Today's Top Stories Editor's Corner: Morgan Stanley unit to invest in companies with women directors Also Noted: Spotlight On... Cohen's conspicuous consumption slammed News From the Fierce Network:
Today's Top News
Bank of America CEO Brian Moynihan told Charlie Rose that he has "the best job there is. While there have been times when you sit there and say, 'Jeez, this is a lot of pounding,' you always keep your eye on the purpose you're here. And that's to help people with their financial lives -- if you really keep focused on that, I could do this the rest of my life." The statement, as reported by Bloomberg is fascinating in this regard: Does the CEO of Bank of America really regard his "purpose" as helping people with their financial lives? It would be nice to think that bank CEOs are single mindedly bent on serving customers, but that's hopelessly naïve. You can appreciate the sentiment, however. Moynihan has every reason, from a PR perspective, as painting himself as a champion of the public good when it comes to financial services. That's not the job of the CEO of public bank corporation, however. Most people will tell you that the CEO's real purpose is to serve shareholders. That's the ultimate yardstick by which she is measured. That's how they are incented; if they can get the stock price moving north, they win big with all their options and restricted stock. Of course, in this day and age, it's hardly advisable from a PR point of view to state nakedly that your sole goal is to get the stock price higher. It would be unwise, optically speaking, to go around espousing the views of, say, Milton Friedman, who called corporate social responsibility programs "hypocritical window-dressing" in an article titled "The Social Responsibility of Business Is to Increase Its Profits." In any case, shareholders should not despair that Moynihan has abandoned them in favor of customers. That's never going to happen. But all CEOs face a tricky balancing act these days. If they really care about people and the planet they have to find a way to balance those concerns with profits and ideally find synergies such that doing right equals doing well. That's not easy. In fact, it's increasingly difficult. Some Harvard professors have been championing an approach called "Shared Value," which is worth exploring in this context. For more: Related articles: Read more about: Bank of America, CEO
2. Judge skeptical about no guilt admission in SAC settlement
It was huge news when the SEC announced that SAC Capital had agreed to settle civil insider trading charges for $602 million, the largest fine ever levied by the agency for such crimes. Certainly, the SEC was willing to crow about its big win. But the settlement also allowed the hedge fund firm to settle without admitting any guilt. And deep down, you know that SEC lawyers were praying that the case would be assigned to anyone but Judge Jed Rakoff for approval. He held up a Citigroup settlement in part because of the lack of any guilt admission by the bank, which he and others have found absurd. But the SEC didn't necessarily get lucky when the SAC Capital case ended up being assigned to U.S. District Judge Victor Marrero, who has raised Rakoff-esque questions about the settlement. Bloomberg quoted Judge Marrero as saying, "This court is in the same position that Judge Rakoff was some months ago." In fact, Judge Marrero said he may wait until an appellate court -- which has been skeptical of Rakoff's position in the Citigroup matter -- makes a decision in that case. He also made an interesting point regarding Matthew Martoma, who is at heart of the SAC Capital insider trading case, ends up being convicted at trial. "How would it look if in the settlement before it, the parties were allowed to say 'We did nothing wrong?'" Judge Marrero was quoted. At some point, it's likely that the judge will approve the settlement with reservations, especially if the appellate court, as expected, ends up ruling that Rakoff overstepped his boundaries in the Citigroup case. For more: Read more about: insider trading, settlements 3. Cybersecurity threats now magnified
State-sponsored actors have stepped up their activity when it comes to web-based attacks on corporate and government web sites. The banking industry has certainly been in the crosshairs. The New York Times weighs in on the issue, making the point that the latest wave of attacks can be differentiated from previous attacks in profound ways. For one thing, the current attacks on the U.S. and other countries represent a significant step-up in sophistication. And the very motive of the attacks has changed. The conventional wisdom previously held that the goal of state-sponsored cybercrime was espionage-oriented, that is, the theft of corporate or state secrets. But more experts are now concluding that the goal is more about destruction of digital assets than anything else. The likes of bank of America, American Express, JPMorgan Chase and other top banks have ably fought back against the recent attacks, which were launched by a group that goes by the moniker Izz ad-Din al-Qassam Cyber Fighters. (Experts tell the Times that the group may be a front for Iran.) At some point, given the unrelenting nature of the attacks, it would not be surprising if the bad guys were to win a few battles. The consequences could well be calamitous, judging by recent attacks on other targets. In South Korea, at attack by North Korean operatives on banks and media companies incapacitated 32,000 computers, displaying a picture of skull. In Saudi Arabia, an attack on Saudi Aramco erased data on 30,000 computers, displaying an image of a burning American flag. In addition, as I've noted before, there is precedent for other criminals to try to take advantage of denial of services attacks to perpetrate more conventional crimes, such as stealing funds from bank accounts. All in all, we're entering dangerous new territory in the cyber security war. Banks have every reason to be nervous, and lawmakers have every reason to act forthrightly on cyber security legislation. For more:
Read more about: Cyber Security, DDOS attacks 4. Will Michael Steinberg cooperate with prosecutors?
