DealBook: Credit Suisse Is Said to Be Facing Double-Barreled Inquiries

After years of false starts and stops, the Justice Department is nearing the end of an investigation into the role Credit Suisse played in hiding American wealth offshore. But at the same time, a new investigation is beginning, threatening to entangle the giant Swiss bank for even longer.

The biggest danger to Credit Suisse, suspected of sheltering billions of dollars for American clients who evaded taxes, comes from federal prosecutors. While the Justice Department has considered a so-called deferred-prosecution agreement that would suspend any indictment in exchange for a large cash penalty and other concessions, it is also pushing for a guilty plea from a Credit Suisse subsidiary, people briefed on the case said, a punishment in some ways harsher that banks generally avoid in all but the gravest cases. The cash penalty, the people said, is expected to exceed the $780 million that Switzerland's largest bank, UBS, paid to resolve a similar case in 2009.

The Credit Suisse case, the outcome of which depends on settlement talks in the coming weeks, will most likely strike a blow at overseas tax shelters, a hallmark of Switzerland's banking system. And while the case will resolve a major liability for Credit Suisse, it won't put the shelter problem to rest.

Just as the criminal inquiry is reaching its conclusion in Washington, a civil investigation has started from scratch in New York. Benjamin M. Lawsky, New York State's top financial regulator, has requested documents from Credit Suisse and is expected to demand additional records this week, two people briefed on that case said.

Mr. Lawsky, who will examine whether Credit Suisse lied to New York authorities about engineering tax shelters, has also petitioned a Senate subcommittee for a trove of internal Credit Suisse documents.

The subcommittee questioned bank executives, including Brady W. Dougan, the bank's American chief executive, at a hearing in February, and produced a scathing report exposing "a classic case of bank secrecy." In late March, the Senate agreed to release the internal Credit Suisse documents to "a state regulatory agency." The people briefed on the case, who were not authorized to speak publicly, identified that agency as Mr. Lawsky's Department of Financial Services.

The developments, coming on the heels of Credit Suisse settling a related civil case with the Securities and Exchange Commission, might inject some competition into the investigative process. Mr. Lawsky, himself a former federal prosecutor, has squeezed settlements out of banks, as his Washington colleagues continued to investigate. And while the Justice Department's investigation has evolved in fits and starts over several years, Mr. Lawsky's agency has churned out cases in a matter of months.

The heightened scrutiny of Credit Suisse, from the Justice Department and Mr. Lawsky, might quiet critics in Congress like Senator Carl Levin, the Michigan Democrat who led the subcommittee's investigation into Credit Suisse and complained that the United States government had let "them get away with it."

The escalating Credit Suisse probe, along with some recent shifts in international law, might also provide momentum to the government's uneven effort to collect taxes and punish the banks involved. While Credit Suisse will not be the first bank to settle with American authorities, a sweeping government response could send a message of deterrence to the shadowy world of Swiss bank secrecy.

A spokesman for Mr. Lawsky declined to comment, as did spokesmen for Credit Suisse and the Justice Department.

In the Senate subcommittee hearings in February, Credit Suisse executives apologized for the misconduct. But they also argued that the problems stopped in 2008 and were contained to a few low-level rogue bankers. The bank, which said it voluntarily adopted a number of controls against tax evasion, reported that there was no evidence that executive management knew of the problems.

"Some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management," Mr. Dougan testified at the hearing. "While that employee misconduct violated our policies and was unknown to our executive management, we accept responsibility for and deeply regret these employees' actions."

Like watches and chocolate, private banking is a staple of the Swiss economy. And for decades, as wealthy Americans concealed their assets through clandestine accounts, United States authorities took scant action.

That changed in the final years of the George W. Bush administration. Name a Swiss bank, and it was suspected of harboring American assets.

UBS was first in line to settle. Through a 2009 deferred-prosecution agreement, the bank struck a $780 million settlement and produced the names of about 4,700 accounts unknown to the Internal Revenue Service. The I.R.S. also formed a program that provided Americans immunity from prosecution in exchange for divulging offshore accounts — an effort that prompted some 43,000 taxpayers to pay nearly $6 billion in taxes and penalties.

All told, the Justice Department has charged 73 account-holders and 35 bankers, and has identified 14 banks as suspects. In 2011, federal prosecutors indicted seven Credit Suisse bankers for abetting tax evasion.

But the investigation into Credit Suisse dragged on. The quirks of international law prolonged the inquiry, requiring Swiss courts to review Credit Suisse documents before releasing them to the Justice Department.

Ultimately, the Justice Department gained access to many of the documents and interviewed bank employees. And by the time the Senate subcommittee convened its hearing in February, the Justice Department was closing in on a case.

Bracing for a settlement, the bank announced last week that it had set aside roughly $528 million for legal expenses. Credit Suisse, which in February paid about $200 million to settle with the S.E.C., said it had earmarked much of the new provision to pay any new penalty to the Justice Department. (In a separate matter, in late March the bank agreed to an $885 million settlement to resolve claims that it sold questionable loans to Fannie Mae and Freddie Mac.)

And Mr. Lawsky's case could bring a fine of its own. In its investigation, the New York State Department of Financial Services is expected to examine what role, if any, the bank's New York employees played in creating the tax shelters. The agency, the two people briefed on the case said, is also seeking to recover any lost tax revenue for New York.

The subcommittee's report inspired Mr. Lawsky's inquiry, the people said. After reading the report, aides to Mr. Lawsky contacted the subcommittee's lawyers to seek some of the underlying evidence in their investigation: more than 100,000 internal documents from Credit Suisse and transcripts of interviews of nearly two dozen sources.

