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S&P Rules Redo, Carlyle Deal, Audit-Proxy Reforms: Compliance

May 15 (Bloomberg) -- The U.S. Federal Reserve may revise rules that currently favor Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, Fed Chairman Ben S. Bernanke said in a letter released yesterday by Connecticut Attorney General Richard Blumenthal.

The Fed is “conducting a broad review of our approach to using rating agencies,” Bernanke said in an April 13 letter written in response to a complaint from Blumenthal that the central bank’s rules unfairly favor the companies that helped cause the financial crisis.

“That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans,” Bernanke wrote.

The Fed currently only accepts collateral evaluated by the “major” nationally recognized statistical ratings organizations, or NRSROs, Bernanke said. Because “the number of NRSROs is expanding” the Fed is conducting its review, he said.

Blumenthal wrote Bernanke last month to complain about the Term Asset-Backed Securities Loan Facility, or TALF, a $1 trillion program aimed at restarting the market for asset-backed securities. The Fed mandated that for securities to be eligible for government support they must be rated by two or more “major” NRSROs.

Moody’s, S&P and Fitch helped fuel the global credit crisis by rating mortgage-backed securities AAA only to reduce their evaluation of the debt later, according to Blumenthal’s letters. The companies were paid by the issuers of the securities, not the investors.

The Connecticut attorney general wrote a second letter dated May 6 and released yesterday to U.S. Treasury Secretary Timothy Geithner asking him to urge the Fed to alter the credit rating requirement so as not to favor Moody’s, S&P and Fitch, all based in New York.

Bernanke, in his response, said the Fed “put a high priority on making the TALF available expeditiously while ensuring appropriate protection against credit risk for the taxpayer. Timely initiation of the facility has required that the Federal Reserve proceed with the set of NRSROs whose ratings it has customarily employed.”

The Fed chairman said that as part of its analysis of expanding the number of credit raters, it “is in the process of reviewing the full set of NRSROs that rate commercial mortgage-backed securities (CMBS) in connection with the Federal Reserve’s consideration of expanding TALF to include CMBS.”

He also agreed with Blumenthal that “the ratings methods employed by the major NRSROs for asset backed securities have exhibited significant shortcomings.”

For more, click here.

Carlyle to Pay $20 Million, Submit to Cuomo’s Code of Conduct

Carlyle Group agreed to end “pay to play” tactics in its public pension fund business and pay $20 million to resolve a corruption probe by New York Attorney General Andrew Cuomo.

Under the agreement, Carlyle will adopt Cuomo’s code of conduct, which bans investment firms from using placement agents or other third parties to negotiate with public pension funds to obtain investments. To avoid pay-to-play schemes, investment firms will be prohibited under the code from doing business with a public pension fund for two years after the firm makes a campaign contribution to a public official who can influence the fund’s investment decisions.

Carlyle executives will not be subject to any criminal liability, Cuomo said at a press conference. Carlyle is the second-biggest private equity firm after New York-based Blackstone Group LP. Founded by David Rubenstein with William Conway and Daniel D’Aniello in 1987, it manages about $85.5 billion in assets.

For more, click here.

SEC Adopts Post-Madoff Money-Manager Rules to Curb Ponzi Scams

The U.S. Securities and Exchange Commission moved to impose new rules on money managers to safeguard client holdings after Bernard Madoff’s Ponzi scheme cost investors as much as $65 billion.

SEC commissioners voted 5-0 yesterday on a proposal to subject about 9,600 investment advisers to annual surprise inspections by independent auditors. About 370 money managers with direct custody of client holdings also would face yearly compliance exams to ensure they have adequate procedures to protect assets.

“We are taking this action in response to major investment scams such as Madoff,” SEC Chairman Mary Schapiro said at a public meeting in Washington. “Our proposals would greatly enhance the independent checks on client assets.”

The SEC is trying to strengthen oversight after lawmakers criticized the agency for missing Madoff’s scheme. Schapiro is considering other reforms such as increasing use of professional examiners and overhauling the structure of the SEC enforcement division, which investigates and prosecutes fraud.

