Ex-Nasdaq Director Plea, EPA Rules, Zillow’s ‘Z’: Compliance

Former Nasdaq Stock Market Managing Director Donald Johnson pleaded guilty to using information gleaned from his position with the exchange to engage in insider trading, the U.S. Justice Department said.

Johnson, 56, pleaded guilty to one count of securities fraud, according to papers filed in federal court in Alexandria, Virginia. He admitted he bought and sold shares of five Nasdaq- listed companies based on inside information from 2006 to 2009.

He often made the trades from his work computer at Nasdaq, according to a lawsuit filed at the same time in federal court in Manhattan by the U.S. Securities and Exchange Commission.

Johnson, a former managing director at Nasdaq’s market intelligence desk in New York, admitted making more than $640,000 from the illegal trades. Johnson used a brokerage account in his wife’s name to conceal the illicit trades, the Justice Department said.

Among the shares he traded was United Therapeutics Corp. (UTHR) based on inside information about test results for the drug Viveta, now called Tyvaso, and about the approval of the drug, prosecutors said.

“My client chose to accept responsibility today for his actions,” Johnson’s lawyer, Jonathan Simms, said May 26 in a phone interview. “Those who know Mr. Johnson will agree that these charges are in no way indicative of his overall character.”

Johnson faces a maximum sentence of 20 years in prison at his sentencing, scheduled for Aug. 12. The plea deal didn’t include an agreement on what sentence the government will ask the judge to impose, Simms said.

“We’re fully cooperating with the authorities,” said Frank De Maria, a spokesman for Nasdaq OMX, who declined to comment further.

The case is U.S. v. Johnson, 11-254, U.S. District Court, Eastern District of Virginia (Alexandria.)

Compliance Policy

High-Frequency Trading Needs More Control, AMF’s Jouyet Says

Regulators may need to develop “circuit-breakers” that halt high-frequency trading practices like those that exacerbated a stock market plunge a year ago, said the head of France’s financial markets regulator.

Jean-Pierre Jouyet, chairman of Autorite des Marches Financiers, said in a speech at the International Capital Market Association annual conference in Paris on May 27 that the measure would provide for circuit breakers like the ones in the U.S.

High-frequency trading is a computer-driven trading method in which firms may make thousands of transactions a second. The so-called flash crash of May 6, 2010, which temporarily erased $862 billion in stock value, spurred U.S. Securities and Exchange Commission proposals for market circuit breakers and plans to establish a system for cross-market surveillance.

The rise of high-frequency trading techniques has made it harder for investors to analyze movements in markets, Jouyet said. “Precise rules” are required to ensure markets can “return to their role of financing the economy,” he said.

EPA Rules Maligned by Industry Seen Untouched in Overhaul

U.S. environmental rules most maligned by industry, including limits on toxic emissions from coal-fired power plants, escaped the federal regulatory overhaul ordered by President Barack Obama, critics said.

The Environmental Protection Agency, in response to Obama’s executive-branch directive, said May 26 it plans 31 reviews this year. These include eliminating a requirement in some states for vapor-recovery systems at gas stations, saving about $670 million during the next 10 years. The agency also said it will aim to coordinate air-pollution rules.

The U.S. Chamber of Commerce, the largest U.S. business group, said the EPA’s preliminary response to Obama falls short because of what it leaves out. While the administration is promoting Obama’s push for agencies to take a new look at their rules to get rid of burdensome and unnecessary mandates, the EPA plan “borders on the trivial,” Bloomberg Government analyst Rob Barnett said in a research note May 26.

Like the EPA, the Energy and Interior departments seem mainly focused on reducing paperwork and shifting to electronic reporting of certain data, according to Barnett.

The Chamber has said Obama’s EPA is issuing more major rules, or those costing industry at least $100 million, than any administration in at least three decades.

An EPA spokeswoman didn’t respond May 26 to several requests for comment.

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EU Says It Won’t Weaken Effects of Basel Rules in the Region

The European Union’s financial services chief said the region will respect the “level of ambition” of global rules on capital and liquidity endorsed by the Basel Committee on Banking Supervision.

Criticisms that the EU will not “properly” implement the measures, known as Basel III, are “unjustified and simply factually wrong,” Michel Barnier, the member of the European Commission dealing with banking regulation, said in an e-mailed statement May 27.

Barnier told lawmakers earlier this week that the EU would carry out a thorough analysis before deciding whether to implement a binding limit on bank indebtedness proposed by the Basel committee. Draft legislation prepared by the commission, and circulated to national finance ministries this month also says the EU is debating whether to apply some Basel rules.

Europe will implement Basel III: we have said it before and I confirm it to you today, the commission’s proposals to implement Basel III will respect the balance and level of ambition included” in the committee’s work, Barnier said May 27.

Global regulators in the Basel committee adopted the standards last year to mitigate the effects of future banking crises.

The commission’s draft proposals for implementing Basel III fall short of promising to seek a mandatory adoption of a so- called net-stable funding ratio, which aims to limit the mismatch between the duration of loans and deposits, to ensure that banks don’t face cash-flow shortages. Instead, it says the commission will “consider proposing” such a requirement “after an observation and review period.”