The materials, detailed in an inch-thick report that reads at times like a John le Carré spy novel, laid bare what the subcommittee described as a brazen attempt to dodge taxes.

The subcommittee's report accused the bank of helping thousands of United States clients to set up Swiss accounts worth as much as $12 billion, though Credit Suisse has said the sum of unreported income is far lower and the Justice Department has cited a $4 billion figure when indicting Credit Suisse bankers. The effort spanned at least seven years, the report said, from 2001 to 2008.

The report also detailed the lengths that Credit Suisse bankers took to cater to their American clients. They established an office in the Zurich airport as convenience to American customers. They opened accounts in the name of shell companies. And to limit a paper trail, the bankers would travel to the United States to meet with clients.

On one occasion, a banker visited a client at the Mandarin Oriental Hotel. Over breakfast, the banker handed his client account statements in the pages of Sports Illustrated.

A version of this article appears in print on 04/07/2014, on page B1 of the NewYork edition with the headline: Credit Suisse Is Said to Be Facing Double-Barreled Inquiries .

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Bits Blog: Mozilla Chief, a Foe of Gay Marriage, Steps Down

Updated | In Silicon Valley, where personal quirks and even antisocial personalities are tolerated as long as you are building new products and making money, a socially conservative viewpoint may be one trait you have to keep to yourself.

On Thursday, Brendan Eich, who has helped develop some of the web's most important technologies, resigned under pressure as chief executive of Mozilla, the maker of the popular Firefox web browser, just two weeks after taking the job. The reason? In 2008, he donated $1,000 in support of Proposition 8, a California measure that banned same-sex marriage.

Once Mr. Eich's support for Proposition 8 became public, the reaction was swift, with a level of disapproval that the company feared was becoming a threat to its reputation and business.

For example, OkCupid, a popular online dating service, set up a letter, visible to those visiting its site on Firefox, that castigated the chief executive. "Mozilla's new CEO, Brendan Eich, is an opponent of equal rights for gay couples," the letter said. "We would therefore prefer that our users not use Mozilla software to access OkCupid."

The letter, which has since been removed, concluded that "those who seek to deny love and instead enforce misery, shame and frustration are our enemies, and we wish them nothing but failure."

Mr. Eich's departure from the small but influential Mountain View, Calif., company highlights the growing potency of gay-rights advocates in an area that, just a decade ago, seemed all but walled off to their influence: the boardrooms of major corporations.

But it is likely to intensify a debate about the role of personal beliefs in the business world and raise questions about the tolerance for conservative views inside a technology industry long dominated by progressive and libertarian voices.

Andrew Sullivan, a prominent gay writer and an early, influential proponent of making same-sex marriage legal, expressed outrage over Mr. Eich's departure on his popular blog, saying the Mozilla chief had been "scalped by some gay activists."

"If this is the gay rights movement today — hounding our opponents with a fanaticism more like the religious right than anyone else — then count me out," Mr. Sullivan wrote.

A number of gay rights advocates pointed out that their organizations did not seek Mr. Eich's resignation. Evan Wolfson, a leading gay marriage advocate, said that this was a case of "a company deciding who best represents them and their values. There is no monolithic gay rights movement that called for this."

Throughout the controversy, Mr. Eich, who is in his early 50s, refused to repudiate his donation, even after being asked personally to do so in a meeting with two prominent software developers, who said they would no longer create apps for Firefox.

While he was being portrayed as an opponent of gay people, Mr. Eich said he believed in inclusiveness within Mozilla and had never discriminated. A different issue was at stake, he said — the right not to be judged for one's private beliefs. This right was vital to a collaborative software project like the Firefox browser, he said, because it harnesses the work of volunteers and contributors from around the world in a competition with large corporations like Google and Microsoft.

"If you can't leave your other stuff at the door you're going to break into other groups," he said in an interview. "We have to be one group."

Mr. Eich said he had a number of gay supporters within Mozilla who didn't agree with his personal beliefs, but supported him as chief executive. He said the issue of his donation came to light in 2012 at a conference. When a friend who would have been barred from marrying by the successful Proposition 8 effort learned of his donation, "I could see the pain in her eyes. I'm sorry that people felt a lot of pain," he said. Proposition 8 has since been struck down in federal court.

The conflicting values between free speech and gay rights were a riddle that was hard for many Mozilla officials to solve, and there is no indication that Mr. Eich behaved in a biased manner at work.

In one blog post, Geoffrey MacDougall, the head of development for Mozilla, described the confusion within the organization. "The free speech argument is that we have no right to force anyone to think anything," he wrote. "We have no right to prevent people from pursuing their lives based on their beliefs."

At Mozilla, embracing various viewpoints holds particular meaning. It was one of the pioneers of a type of software development, called open source, that is now widely used in the technology industry. Mr. Eich helped found the company in early 1998 after working at Netscape, where he developed the JavaScript programming language commonly used on websites.

Earlier this week, Mr. Eich said that he would not resign and asked Mozilla's critics to give him time to show that he could separate his personal views from the way his company conducts business. But Mozilla announced his abrupt departure in a blog post two days later.

In a subdued post on his personal blog on Thursday, Mr. Eich wrote about several programming issues he hopes to solve and said he had resigned as chief executive at Mozilla and hoped to travel with his family. He did not directly address the controversy.

"We didn't act like you'd expect Mozilla to act," wrote Mitchell Baker, the executive chairwoman of Mozilla. "We didn't move fast enough to engage with people once the controversy started. We're sorry. We must do better."

A version of this article appears in print on 04/04/2014, on page A1 of the NewYork edition with the headline: Mozilla's Chief Felled by View On Gay Unions .