About 11,000 money managers are registered with the SEC and most keep client assets with an outside firm to prevent misuse.

Still, almost all investment advisers have custody of customer holdings “in one form or another” through an affiliate or because they have authority to withdraw funds, Schapiro said. Fewer than 200 money managers now undergo surprise audits, SEC staff told reporters after the meeting.

Under current SEC rules, money managers aren’t subject to surprise audits if an independent custodian sends account statements to clients detailing their holdings. Under the proposed rule, money managers who hire brokers to send out statements would also undergo unannounced examinations.

Some banks and money managers are permitted direct control over customer assets because they’ve registered with U.S. regulators as both an investment adviser and a brokerage. The SEC proposal would subject such firms to an “annual custody control examination” performed by an auditor regulated by the Public Company Accounting Oversight Board.

The rule would affect about 370 money managers and force them to hire accountants subject to PCAOB inspections. Madoff was audited by Friehling & Horowitz, an unregulated three-person firm in New City, New York.

For more, click here.

SEC Said to Consider 1 Percent Threshold for Board Nominations

The U.S. Securities and Exchange Commission may let shareholders who own 1 percent of the biggest companies nominate directors on corporate proxy statements, giving investors a new tool to overhaul boards at banks blamed for helping fuel the financial crisis.

The SEC will probably consider the proposal, which would apply to companies with market values exceeding $700 million, at a May 20 public meeting in Washington, said three people familiar with the matter. Investors would have to own a larger proportion of shares to nominate directors at smaller companies, said the people, who declined to be identified because the plans are still under discussion.

“This is going to strike chief executives of all public companies as confrontational,” said James Cox, a law professor at Duke University in Durham, North Carolina. “It gives shareholders a significant amount of leverage.”

The SEC is responding to investor complaints that directors are too cozy with management and failed to block decisions that led to $1.4 trillion of writedowns and credit-market losses at banks including Citigroup Inc. and Bank of America Corp. Efforts by labor unions and public pension funds to gain more authority over corporate boards have stalled amid company opposition.

A final decision on the proposal’s content hasn’t been made, SEC spokesman John Nester said. “We are committed to considering new rules that would remove barriers so that shareholders are able to exercise their right to nominate directors.”

Activist investors such as Carl Icahn and Nelson Peltz have waged successful proxy fights to get their nominees elected to boards of companies they say are underperforming. Under current SEC rules, the process requires distributing a separate ballot listing dissident nominees. Unions and pension funds say the process is too expensive for most investors to pursue.

The SEC plan would let shareholders, or groups of investors, who have held 1 percent of a company’s shares for one year nominate directors on the proxy. The threshold would be 3 percent for companies with market values of less than $700 million and 5 percent for companies below $75 million.

SEC officials are discussing whether to make clear that the proposed rules wouldn’t supersede state measures, the people said. Including such a provision may protect the SEC against lawsuits, Cox said.

The U.S. Chamber of Commerce, which represents more than 3 million businesses, argued in an April 28 letter to SEC Chairman Mary Schapiro that states, not the SEC, have authority over director elections. The nation’s biggest business lobby has been consulting with lawyers at Gibson, Dunn & Crutcher LLP, which represented the group in a successful 2006 challenge of an SEC rule that required mutual funds to name independent chairman.

The agency may get a boost from U.S. Senator Charles Schumer, a New York Democrat who plans to introduce legislation that clears the way for the SEC to “grant shareholder access to the corporate proxy,” according to an April 24 letter he sent to other lawmakers.

The SEC may stipulate in its proposal that investors can revise corporate bylaws that govern director elections, the people said. Doing so would give investors a pathway to nominating directors on corporate ballots in states with restrictive proxy rules.

For more, click here.

Frank Defends Government Role in Setting Executive Pay Standard

House Financial Services Committee Chairman Barney Frank said the federal government should play a role in setting executive-pay rules for public companies to reduce incentives that lead to excessive risk-taking.