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Sarkozy Seeks Investor ‘Burden Sharing’ in Greek Endgame

French President Nicolas Sarkozy said bondholders need to share the burden of solving Greece’s fiscal woes, following leaders in Germany and Luxembourg in raising the prospect of a Greek debt restructuring.

Sarkozy called for a “formula” involving investors, adding to talk that Europe may engineer an extension of Greece’s debt-repayment schedule or press creditors to buy new bonds as old ones mature.

“Restructuring is a poorly used word,” Sarkozy told reporters May 27 after a Group of Eight summit in Deauville, France. “If it means that we can think of ways for the private sector, private operators, to take on a share of the burden, it’s not restructuring at all; then there are formulas, there is no problem, and we should then converge in that direction.”

Saddled with Europe’s heaviest debt load, Greece is seeking additional loans after last year’s 110 billion-euro ($157 billion) European-led package failed to dig it out of its fiscal hole. The European Central Bank has led the charge against a restructuring, warning of a domino effect in European markets.

In his first comments on a potential restructuring, Sarkozy gave no timeline for talks on pushing bondholders to take losses in Greece. A planned permanent European rescue fund would mandate some “private-sector involvement” as of mid-2013.

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Europe Imposes Repression Pimco Sees Going Global: Euro Credit

European governments are pursuing ways to dragoon the private sector into helping them fight the sovereign debt crisis in a strategy other over-leveraged nations may soon adopt.

Increasingly unable to deliver enough austerity or growth to slash debt, Portugal plans to “encourage” domestic banks and savers to maintain their debt exposure and Greece may soon follow. The cajoling is aimed at easing the financing of public debt even if it exposes creditors to greater risks and lower returns than they would otherwise accept. The investors may pay that price to avoid the greater pain of a restructuring.

European governments are struggling to persuade investors of their credit-worthiness 18 months since the debt turmoil began and a year since Greece tapped a bailout. Pacific Investment Management Co. says advanced economies, including the U.S., will introduce their own versions by pushing savers to accept returns below inflation, while Morgan Stanley says new regulations will force financial companies to increase their holdings of government securities.

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Qatar to Set Up Junior Market for Small, Medium-Sized Companies

Qatar plans to create a secondary market at the Qatar Exchange for small and medium-sized companies, the bourse said yesterday in a release on its website.

The May 25 decision by the Supreme Council for Economic Affairs and Investment would increase small and medium-sized companies’ “efficiency and enhance their role, so they will be able to occupy advanced positions regionally and internationally,” the Qatar Exchange’s vice chairman, Ahmad Al- Sayed, said in the statement.

The regulations for listing on the junior market will be “lighter” and more “flexible” than the regulations for listing on the main Qatar Exchange, the bourse said.

Compliance Action

Zillow With a Z Will Break NYSE Grip on One-Letter Tickers

Zillow Inc. wants to end the New York Stock Exchange’s monopoly on companies trading under a single letter.

Zillow, a real-estate website that filed last month to raise as much as $51.8 million by going public, disclosed this week that it applied for a Nasdaq Stock Market listing under the ticker Z. Assuming the application is approved, Zillow would be the first Nasdaq stock with a one-letter symbol.

Nasdaq-listed companies have been able to trade under a single letter since July 2007, when the Securities and Exchange Commission changed the regulations that governed ticker symbols. Before then, stocks could only have one to three letters on the NYSE or the former American Stock Exchange, now NYSE Amex.

Another company preparing for an initial public offering, Pandora Media Inc., plans to list its shares on the NYSE under the letter P. The Internet-music service would become the first company to use that ticker since September 2002, when Phillips Petroleum Co. combined with Conoco Inc. to form ConocoPhillips.

The Z ticker has been available since March 2003, when Foot Locker Inc. adopted FL as its symbol. Z had previously been used by Foot Locker and three predecessor companies -- Venator Group Inc., Woolworth Corp. and F.W. Woolworth Co. -- since 1925.

A Zillow spokeswoman, Charlynn Duecy, declined to comment on the decision to use the symbol. The Seattle-based company provides property-value estimates and displays real-estate listings on its site.

Rich Adamonis, a spokesman for NYSE Euronext (NYX), declined to comment. Nasdaq OMX Group Inc. (NDAQ)’s Frank De Maria didn’t return a telephone call and e-mail seeking comment.

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EU Carries Out Antitrust Inspections in Engines Sector

European Union antitrust regulators officials this week carried out unannounced inspections of companies active in the manufacturing, supply and distribution of piston engines mainly used for industrial applications.

The antitrust inspections took place on May 25 in several EU member states, the European Commission said May 27 in a statement without naming the countries or companies involved.

“The commission has reason to believe that the companies concerned may have engaged in anticompetitive practices,” according to the statement.

Abu Dhabi Hires Auditor to Check Saadiyat Labor Conditions

The Abu Dhabi government-owned Tourism Development & Investment Co. hired an international auditor to monitor contractors’ treatment of 11,000 laborers on Saadiyat Island, where branches of the Guggenheim and Louvre museums are being built.