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DealBook: Crime Inquiry Said to Open on Citigroup

Just as Citigroup was putting a troubled past of taxpayer bailouts and risky investments behind it, the bank now finds itself in the government's cross hairs again.

Federal authorities have opened a criminal investigation into a recent $400 million fraud involving Citigroup's Mexican unit, according to people briefed on the matter, one of a handful of government inquiries looming over the giant bank.

The investigation, overseen by the F.B.I. and prosecutors from the United States attorney's office in Manhattan, is focusing in part on whether holes in the bank's internal controls contributed to the fraud in Mexico. The question for investigators is whether Citigroup — as other banks have been accused of doing in the context of money laundering — ignored warning signs.

The bank, which also faces a parallel civil investigation from the Securities and Exchange Commission's enforcement unit, hired the law firm Shearman & Sterling to lead an internal inquiry into the fraud, said the people briefed on the matter, who spoke only on the condition of anonymity. At a meeting last month, the bank's lawyers presented their initial findings to the government.

The bloom of activity stems from Citigroup's disclosure in February that its Mexican unit, Banamex, uncovered an apparent fraud involving an oil services company.

The disclosure — that at least one Banamex employee processed falsified documents that helped the oil services company obtain a loan that cannot be repaid — generated immediate interest from federal authorities. But the decision by the F.B.I. and prosecutors to open a formal investigation, a move that has not been previously reported, has now officially drawn a faraway crime to Citigroup's doorstep.

The case represents another setback for the bank, which has also come under fire from regulators in Washington. Last week, the Federal Reserve rejected Citigroup's plan to increase its dividend. The rebuke embarrassed the bank and raised questions about the reliability of its financial projections.

The scrutiny coincides with Citigroup's recent announcement that it faces a separate, and perhaps more threatening, investigation from federal prosecutors in Massachusetts. The prosecutors, who have sent subpoenas to Citigroup, are examining whether the bank lacked proper safeguards against clients laundering money. Citigroup, the people briefed on the matter said, has hired the law firm Paul, Weiss, Rifkind, Wharton & Garrison to handle that case, which stems from the prosecutors' suspicion that drug money was flowing through an account at the bank.

Together, the developments threaten to complicate Citigroup's relationships with government authorities, who had previously lost faith in the bank after it required two bailouts and came to epitomize Wall Street's role in the financial crisis. While Citigroup's chief executive, Michael L. Corbat, has repaired ties to regulators using a blend of contrition and self-accountability, the latest investigations could test those improvements.

Still, the government scrutiny could be short-lived. Citigroup has not been accused of wrongdoing, and prosecutors might ultimately close the cases without extracting fines or imposing charges, which typically come only if wrongdoing was pervasive.

And Citigroup is sharing the spotlight with banks like JPMorgan Chase, whose missteps, including a $6.2 billion trading loss in London, make its own problems seem arguably manageable by comparison.

A Citigroup spokesman declined to comment. In a letter to shareholders last month, Mr. Corbat said: "We continue to investigate what took place in Mexico and are working to identify any areas where we need to strengthen our controls through stronger oversight or improved processes."

Spokesmen for both the F.B.I. in New York and Preet Bharara, the United States attorney in Manhattan, declined to comment.

In a speech this week, however, Mr. Bharara emphasized the importance of investigating not only individual bankers and traders, but also the Wall Street firms that employ them.

"Effective deterrence sometimes requires that institutions be punished, because sometimes it is the institution that has failed," he told a conference of Wall Street lawyers.

At first glance, Citigroup appeared to be the victim of the fraud involving the Mexican oil services company Oceanografía. After all, the bank lost millions of dollars.

But the F.B.I. and prosecutors, the people briefed on the matter said, are questioning whether Citigroup was equal parts victim and enabler.

For one, it is unclear whether the wrongdoing at Citigroup was actually limited to a single Banamex employee, as early reports indicated. The authorities, according to the people briefed on the matter, are investigating whether the scheme involved co-conspirators at the bank's offices in the United States.

Prosecutors also tend to weigh whether an episode was isolated or illustrative of a broader problem. In the case of Banamex, the fraud was the latest in a series of questionable loan deals for the Citigroup unit. Bank employees say that Banamex, which accounts for 13 percent of Citigroup's revenue, undergoes the same level of oversight as any other business arm. But others inside the bank say that the Mexican unit has always had some degree of autonomy from New York.

And even if Oceanografía defrauded Citigroup — and the fraud was indeed an "isolated incident," as the bank has said — Citigroup may have lacked the proper controls to thwart the scheme at its inception.

Under the law, banks must report suspicious activity and set up compliance programs to prevent money laundering and other illegal activity. When banks fail to do so, it could amount to a criminal or civil violation, depending on the severity of the problem. For a breakdown to be criminal, prosecutors would typically need to show that the bank willfully ignored warning signs of the fraud.

With the focus on bank controls, the Banamex case and the separate money-laundering investigation in Massachusetts echo other recent Wall Street investigations. Prosecutors have claimed that lax controls enabled drug trafficking, money laundering and business deals with blacklisted countries like Iran and Cuba. In 2012, federal prosecutors penalized HSBC for turning a "blind eye to money laundering that was happening right before their very eyes."

The HSBC case, defense lawyers say, provided a template for prosecutors to go after not just a bank's actions, but its inaction as well.

In January, Mr. Bharara's office announced a criminal case that extracted a $1.7 billion penalty from JPMorgan Chase over accusations that it ignored warning signs about Bernard L. Madoff's Ponzi scheme. Mr. Madoff's firm used JPMorgan as its primary bank for more than two decades.

At Banamex, Oceanografía became one of the bank's largest corporate clients.