Government involvement, including passing legislation, is appropriate “not in terms of dollars, but in terms of the rules,” Frank said yesterday in a Bloomberg Television interview. “I do think the dollar amount should be addressed, but not by the government, by the shareholders.”

President Barack Obama’s administration is discussing with federal regulators how to create new compensation limits for financial companies, including those that haven’t received money from the government’s Troubled Asset Relief Program. Frank said the rules should extend to non-financial companies.

For more, click here.

For a transcript of Peter Cook’s interview, click here.

JPMorgan’s TARP Warrants Cost About $1.13 Billion

JPMorgan Chase & Co., the second-biggest U.S. bank by assets, would have to pay $1.13 billion to buy back warrants that the U.S. government received as part of the Troubled Asset Relief Program, an analyst estimated.

JPMorgan’s warrants would cost the most of 39 banks analyzed by David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, using the Black-Scholes option-pricing model. The second-most expensive warrant repurchase would be Bank of America Corp., which Trone said in a note to investors May 14 would cost $1 billion. Wells Fargo & Co.’s warrants would cost $901 million.

The warrants for all 39 banks are worth about $5.7 billion, Trone estimated. As some banks prepare to begin repaying money they received from the TARP over the next few weeks and months, they will have to weigh whether to repurchase the warrants that could otherwise give the government a stake in the companies.

“While banks would prefer to buy back warrants to avoid potential government ownership, it is currently unclear whether the government would want to continue owning the warrants even after TARP repayment to benefit from the potential upside,” Trone wrote in yesterday’s note. “We believe an independent valuation expert will determine the price.”

Goldman Sachs Group Inc., whose executives have said since February that they want to repay the TARP money as soon as they can, would probably need to pay $685 million to repurchase the government’s warrants, Trone estimated. Morgan Stanley’s warrants would probably cost $770 million, he calculates.

Of the 39 banks Trone examined, only six had warrants that were “in the money,” meaning their exercise price was below their closing price on May 12, when the analysis was done. Those were Morgan Stanley, Goldman Sachs, First Horizon National Corp., Westamerica Bancorp., Sterling Bancshares Inc. and FirstMerit Corp.

For more, click here.

BankUnited Bidders Said to Seek Receivership Before Purchase

Bidders for BankUnited Financial Corp. are asking federal regulators to put the company into receivership before selling its assets, a step that could wipe out shareholders, people familiar with the matter said.

New York-based Goldman Sachs Group Inc. is weighing a bid with Toronto-Dominion Bank, people familiar with the matter said.

For more, click here.

PNC to Sell Shares for Capital: Stress-Test Scorecard

U.S. lenders are selling shares to raise $40.2 billion as they fill capital shortfalls or seek to repay the Treasury’s bailout fund after receiving results from the government’s stress test.

The test examining 19 of the largest U.S. financial companies showed 10 need $74.6 billion in additional capital to survive a longer, more severe recession. The banks have until June 8 to develop a capital-raising plan and Nov. 9 to implement it, regulators said in a statement last week.

PNC Financial Services Group Inc., the fifth-largest U.S. bank by deposits, said yesterday it may sell as many as 15 million shares. KeyCorp said yesterday it would give common stock to institutional investors in exchange for preferred shares to bolster capital after being told to raise $1.8 billion by bank regulators.

The KBW Bank Index, which includes 24 of the biggest U.S. lenders, has surged 15 percent since the end of April.

A related table tracks banks selling shares or converting preferred stock to bolster capital. It also lists lenders issuing debt without a Federal Deposit Insurance Corp. guarantee. Regulators are requiring banks to demonstrate they can issue debt to private investors before they are allowed to repay funds from the Troubled Asset Relief Program.

For the table, click here.

Schapiro May Implement Trace-Like Reporting for OTC Swaps

U.S. regulators may impose the same price reporting and transparency requirements on over-the-counter derivatives that reduced bank profits by almost half in the corporate bond market when the Trace system was adopted seven years ago, Matthew Leising of Bloomberg News reports.

Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, gives anyone with an Internet connection access to trading data for corporate bonds. The system, in full operation since February 2005, reduced the difference in prices that banks charge to buy and sell bonds by almost half.

Securities and Exchange Chairwoman Mary Schapiro said at a news conference May 14 in Washington that the SEC was considering Trace as a model for potential structural changes to improve policing of the $684 trillion OTC derivatives market.

Schapiro helped developed the Trace system in 2002 when she was president of the NASD, which was consolidated into Finra. Schapiro, Geithner and Dunn pledged at the news conference to work together on changes in the market.

For more, click here.

For TMX Group CEO Thomas Kloet on the plan, click here.

For more on yesterday’s press conference, click here.

Levin, Collins Proposed Bill to Regulate Swaps on May 4

U.S. Senators Carl Levin, a Michigan Democrat, and Susan Collins, a Maine Republican, proposed legislation on May 4 that would give regulators “immediate authority” to oversee swaps. The measure would repeal parts of the Commodity Futures Modernization Act, a 2000 law that barred government agencies from regulating over-the-counter derivatives.

The bill, which clears the way for direct regulation of swap agreements in future legislation, contains three key provisions, according to Judy Kim of Haynes & Boone, who has written on the subject of proper venue for filing swaps suits and regulator jockeying for swaps control.

It would lift bans on regulating swaps contained in the 2000 law, the Securities Act of 1933, the Securities Exchange Act of 1934 and the Commodity Exchange Act. It would give the SEC exclusive jurisdiction to regulate swaps traded on or cleared through securities exchanges and clearing agencies; the Commodity Futures Trading Commission exclusive jurisdiction to regulate swaps traded on or cleared through commodities and futures exchanges and clearing agencies; and general authority to federal financial regulators to oversee the swap market. It also would promote consistent treatment of swaps by requiring regulators to “consult, work and cooperate” with each other “to promote consistency in the treatment of swap agreements,” Kim said.

For more, click here.


Ex-Lehman Salesman Bowers Pleads Guilty in Insider Trading Case

A former Lehman Brothers Holdings Inc. salesman pleaded guilty to federal charges that he traded on stock tips gleaned from the wife of a colleague.

The guilty plea yesterday by Frederick Bowers in Manhattan federal court is the third since May 5 in the case. It follows pleas from Eric Holzer, a tax lawyer who worked at Paul Hastings Janofsky & Walker LLP, and Jamil Bouchareb, a former day trader.

Along with Bowers, Holzer and Bouchareb, prosecutors in December charged Matthew Devlin, a former Lehman salesman, with insider trading for stealing information from his wife, a Brunswick Group public-relations executive involved in corporate deals. Nina Devlin, who wasn’t accused of wrongdoing, was suspended from her job after her husband’s arrest.

For more, click here.

Credit Suisse Chief Dougan Owes Interest to Ex-Wife, Court Says

Credit Suisse Group AG Chief Executive Officer Brady Dougan must pay a year’s worth of interest on a late $7.5 million payment he made to his ex-wife under their 2005 divorce agreement, a Connecticut appeals court ruled.

Dougan, 49, and Tomoko Hamada Dougan, 52, were divorced on June 17, 2005, under an agreement requiring him to pay $7.83 million within 30 days and another $7.5 million by June 16, 2006, according to an opinion released by the appellate panel yesterday in Hartford. Dougan made the second payment 12 days late, triggering a 10 percent interest payment provision.

The dispute was over what period the interest should cover. Dougan paid $24,999.96 in interest, covering the 12 days he was late. In a 2-1 opinion, the court said he owed interest dating to the time of the divorce agreement, covering another year. The court reversed a ruling by the trial judge, who found the interest provision was unenforceable even though the parties had negotiated and agreed to it.