At this point, it's tempting to say that prosecutors are closing in on their ultimate target, the secretive founder of SAC Capital, Steven Cohen. After all, the recent arrest of his former confidante and good friend Michael Steinberg marks the eighth former employee of the hedge fund firm to be arrested in the insider trading crackdown that began in 2007. But it would appear that prosecutors still need one final piece to build a strong criminal case that could put Cohen in jail: A cooperating witness. The big question is if Steinberg will testify against Cohen. He would likely prove a strong witness if he did. He has been a close friend of Cohen's since the late 1990s, when he joined the firm. Over the years, Steinberg carved out a role as someone who could filter information for Cohen from the many competing SAC Capital analysts and portfolio managers. His career arc was enviable until he was ensnared in the investigations and was put on administrative leave late last year. Given their long friendship, the chances that he would turn on Cohen seem rather low. But the prospect of many years in jail might change the calculus for him. At the same time, one has to wonder if Mathew Martoma might change his mind and decide to cooperate with prosecutors after all. So far, he has been adamant that he will not do so, opting instead to fight insider trading charges in court. But the fact that SAC Capital has settled civil charges related to insider trading may change the equation, especially given that SAC Capital says it is cooperating in the case against Martoma. In any case, you do get the feeling that the last chance for prosecutors to bring criminal charges against Cohen rests with these two men. For more: Read more about: insider trading, SAC Capital 5. Dell intrigue thickens as CEO ponders his options
Without question, any company offering to buy Dell will gain an advantage if they could persuade founder Michael Dell to join their cause. For now, he remains aligned with Silver Lake and Microsoft, though the conventional wisdom holds that he's amendable to switching sides and joining Blackstone if that will increase his chances at taking his company private. Blackstone is open to the idea of working out an arrangement that will leave Dell in charge of the company. But already, there is speculation that a big roadblock might exist in the form of David Johnson, a former Dell executive in charge of mergers and acquisitions who now works for Blackstone. Reuters reports, "Among people who know Michael Dell and Johnson, there is little agreement about how well the two men get along now. The relationship was still close when Johnson, who led some $10 billion worth of deals during his time at Dell, worked to bolster the company's non-PC-making businesses in areas such as software and enterprise services. Johnson was said to have weighed the offer from Blackstone for a while before taking the plunge, one of the people said. Three others said Johnson left Dell alienated, and that some members of top management were unhappy with his track record and had few qualms about letting him leave for the world's largest private equity firm." You certainly can't blame Michael Dell for not wanting to answer to a former lieutenant, who just might be contemplating a seat on board if Dell goes private. At the same time, there might be a way for Blackstone to work out some sort of arrangement that both men can live with. And there's always the possibility that Johnson will be kept away from management of the company once it goes public. As the architect of some $10 billion in acquisitions, he might be somewhat conflicted when it comes to re-imagining the computer maker. For more: Related articles: Read more about: lbo, Blackstone Also NotedSPOTLIGHT ON... Cohen's conspicuous consumption slammed When it comes to conspicuous consumption, Steven Cohen of SAC Capital may not be getting the best advice. After he inked a deal to settle insider trading-related charges with the SEC for $616 million, the new hit that he had purchased a Picasso for $155 million and a fancy new home for $60 million. "The flagrant, extravagant public demonstration of wealth is an in-your-face reaction to the SEC and the justice system," One lawyer was quoted by Moneywatch. "The guy's saying, 'I'll give you $600 million, and then I'll turn around and buy a $60 million house --because I can afford it." Article Company news:
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Monday, April 1, 2013
| 04.01.13 | Cybersecurity threats now magnified
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