Under a short-term lending arrangement, Banamex would advance money to Oceanografía, whose existence hinged almost entirely on government contracts. Banamex issued the loans with the understanding that Oceanografía had received contracts from the state-owned oil monopoly Pemex. Once the work was completed, Pemex would repay the loan to Banamex.

But this year, Mexican authorities suspended Oceanografía from obtaining additional government contracts for several months. Shortly after, Banamex discovered a fraud.

There was valid documentation for $185 million of work, Citigroup said, but Banamex had advanced Oceanografía a total of $585 million. Some of Oceanografía's invoices, Citigroup said, "were falsified to represent that Pemex had approved them. A Banamex employee processed them."

Mexican authorities, including lawmakers and the attorney general, have directed their own investigations into the fraud.

Citigroup has said it has worked with the Mexican authorities "to initiate criminal actions" that may allow it to recover some of the missing money.

"We are exploring every available option to recoup the misappropriated funds and we will be relentless in pursuing their recovery," Mr. Corbat said in a memo to employees. "All will be held equally responsible and we will make sure that the punishment sends a crystal-clear message about the consequences of such actions."

Jessica Silver-Greenberg contributed reporting.

A version of this article appears in print on 04/03/2014, on page A1 of the NewYork edition with the headline: Crime Inquiry Said to Open On Citigroup .

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Sports: Live Analysis: Yankees Open Season in Houston

The Yankees could not recover from C.C. Sabathia's ugly start and lost the season opener, 6-2., to the Houston Astros. Continue reading for highlights and analysis.

10:08 P.M. Yankees Lose Opener, 6-2

The Yankees could not recover from Sabathia's ugly start and lost the season opener, 6-2.

Was there any good news tonight? Well, there are 161 more games to play, so that's good.

No Yankees got hurt, including Jeter, who was hit in the left forearm by a pitch in the first inning.

Sabathia did settle down after yielding six runs in the first two innings, striking out five in the four scoreless innings that followed.

The bullpen was very sharp, with Betances and Vidal Nuno striking out a combined five of six batters.

The only runs came in the eighth inning, two of them on singles by McCann and Teixeira.

The Yankees will try again on Wednesday night with Hiroki Kuroda making the start against Jarred Cosart.

9:47 P.M. Yankees Get on the Board, Trail 6-2

Ellsbury led off the inning with a walk and Jeter followed with his first hit of the season, a single to right field. Ellsbury eventually scored on a McCann single, and Teixeira nudged the ball through the left side of the shift to bring home Jeter. But before hopes got too high, Soriano grounded into an inning-ending double play.

9:34 P.M. 'Killer B' Sighting

Yankees fans will remember Dellin Betances as one of the "Killer B's," the trio of Yankees pitching prospects (along with Manuel Banuelos and Andrew Brackman) that were highly thought of just a few years ago.

Brackman is no longer with the Yankees and Banuelos is recovering from Tommy John surgery, but Betances is still very much relevant. Betances, once thought of as a possible future anchor of the rotation, reinvented himself as a relief pitcher this past spring and earned a spot in the bullpen.

Betances just showed us why, striking out two in a perfect seventh inning, mixing his four-seam fastball (in the high-90s) with a nasty knuckle curve. The Yankees bullpen has question marks, so there's room for Betances to play a major role.

9:24 P.M. Astros Lead, 6-0, Seventh Inning Stretch

Johnson was retired easily on a dribbler back to the mound.

Sabathia's night also appears to be over. He managed to settle down after two scary innings, which gives Girardi something positive to say during the postgame press conference.

9:20 P.M. Yankees Finally Threatening

The Yankees have their first major threat of the game. The bases are loaded with two outs, and Kelly Johnson is stepping up. Feldman is finished after a stellar first start, but a walk, hit batsman and a single to Teixeira led to his exit.

Teixeira, who has reached base twice now (walk and single), is one of the many question marks in the Yankees' infield as the former All-Star is attempting to come back from wrist surgery.

"Everyone can go out after major surgery and say they feel fine," Teixeira said earlier this spring. "But you never really know it until you go out there."

Last season, the Yankees sorely missed the player who averaged 34 home runs and 106 runs batted in over his first four seasons with the club and whose defense is second to none at first base.

Teixeira's numbers this spring were anything but impressive, with only three hits in 35 at-bats. But more importantly, he did not suffer any setbacks regarding his health. Yankee fans will also be quick to remind skeptics the Teixeira is a notoriously slow starter.

9:02 P.M. Houston Fans Have Not Forgiven Beltran

I've been a bit surprised to hear the reaction that Beltran has gotten by the Houston fans. He played for the Astros for just a few months in 2004, but almost carried them to the World Series that fall, batting .435 with 8 home runs 14 runs batted in during the playoffs. But he chose to sign with the Mets that following season, and the Astros fans are still angry about that, apparently.

Beltran still has the only Yankees hit here in the seventh inning, Astros still lead 6-0.

8:54 P.M. At Least Jeter Looks Good on Defense

For any Yankees fans looking for good news on this bleak opening night, Jeter has looked like his old self playing the field. There have not been any highlight reel moments, but on the balls hit to him tonight, he is having no issues with his footing and making strong throws. Exciting, I know. But it is encouraging.

8:30 P.M. Yankees Get First Hit, Still Looking for First Run

The first Yankees hit of the 2014 season came off of the bat of Carlos Beltran, who signed a three-year, $45 million contract with the Yankees this off-season.

For Beltran, who will turn 37 on April 24, this is his second tour with a New York club, so he knows what to expect playing in a big market.