Dougan “had use of $7.5 million for one year,” according to the majority opinion by Judge C. Ian McLachlan. The bank CEO “could have made that payment at the time of the judgment. Instead, the plaintiff, an investment banker, had the use of the money with the knowledge that he would lose the benefit of no interest for that year if he failed to pay the defendant on time.”

Gaetano Ferro, an attorney for Tomoko Hamada Dougan, estimated in an interview that Dougan owes about $970,000 in interest based on the appeals court’s ruling, which sent the case back to the lower court to implement the findings.

Dougan became the first American to serve as sole CEO of Credit Suisse in May 2007 after heading the company’s investment bank for three years. He helped steer Credit Suisse clear of subprime mortgage investments before their collapse froze debt markets and led to $1.46 trillion in writedowns and losses at financial companies worldwide.

For more, click here.

Halliburton, KBR Accused of Bribery, False Claims

Halliburton Co. and KBR Inc., two of the largest contractors to the U.S. military, paid bribes, made false claims and operated as criminal enterprises for the better part of a decade, according to a shareholder lawsuit.

Executives of both companies engaged in a “reign of terror” that involved paying bribes in Nigeria, overcharging the U.S. government for services, accepting kickbacks, engaging in human trafficking and concealing a rape of an employee, according to the complaint filed yesterday by a pension fund.

For more, click here.

Satyam Win for Mississippi Pension Fund Boosts Plaintiff Role

Mississippi’s pension system, the 65th largest in the U.S., has emerged as one of the nation’s most aggressive institutional litigants against companies it says committed securities fraud.

The Public Employees’ Retirement System of Mississippi is involved in at least 21 active federal securities-fraud class actions. It’s a lead plaintiff, either on its own or as part of an investor group, in at least 11 of them, including its May 12 appointment to co-manage litigation against Satyam Computer Services Ltd., the software-services provider at the center of India’s biggest corporate fraud inquiry.

“It certainly is at the high end of public pension fund participation,” said Michael Perino, a securities-law professor at St. John’s University School of Law.

For more, click here.

Madoff Trustee Seeks to Block Money Transfers by Kingate Funds

The trustee liquidating Bernard Madoff’s defunct money management firm asked a judge to block two Kingate Management Ltd. funds from moving money during the trustee’s $255 million lawsuit against the funds.

Kingate Global Fund and Kingate Euro Fund are wrongfully trying to unfreeze their accounts in the Bank of Bermuda by filing a lawsuit in Bermuda Supreme Court, trustee Irving Picard said yesterday in a request for a temporary restraining order in U.S. Bankruptcy Court in Manhattan.

If the funds “are successful in the Bermuda action, then they will dissipate the funds making their recovery impossible, and the trustee will suffer irreparable harm,” Picard’s lawyer, Marc Hirschfield, said in the filing.

For more, click here.

Madoff Cases Impose Travel Restrictions on Luxembourg Lawyers

Francois Kremer, a lawyer at Luxembourg’s largest law firm, returned from an Easter trip to find an in-box filled with e-mails with a common name: Bernard Madoff. Thirty minutes later he was at a hearing involving UBS AG and a fund that went bust after investing with Madoff.

For more, click here.

SEC Filings, Interviews, Company News

UBS Shares Need to Rise Before State Sells Stake, Merz Says

UBS AG shares would need to rise to at least 18 francs before the Swiss government would consider selling its investment in the country’s biggest bank, Finance Minister Hans-Rudolf Merz said.

“We are convinced that we should exit this engagement as soon as possible,” Merz told reporters after the meeting with UBS Chairman Kaspar Villiger and the head of the banking regulator in Bern. “As soon as possible means when the share price is right and the bank is in a good position.”

The government can convert its 6 billion-franc ($5.4 billion) mandatory convertible bond, which it bought last year to help UBS split off risky assets, into shares starting June 9, when a lockup period expires. Villiger and UBS Chief Executive Officer Oswald Gruebel, 65, who both joined the company this year to help revive profit, said last month they aim to wean the bank off government support as quickly as possible.

