions about the bank’s oversight and risk management.

After the financial crisis, UBS, which had been hobbled by bad real estate bets, vowed to overhaul its internal controls. But the bank disclosed two years later that it had “discovered unauthorized speculative trading,” and Mr. Adoboli was arrested. According to the charges, his activities spanned more than three years, starting in 2008.

UBS subsequently conducted an internal investigation into the loss. The review showed that the firm’s risk controls had raised red flags about unusual trading activity, but that managers had failed to adequately follow up. “We have to be straight with ourselves,” Mr. Ermotti, the chief executive, said in 2011. “In no circumstances should something like this ever occur.”

The UBS trading scandal echoes past cases.

In 2010, Jérôme Kerviel, a trader at the Paris-based bank Société Générale, was convicted of generating more than $6 billion in losses. He is appealing the matter. Another trader, Nicholas W. Leeson of Barings Bank, racked up $1 billion in losses, prompting the failure of the British institution in 1995. Mr. Leeson pleaded guilty and served four years in prison.

Mr. Adoboli started his finance career at UBS. He joined the bank as an investment adviser trainee in London shortly after graduating from Nottingham University in 2003, and eventually worked his way up to the Delta One desk, a plain-vanilla version of derivatives trading. Traders in this group create investments that track specific financial assets like a basket of company stocks.

Mr. Adoboli fired his lawyers at Kingsley Napley, the firm that had previously represented Mr. Leeson. Mr. Adoboli is now represented by Bark Company, another law firm in London.

If convicted, he could face up to 10 years in prison. The trial is expected to last up to eight weeks. Both current and former UBS employees could be called as witnesses, though the firm has not been accused of any wrongdoing.

Legal restrictions in Britain limit the information that can be reported about the case to avoid biasing the proceedings. UBS and a lawyer for Mr. Adoboli declined to comment.

When the trading scandal erupted last year, it reverberated through the upper ranks of UBS. The chief executive, Oswald J. Grübel, whom UBS had recruited to oversee its turnaround, promptly resigned. The co-chiefs of global equities, the division where the loss occurred, also left the firm.

The firm’s profit also suffered. After disclosing the trading losses, UBS reported that quarterly earnings dropped 39 percent to $1.2 billion.

The blowup has worsened the bank’s financial woes. Like other European banks, UBS is dealing with the sluggish economy and the sovereign debt crisis in Europe.

With investment banking operations slumping, institutions have moved swiftly to lay off staff and revamp their strategies. UBS has announced 3,500 job cuts, with about half expected in the investment banking division. It has also shifted its focus toward wealth management.

“The banks are slowly realizing there are parts of their businesses that just don’t make money,” said Pete Hahn, a fellow at Cass Business School in London. “A fundamental rethink is under way.”

Article source: http://dealbook.nytimes.com/2012/09/13/trial-to-begin-for-former-ubs-trader-accused-of-hiding-huge-loss/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: dozen institutions, fraud case, multibillion dollar

DealBook: Man Group Announces More Cost Cuts as Assets Decline

July 24, 2012 by NewsMaker Leave a Comment

Sebastien Nogier/ReutersPeter Clarke, chief of Man Group.

LONDON – Shares in Man Group, the world’s largest publicly traded hedge fund manager, rose sharply on Tuesday after the firm announced a new round of cost cuts aimed at stemming the continuing decline in its assets under management.

Man Group said it would find an additional $100 million of cost savings by the end of 2013, according to a company statement. The announcement builds on a plan unveiled in March to cut costs by $95 million.

Despite the cost reductions, investors continue to pull money out of the hedge fund group. By the end of June, Man Group said its assets under management had fallen 26 percent, to $52.7 billion, from the period a year earlier.

“Against a turbulent market and economic background, Man’s funds under management have declined in the period principally as a result of continued net outflows and the deleveraging of our guaranteed products,” Man Group’s chief executive, Peter Clarke, said in a statement.

Amid the financial crisis, Man Group has suffered from a crumbling stock price and poor market performance. Analysts have also speculated that the firm, based in London, could become a takeover target for a buyer looking to pick up an asset manager on the cheap.

Investors, however, reacted positively on Tuesday to Man Group’s new round of cost savings. The firm’s share price, which has fallen about 69 percent in the last 12 months, rose as much as 12 percent in early trading in London. By the afternoon, Man Group’s shares had given up some of their gains, but were still trading 4 percent higher.

Man Group on Tuesday reported a $164 million pretax loss in the first six months of the year because of write-downs connected to its GLG division and fund-of-funds unit. Man Group merged with GLG, another multibillion-dollar hedge fund, in 2010.

As part of an executive shake-up, Man Group said last month that Jonathan Sorrell, who joined the firm last summer as head of strategy after his departure from Goldman Sachs, would succeed Kevin Hayes as its finance director.

Article source: http://dealbook.nytimes.com/2012/07/24/man-group-announces-more-cost-savings-as-assets-fall/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: economic background, multibillion dollar, takeover target

Few Suitors to Build a New Marine One

DealBook: JPMorgan Vote Is Said to Favor Dimon Keeping 2 Top Jobs

JPMorgan’s Trading Loss

DealBook: Small Firm Could Turn the Vote on Dimon

JPMorgan’s Trading Loss

For Homesick Russian Tycoon, Instant of Ruin Came in Court

DealBook: R.B.S. Stock Drops Amid Concerns of Potential Guilty Plea in Libor Case

Bankers to Find Atmosphere a Bit More Congenial in Davos

DealBook: Citigroup Earnings Plummeted in Quarter on Write-Down

Related Links

DealBook: At JPMorgan, an Inquiry Built on Tapes

Timeline: JPMorgan Trading Loss

DealBook: Trial to Begin for Former UBS Trader Accused of Hiding Huge Loss

DealBook: Man Group Announces More Cost Cuts as Assets Decline

Recent News

Partners