"I learned that you have to be strong mentally," he said this spring. "Don't worry about what people say about you, what you hear on TV, read in the newspaper. I came from a small-market team, the Kansas City Royals, so that first year in New York was hard for me. I was too nice. I tried to accommodate everybody. I forgot about the reason I was brought to New York — to play baseball. Instead, I tried to please people."

His hit did not lead to a run. The Yankees had two on with two out, after a Teixeira walk, but Feldman got Soriano out swinging. They still trail, 6-0, heading into the bottom of the fourth.

7:59 P.M. Astros Lead 6-0 After Two Innings

It was not supposed to start like this for Sabathia.

The Astros tacked on two more runs in the second inning, one on a solo homer by L.J. Hoes and another on a single by Altuve.

While it's true Sabathia had the worst season of his career in 2013, including his highest earned run average (4.78) and his lowest winning percentage (.519), he did finish the season strong, or at least better, with a 3.90 E.R.A. in September. He also didn't allow a home run over his last four starts.

The improvement came after Sabathia rediscovered some old things and figured out some new things, like how to get by with a fastball in the lower 90s rather than mid-to-high 90s. That success carried over to the spring for Sabathia.

"I feel unbelievable," he said recently. "All the work in the off-season this spring has really paid off. My arm feels great, my knees feel fantastic. I have no complaints. I feel really strong and ready to start the season."

Maybe that will translate to success this season, eventually.

7:46 P.M. Who Are These Astros Anyway?

The differences between the Yankees and Astros are stark and obvious. Most glaring is in team payroll, with Houston having the lowest in the majors ($45 million) and the Yankees the second-highest ($204 million).

After finishing with the worst record in baseball (51-111), the Astros made a few changes, trading for the outfielder Dexter Fowler and signing starting pitcher Scott Feldman.

Feldman, tonight's starting pitcher, is earning more than a quarter of the team's total payroll for 2014 ($12 million) after going 12-12 with a 3.86 E.R.A. with the Chicago Cubs and Baltimore Orioles.

But the thing to know about the Astros is that they are loaded with young talent, with their best players waiting in the wings. Their top prospects include: shortstop Carlos Correa, first baseman Jon Singleton, starters Mark Appel and Mike Foltynewicz, and outfielders Delino DeShields Jr. and George Springer.

"Nobody knows when this team's going to turn the page and start winning a lot of ballgames, but everything is headed in that direction right now," Feldman said this spring. "We've got the No. 1-rated farm system. You know when that wave of talent reaches this level, they're going to be here for a while."

The future looks bright, and so does the present. They lead the Yankees, 4-0, heading into the bottom half of the second.

Has Andy Pettitte come out of retirement yet?

— Harvey Araton (@HarveyAraton) 1 Apr 14

7:35 P.M. A Disastrous Start for Sabathia, Astros Lead 4-0

Sabathia has had a very rough first inning, allowing a long lead-off double to Dexter Fowler, who came around to score on a single by Jose Altuve.

But it got much worse from there. Altuve stole second and ended up at third on a wild throw by McCann and eventually scored on a fielder's choice. Then, Jesus Guzman launched one over the left-center field wall.

lets recap: Jeter hit by pitch in his first at-bat, CC gives up long 2B in Stros first AB, Yankees have 1 error and 2 more def. miscues…

— David Waldstein (@DavidWaldstein) 1 Apr 14

7:19 P.M. Jeter Starts Last Season By Getting Plunked

Jeter got a nice hand from the Houston crowd before the first at-bat of his last season. The mood quickly shifted after Jeter was hit on his left forearm with the second pitch. He did not appear to be seriously injured as he stayed in the game. But he was stranded on base as the three big-name additions, Ellsbury, Beltran and McCann, all made outs.

Jeter's spring numbers were weak (.137 average) but, more importantly, his body held up.

"I'd rather get out three times and have three good at-bats as opposed to getting three hits." Jeter said about his spring stats. "In the regular season, it's the complete opposite."

Overall, Jeter was happy with his spring, saying his timing at the plate was steadily improving.

7:12 P.M. Similar to 2009?

With all the new additions this off-season, one can't help but think of the Winter of 2009, when the Yankees added several high-priced free agents like Sabathia and Mark Teixeira. The result: a World Series championship.

"I think it has a lot of the same feel," Joe Girardi said this spring. "I think there's a high expectation with the names that we've added. We addressed a lot of situations because of all of the things we went through last year, and there's a lot of the same feelings."

We're a long way from October. But we're just moments away from the first pitch.

The great Nolan Ryan threw out the first pitch so wide that Craig Biggio couldn't catch it. Inauspicious.

— David Waldstein (@DavidWaldstein) 1 Apr 14

6:47 P.M. The Very New Yankees Lineup

Tonight is our first chance to see the new and improved Yankees lineup in action. The difference from last year's opening day squad is drastic, with Brett Gardner the only starting offensive player remaining from April 1, 2013.

2013: Brett Gardner CF; Eduardo Nunez SS; Robinson Cano 2B; Kevin Youkilis 1B; Vernon Wells LF; Ben Francisco DH; Ichiro Suzuki RF; Jayson Nix 3B; Francisco Cervelli C.

2014: Jacoby Ellsbury CF; Derek Jeter SS; Carlos Beltran RF; Brian McCann C; Mark Teixeira 1B; Alfonso Soriano DH; Brett Gardner LF; Brian Roberts 2B; Kelly Johnson 3B.

By the end of the season, the Yankees' lineup didn't look any closer to what it looks like tonight. In fact, the starting lineup for the last game of the season, against these same Astros, has zero similarities with tonight's starting nine.

Sure, the final game for a team out of the playoff hunt will often feature late-season call-ups, but Curtis Granderson, Cano, Wells, Mark Reynolds, Nunez and to some extent, Travis Hafner, were all regulars on last season's squad.