For more, click here.

Tudor Investment Buys Financial Industry ETF, Filing Shows

Paul Tudor Jones’s hedge-fund firm Tudor Investment Corp. raised its holdings in the first quarter of an exchange-traded fund that tracks financial companies.

The fund bought 3.2 million shares of Financial Select Sector SPDR Fund, making the ETF its largest U.S. stock investment, according to a filing yesterday with the U.S. Securities and Exchange Commission. The ETF tumbled 30 percent in the quarter, compared with a 12 percent drop for the Standard & Poor’s 500 Index of U.S. stocks.

Tudor, based in Greenwich, Connecticut, also increased its stake in Semiconductor HOLDRs Trust depositary receipts, which invests in companies in the semiconductor industry. It bought 929,000 shares.

Tudor oversees $10.5 billion.

For more, click here.

Lehman Creditors May Recover $45 Billion From Assets

Lehman Brothers Holdings Inc., the bankrupt New York-based investment bank, may recover a total of $45 billion for its remaining creditors who are owed $200 billion to $250 billion, said Chief Executive Officer Bryan Marsal.

Within a year, Marsal plans to spin off an estimated $34 billion in real estate and private-equity properties to Lehman creditors, with an eye to taking the unit public eventually, he said in a phone interview yesterday. Marsal has raised about $11 billion in cash from the assets of Lehman in the eight months since it filed for bankruptcy, he said.

Creditors aren’t likely to see any cash from Lehman’s real estate anytime soon. Because the properties couldn’t be sold for much, creditors were given an equity stake they can hold until prices rise, Marsal said.

“It’s a way to intelligently manage a recovery as opposed to fire sale-ing it,” he said.

In a similar way, Lehman spun off its money management business after failing to find a buyer who would pay enough. The deal transferred 51 percent of the stock to the executives of Neuberger Berman Inc., its biggest investment management unit, for no cash. Lehman retained 49 percent of the equity in the “hope” that the value will rise later, Marsal said.

For more, click here.

For Weil Gotschal’s delay on fee bid, click here.

Target May Have ‘No Simple Answer’ to Real Estate, Nominee Says

Target Corp. may not have a “simple answer” for maximizing the value of its property, according to the real estate executive who is one of hedge-fund manager William Ackman’s nominees to the retailer’s board.

For more, click here.

Elliott’s Singer Seeks Credit Swaps Payday in Failing Companies

Elliott Management Corp., the hedge fund that almost pushed the government of Peru into default in 2000, is now seeking to profit from the failure of distressed companies.

About 11 percent of Elliott’s $13 billion of assets were in so-called basis trades at the end of the first quarter, meaning it bought bonds and credit-default swaps that protect against losses on the debt, according to a report dated April 29 sent to investors and obtained by Bloomberg News.

For more, click here.

Mitsubishi UFJ Cancels NikkoCiti Trust Acquisition

Mitsubishi UFJ Financial Group Inc. canceled an agreement to buy a Citigroup Inc. banking unit after failing to purchase other Japanese assets from the U.S. bank.

Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s biggest lender, scrapped the commitment it made in December to buy NikkoCiti Trust & Banking Corp., it said yesterday in a statement on its Web site. The Tokyo-based bank cited a change in strategy and circumstances for the decision, without elaborating.

For more, click here.

Comings and Goings

Chrysler Asks Permission to Cancel 789 Dealer Agreements

Chrysler LLC asked court permission to cancel 789 car dealership agreements, many in the suburbs of major U.S. cities, a step it called critical to its future.

For more, click here.

BlackRock High-Yield, High-Risk Debt Managers Resign From Firm

BlackRock Inc., the largest publicly traded U.S. asset manager, said Mark Williams and Kevin Booth, two managing directors who ran high-yield debt portfolios, resigned.

Williams ran the New York-based company’s bank-loan investment team and was co-head of its leveraged finance business. Booth was co-head of the firm’s high-yield team and also co-ran the leveraged finance business, according to regulatory filings.