TDIC appointed PricewaterhouseCoopers LLP as an independent monitor to oversee contractors and subcontractors working on its projects and their compliance with regulations protecting workers welfare, the company said in an e-mailed statement today.

The company said incidents of noncompliance reported in the audit “will be handed up to TDIC senior executives for action,” and “strict penalties” are in place to deal with breaches.

The Abu Dhabi Guggenheim, designed by Frank Gehry, is due to open after 2014 on Saadiyat Island, or Island of Happiness, as part of the emirate’s push to diversify its economy away from oil revenue. The island will house $27 billion of developments including a branch of the Louvre Museum that is set to open in 2013, the Zayed National Museum scheduled for 2014, and a New York University campus.

The Guggenheim project came under attack earlier this year when artists and curators threatened to boycott the project unless laborers’ rights were protected. Laborers in the United Arab Emirates, most of whom come from the Indian subcontinent, have complained of being forced to work long hours in scorching summer temperatures, and of having their passports confiscated and wages withheld by employers.

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Bilfinger Probed by U.S. Over Alleged Bribe Payments in Nigeria

Bilfinger Berger SE (GBF) said the U.S. Department of Justice is probing Germany’s second-largest construction company over alleged bribery payments in Nigeria.

Bilfinger is cooperating with the U.S. officials, Sascha Bamberger, a spokesman for the Mannheim-based company, said in an interview yesterday. He declined to provide more details as the case is pending. A related investigation in Frankfurt is examining seven current and former Bilfinger managers, according to the prosecutors’ spokeswoman Doris Moeller-Scheu.

Nigeria has been probing $180 million of alleged bribery payments by several companies to win a $6 billion liquefied natural-gas contract. Corruption charges against Julius Berger Nigeria Plc (JBERGER) were dropped as part of a settlement.

Courts

Nvidia Senior Analyst, Barai Capital Founder Plead Guilty

Sonny Nguyen, a senior financial analyst for Nvidia Corp. (NVDA), pleaded guilty to conspiracy to commit securities and wire fraud in a case that is part of the U.S. government’s largest crackdown of insider trading at hedge funds.

Nguyen told U.S. District Judge Jed Rakoff May 27 that he passed tips about Nvidia’s quarterly earnings before they were publicly announced to Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC, who is scheduled to go on trial before Rakoff on June 1. Assistant U.S. Attorney Avi Weitzman told Rakoff that Nguyen is cooperating with the government and will be a witness against Jiau.

Nguyen faces as long as five years in prison when he is sentenced by Rakoff on Nov. 29, Weitzman said.

Nguyen was permitted to remain free on $100,000 personal recognizance bond and allowed to travel between his home in California and New York. Rakoff told him to surrender his passport.

His lawyer, Douglas Schneider, and Weitzman declined to comment after court. Bob Sherbin, a spokesman for Nvidia, didn’t immediately return a voice-mail message seeking comment.

Separately, Barai Capital Management LP founder Samir Barai pleaded guilty May 27 to securities fraud and other charges just hours after Nguyen’s guilty plea.

Barai, 39, of New York, also pleaded guilty in Manhattan federal court to conspiracy to commit securities and wire fraud, and obstruction for impeding a federal grand jury probe by destroying evidence. U.S. Magistrate Judge Nathaniel Fox said Barai could face as long as 65 years in prison when he is sentenced Aug. 29.

Barai spoke into a microphone to describe his crimes, saying he conspired with two SAC Capital Advisors LP fund managers, Noah Freeman and Donald Longueuil, to violate federal securities laws. Freeman and Longueuil have pleaded guilty to insider trading charges in the case. Freeman is cooperating with prosecutors.

The cases are U.S. v. Barai 11-cr-00116, and U.S. v. Nguyen, 11-CR-161, U.S. District Court, Southern District of New York (Manhattan).

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Interviews

BlackRock’s Fink Says Europe Problems Go ‘Way Beyond’ Greece

Europe’s financial problems aren’t confined to Greece and a reorganization of the continent’s banking system is necessary, Laurence D. Fink, chief executive officer of BlackRock Inc. (BLK), said in a Bloomberg television interview yesterday.

“The European problem is way beyond Greece,” Fink said in the interview in Hong Kong. “Greece is the most immediate problem. I find it very difficult to restructure Greece without the understanding that we’re probably going to have to restructure Ireland and restructure Portugal.”

Inspectors from the EU, International Monetary Fund and European Central Bank are set to wrap up a review of Greece’s progress in meeting the terms of last year’s 110 billion-euro ($157 billion) bailout in coming days. The EU will then formulate its plan for further aid to Greece, which remains shut out of financial markets a year after the rescue package.

Many smaller banks in Europe will need to be recapitalized, said Fink. The largest banks on the continent are well capitalized, though devaluation of some of the sovereign credit will put stress on them, he added.

“The banking system in Europe owns all this debt,” Fink said. “If we restructure one country, we’re now basically putting huge capital stress on these banks. Before we restructure any country, we’re going to have to restructure the banking system in Europe.”

Europe is going to need a “giant TARP,” Fink said, referring to the Troubled Asset Relief Program that the U.S. introduced to rescue financial firms.

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To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.

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