I heard Derek Jeter had lunch with George H.W. Bush today — the 1st President Bush, who "may make an appearance" here at Minute Maid Park

— David Waldstein (@DavidWaldstein) 1 Apr 14

6:39 P.M. Can the Yankees Have Their Ace Back Now?

Much has changed for the Yankees since C. C. Sabathia last pitched in a regular-season game.

One just has to look at the starting lineup from that Sept. 20 game against the San Francisco Giants. Only one player from that lineup, Alfonso Soriano, is expected to be in Tuesday night's batting order when the Yankees open their 2014 season against the Astros in Houston.

Yes, the Lyle Overbay era came to an end this winter with the infusion of the highly paid, proven talents of Jacoby Ellsbury, Carlos Beltran and Brian McCann, along with the $155 million Japanese import, pitcher Masahiro Tanaka.

The Yankees are also banking on the healthy return of Mark Teixeira at first base and Derek Jeter at shortstop, and of pitcher Michael Pineda, an All-Star in 2011 with Seattle at age 22 whose impressive spring earned him the fifth spot in the starting rotation.

But one thing that has stayed true since September is that Sabathia is the ace of the pitching staff, and he will need to look the part more than he did last season if the Yankees want to make the playoffs.

After the worst season of his career, 14-13 with a 4.78 earned run average, Sabathia made changes this spring. No longer able to rely on an overpowering fastball, he worked on adding a cut fastball and mixed in more changeups, and the results were promising. He finished the exhibition season 3-1 with a 1.29 E.R.A.

Sabathia is also stronger physically than he was entering 2013, when he was recovering from elbow surgery.

"Last year, I kind of had some doubts going into the year, not feeling strong, weak, my elbow, just questions," Sabathia told David Waldstein. "And this year feels great. I feel like I don't have anything to worry about."

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DealBook: Failing Stress Test Is Another Stumble for Citigroup

Something didn't quite seem right to Citigroup earlier this week.

The banking behemoth could show that it had enough capital to ride out an economic storm, but a regulator was refusing to approve its plan to increase dividends and stock buybacks, steps intended to please shareholders and build confidence in the bank's turnaround.

Inside Citigroup, board members and senior executives expressed bafflement and anger as they prepared for the rejection to be announced by the Federal Reserve Wednesday afternoon, people briefed on the matter said.

Was the Fed punishing Citigroup for a costly fraud last month at its Mexican unit? Was the regulator trying to look tough? Or was the Fed subtly pressing for a breakup of the bank — a goal of some regulators, investors and analysts for years? A day after Citigroup's capital plan failed the Fed's stress test for the second time in three years, bank executives were still struggling to understand the decision and how best to respond, these people said.

Yet the regulator's displeasure shouldn't have been a total surprise. In its report, the Fed noted that Citigroup had failed to sufficiently correct deficiencies that the regulator had flagged to the bank previously. And it was the only one of the nation's five top banks that failed to persuade the Fed to bless its capital plan. Upon passing their tests, Citigroup's rivals JPMorgan Chase and Bank of America swiftly announced plans to increase dividends and buy back shares.

Since the rejection, some analysts and investors have been pushing for a management shake-up, specifically calling for a new chief financial officer. After all, the Fed criticized the "reliability" of the bank's financial projections under hypothetical situations aimed at testing the bank's resilience during times of financial stress. Investors were quick to register their disappointment, and Citigroup's shares tumbled 5.4 percent on Thursday.

The broader question hanging over Citigroup is the one that has dogged it since Sanford I. Weill created the sprawling global conglomerate in a burst of merger and deregulation fervor nearly two decades ago: that the bank may be simply too big to manage.

"It is a huge challenge at a company that is as big and as everywhere as Citigroup," said Fred Cannon, a banking analyst with Keefe, Bruyette & Woods.

In its rebuff of Citigroup's capital plan, the Fed singled out shortfalls in the bank's financial projections in "material parts of the firm's global operations."

While most of the nation's largest banks operate globally, few banks have the reach of Citigroup. The bank has a physical presence in more than 100 countries, drawing roughly half of its total revenue from countries outside the United States. By comparison, Bank of America operates in 40 countries, but draws only about 14 percent of its revenue from overseas.

More than many of its peers, Citigroup also lends directly to consumers and homegrown companies outside the United States. That strategy may have contributed to Citigroup's recent stumbles in Mexico, where bank officials said they uncovered a fraud involving a local oil services company called Oceanografía.

The $400 million fraud forced Citigroup to adjust its earnings and raised questions about whether the bank had consistent risk controls across its many global business lines.

Citigroup also runs a payment business in which the bank transfers money between different nations on behalf of large companies. That business can pose risks that could be hard to quantify for the Fed, former financial regulators say.

Federal prosecutors are looking into a Citigroup unit that was involved in transferring money between the United States and Mexico. Regulators have previously said Citigroup lacked effective governance and internal controls to oversee compliance against money laundering at the particular unit, Banamex USA.

Over all, the Fed said in its report that "Citigroup had made some considerable progress in improving its general risk management and control practices over the past several years, but its 2014 capital plan reflected a number of deficiencies."

The drumbeat from analysts seeking a breakup of the large bank is likely to grow louder now that Citigroup has failed another stress test. Since the financial crisis, Citigroup has shed about $600 billion of assets and exited undesirable businesses, but some read the Fed's ruling as a signal that the bank needs to sell more units.

Michael Mayo, an analyst with CLSA, said that Citigroup should sell Banamex, its highly profitable Mexican unit that until recently has been considered a crown jewel. But carving out other distinct business for sale is difficult in a company assembled through multiple, disparate acquisitions.