James Keenan, Mitchell Garfin and Derek Schoenhofen are now managing the BlackRock High Yield Bond Portfolio, according to a May 8 filing with the U.S. Securities and Exchange Commission. Leland Hart and Adrian Marshall are now the portfolio managers for the BlackRock Senior Floating Rate Fund, which invests in high-yield, high-risk loans, according to another regulatory filing that day from the $1.3 trillion investment firm.

For more, click here.

Kurt Froehlicher Leaves Energy Trading Team at Valartis Bank

Kurt Froehlicher, managing director of the energy team at Valartis Bank AG, has moved to another position at the Pfaeffikon, Switzerland-based bank.

Froehlicher will take up the position of head of brokerage, trading and services at Valartis Bank, according to Huy Hoang, a managing director and the head of energy trading.

Citigroup Hires Four Staff for Foreign-Exchange Team in Japan

Citigroup Inc., the world’s fifth-largest currency trader, is hiring four staff to increase its foreign-exchange presence in Japan, a company official said.

The last of the four, Justin Geaney, will join Citibank Japan Ltd. as vice president for e-commerce on May 18, from Royal Bank of Scotland Plc in Tokyo, said Bapi Maitra, managing director and head of foreign exchange at Citibank Japan, a unit of New York-based Citigroup.

The company has also recently hired Toshikatsu Furumi from Barclays Plc as head of investor sales, Yoichi Tasaki from Societe Generale SA for its corporate sales division, and Tomosuke Ezoe from Sumitomo Mitsui Banking Corp. as assistant vice president in charge of bank sales, Maitra said in an interview with Bloomberg News.

Bank of America’s Asia-Pacific M&A Head Desai Said to Resign

Bank of America Corp.’s head of Asia-Pacific mergers and acquisitions Kalpana Desai is leaving after 11 years with Merrill Lynch & Co., which the U.S. bank bought this year, two people with knowledge of the matter said.

Desai joined Merrill Lynch in 1998 and rose to become one of the most senior-ranking women at the firm.

JPMorgan’s China Chairman Charles Li Said to Quit After 6 Years

JPMorgan Chase & Co. China Chairman Charles Li is leaving after six years with the New York-based firm, two people with knowledge of the matter said.

Li, 48, will quit the investment banking industry and take up a senior position with a Hong Kong company, the people said, asking not to be identified before an announcement is made. He plans to leave around September, one of the people said.

NY Governor Fires Six From Ethics Panel, Appoints Cherkasky

New York Governor David Paterson dismissed all six gubernatorial appointees on the state ethics panel, after an Inspector General’s report said they failed to contain leaks last year in an investigation of then-Governor Eliot Spitzer.

Paterson also asked for the resignations of Commission on Public Integrity Executive Director Herbert Teitelbaum and General Counsel Barry Ginsberg.

The governor appointed as commission chairman Michael Cherkasky, 59, a former chairman and chief executive officer of Marsh & McLennan Cos. He is now president and chief operating officer of U.S. Investigations Services, which Paterson described as the largest supplier of security investigations for the U.S. government.

For more, click here.

International Compliance

Krugman Says Global Economy Faces Japanese-Style ‘Lost Decade’

The world economy may face near-stagnation for 10 years similar to Japan’s “lost decade” in the 1990s, Nobel Prize-winning economist Paul Krugman said.

“The world as a whole looks quite a lot like Japan during its lost decade,” Krugman, 56, said at a forum yesterday in Taipei. “I am very optimistic about the world in, let’s say, 2030; it’s the next 10 years or so that have me worried.”

China Construction Bank Says Bank of America Sold Stake

China Construction Bank Corp., the world’s second-largest lender by market value, said Bank of America Corp. raised $7.3 billion selling part of its stake to investors including China Life Insurance (Group) Co.

For more, click here.

To contact the reporter responsible for this report: Lisa Brennan in New York at

To contact the editor responsible for this report: David E. Rovella at

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