"There are a lot of pieces to the puzzle," said Mr. Cannon of Keefe, Bruyette.

As if to illustrate the sprawl of Citigroup's international operations, Michael L. Corbat, the chief executive of Citigroup, was in a hotel room in South Korea when he learned that the Fed had rejected the bank's capital plan again. Fed officials called Mr. Corbat before dawn on Wednesday to break the news.

It was a personal blow to Mr. Corbat, who has been lauded for improving the bank's relations with regulators. He came to the helm of the bank, not long after his predecessor, Vikram S. Pandit, failed to pass the stress test in 2012.

Mr. Corbat has vowed to restructure the bank by cutting costs and shedding unwanted businesses. This year, the bank submitted what Mr. Corbat called a "modest" capital plan, which included a dividend increase to 5 cents a quarter, from the current penny.

Even after paying that proposed dividend and buying back $6.4 billion in shares, Citi would still have had a comfortable capital cushion, according to the test. But the Fed objected to the bank's plans on "qualitative" grounds.

In South Korea, Mr. Corbat cut short the next leg of his trip and immediately flew back to New York, arriving in Citigroup's Park Avenue headquarters a few hours before the Fed released the results on Wednesday.

After discussing the results with Citigroup's board by phone, the chief executive traveled downtown to the Federal Reserve Bank of New York, people briefed on the matter said. He wanted to talk over the results with the New York Fed president, William C. Dudley, who did not vote on the stress test rejections.

The decision came from all four Fed governors in Washington, including the new chairwoman, Janet L. Yellen. It was the first time the Fed governors voted on any "qualitative" objections to banks' capital plans.

This year, Citigroup was one of five banks that failed to receive the Fed's blessing to increase dividends and buy back stock. The Fed governors' vote was unanimous. Three of the other rejected banks were American units of large foreign banks — HSBC, Royal Bank of Scotland and Santander — taking part in the test for the first time.

In the next few weeks, the Fed plans to send Citi a letter detailing the deficiencies cited in its report, a person close to the process said. But until then, the regulator doesn't have much more to say to the bank on the matter, the person said.

A version of this article appears in print on 03/28/2014, on page B1 of the NewYork edition with the headline: The Bigger They Are ... .

13.08 | 0 komentar | Read More

DealBook: Candy Crush Maker King Digital Set to Trade at $22.50

The game maker King Digital Entertainment scored a huge hit with Candy Crush Saga. Now the company will test how strongly public investors believe that it can find a new success story.

The game maker priced its offering at $22.50 a share on Tuesday, the midpoint of its projected price range. At that price, the company has raised $500 million, valuing it at more than $7 billion in one of the biggest initial public offerings so far this year. It will begin trading on the New York Stock Exchange on Wednesday under the ticker symbol KING.

It will remain to be seen if investors are convinced that King can come up with new hits — and continued revenue and profits — to back up that huge valuation.

But the company's much-anticipated offering comes during the continued hot streak of the I.P.O. market.

Companies have seized on buoyant stock markets and eager stock buyers, raising $31.2 billion in proceeds to date. That is up nearly 70 percent from the same time last year, according to data from Renaissance Capital.

Much of potential buyers' attention has revolved around fast-growing digital companies like Twitter, whose initial stock sale raised $1.8 billion. Others already attracting potential investors include Box, an online storage provider for corporations, and the Alibaba Group, the Chinese online commerce giant.

Drawing almost as much attention is King, an 11-year-old multinational company that has posted huge growth thanks to its one monster hit, Candy Crush. A version of a classic "match three" game in which players line up three or more same-color candies, the title became a global cultural phenomenon. Nearly 100 million users play Candy Crush every day, drawn, in part, by a seemingly endless supply of new levels and features. Its success has overshadowed King's other titles, including Farm Heroes Saga and Pet Rescue Saga.

King relies on a so-called freemium model: Its games are largely free to play, but additional content or virtual goodies cost money. Most players of freemium games never buy anything. The small percentage who do, however, spend a lot.

Candy Crush's addictive qualities have led to enormous profits for the company. Its earnings jumped 7,000 percent from the same time a year ago, to nearly $568 million.

And the game has propelled King from a relatively unheralded Swedish company into a global phenomenon, with offices in Stockholm, London and San Francisco.

Other game makers have benefited from freemium models, too. Supercell, a Finnish company that makes the popular Clash of Clans, reported a nearly 100-fold jump in pretax income last year. In October, it took an investment from the Japanese telecommunications company SoftBank that valued it at $3 billion.

But monster hits fade over time. Angry Birds, the once-inescapable smash hit, has fallen in popularity, though it remains the 19th most downloaded paid game on Apple's iTunes app store.

Candy Crush seems to be no exception to the trend. Its gross bookings, a nonstandard measure of how much users pay for virtual items and other goodies, fell in the fourth quarter last year.

Other King titles are proving popular, but their level of success appears to be much smaller. Farm Heroes Saga, which was developed in the company's London studios, currently ranks fourth on the iTunes app store's top-grossing games. But it draws 20 million active users each day, a fifth of what Candy Crush does.

"Companies like King are reliant on hits," said Mark Little, an analyst at the technology consultant Ovum in London. "It's an open question whether they can sustain their success."

King hopes to avoid the fate of Zynga, the company behind the FarmVille and Words With Friends franchises. After making a splashy market debut in 2011, Zynga has struggled to stay relevant, prompting a painful restructuring that included bringing in a new chief executive.

Its shares closed at $4.84 on Tuesday, less than half of its I.P.O. price. That values Zynga at $4.2 billion, well below its European rival.

King has already avoided some of its Zynga's problems. It keenly focuses on mobile devices while still encouraging users to link their Facebook accounts to the games as a way to keep players engaged.

Mindful of investor skepticism, King and its advisers deliberately sought a conservative valuation, especially compared to serial hitmakers like Electronic Arts and Activision Blizzard, according to people briefed on the matter.

Yet the company itself has emphasized that it is not going public because it needs money. In the I.P.O. prospectus, King's chief executive, Riccardo Zacconi, noted that the game maker had substantial cash flow and no debt.

Instead, the offering will give the company stock that it can use to make acquisitions and let investors cash out their holdings.

Those backers are still in for a potentially big payday. The investment firm Apax Partners stands to reap about $76.5 million from the sale of some of its holdings — more than double the $35 million it originally invested in the game maker nine years ago.

Apax will still retain a roughly 44 percent stake after the I.P.O., which will be worth about $3.2 billion.

And Mr. Zacconi will own a nearly 10 percent stake that is now valued at $675 million.

JPMorgan Chase, Credit Suisse and Bank of America Merrill Lynch are leading King's offering.

13.07 | 0 komentar | Read More

DealBook: I.R.S. Takes a Position on Bitcoin: It’s Property

Updated, 8:53 p.m. | The Internal Revenue Service may have just taken some of the fun out of Bitcoin. But that may mean that the virtual currency is growing up.

The I.R.S. announced on Tuesday that it would treat Bitcoin, the computer-driven online money system, as property rather than currency for tax purposes, a move that forces users who have grown accustomed to operating under the government's radar to deal with new tax issues and reporting requirements.

While that may seem like an expensive headache, some financial experts view the move as a way to push Bitcoin further away from the fringes and into the mainstream financial system.

"It's getting legitimacy, which it didn't have previously," said Ajay Vinze, the associate dean at at Arizona State University's business school. The ruling, he said, "puts Bitcoin on a track to becoming a true financial asset."

While many users already treat Bitcoin like a currency, the I.R.S. made it very clear that "it does not have legal tender status in any jurisdiction."

The industry had been expecting the government to come out with some sort of guidance on Bitcoin, so the announcement on Tuesday did not come as much of a surprise. But some users worry that treating it as an investment could discourage the use of Bitcoin as a payment method. If a user buys a product or service with Bitcoin, for example, the I.R.S. will expect the individual to calculate the change in value from the date the user acquired Bitcoin to the date it was spent. That would give the person a basis to calculate the gains — or losses — on what the I.R.S. is now calling property.

"People might just be tempted to hoard rather than spend, because as soon as they spend they would be liable to incur capital gains taxes," said Pamir Gelenbe, the co-founder of the CoinSummit conference and a partner at Hummingbird Ventures, a venture capital firm that recently invested in the online Bitcoin exchange Kraken.

The I.R.S.'s decision would treat Bitcoin as property subject to capital gains taxes. Long-term capital gains taxes are capped at 20 percent, a more favorable rate than the top rate of 39.6 percent on federal income taxes. Individual traders in the currency markets — the British pound, for example — are expected to treat gains or losses as regular income for tax purposes.

"From a tax perspective, this is really the best possible outcome," said Barry Silbert, the chief executive of SecondMarket, which is planning to introduce a new Bitcoin exchange.

Up until now, Bitcoin enthusiasts have been able to buy, sell and trade on their gains with few fees and little oversight, since the currency has no central bank and no government regulator. Over the years, the price of Bitcoin has also fluctuated wildly, from just a few cents to more than $1,000 to its current price of nearly $600.

At the same time, an increasing number of merchants, including Virgin Galactic and Overstock.com, have begun accepting Bitcoin, supported by a growing cottage industry of companies who will exchange Bitcoins for dollars for a small fee.

Created by an anonymous computer programmer, or group of computer programmers, Bitcoin has largely been the realm of technology enthusiasts and anti-establishment hobbyists, who often buy and sell Bitcoin on online exchanges. Programmers are also able to obtain them by "mining," or figuring out obscure algorithms to "unlock" new coins.

The I.R.S. now, however, says that these miners must report the fair market value of the virtual currency as part of their income.

The new guidelines also mean that online exchanges that buy and sell Bitcoin will now have to provide customers with annual reports of their transactions, just as stock brokerages and other investment firms do.

But some efforts may already be underway to ensure that the new reporting requirements will not discourage users from trading with Bitcoin.

"I can assure you that there are a number of companies that have come up with software to automate this entire process," Mr. Silbert said.

The Bitcoin start-up Coinbase also said it supported the new guidelines.

"Exciting to see clarity from the I.R.S. Coinbase will help both consumers and merchants to meet the guidelines," the company said in a Twitter message.

In the last year or two, however, the industry has attracted backing from venture capital and other investment firms who anticipate a wider adoption of virtual currency. But at the same time, regulators have become increasingly worried that online marketplaces could be used to facilitate drug deals and other illicit transactions.

All that has put more pressure on governments around the world to figure out some way to regulate the industry. That pressure only increased last month with the collapse of one of Bitcoin's largest virtual exchanges, Mt. Gox. The company filed for bankruptcy in Japan and the United States, leaving few options for users who had lost money with the exchange.

Mt. Gox claimed to have lost nearly all its 850,000 coins, although it announced last week that it found about 200,000. The I.R.S.'s guidelines might mean that users in the United States who lost money could now treat that as a capital loss on their tax forms.

Bitcoin has attracted many of its users precisely because it operated outside the established financial system and offered the promise of cheaper transactions. But many Bitcoin advocates and experts have said that regulation is necessary to make Bitcoin a viable currency.

"The people that feel ideologically that Bitcoin should be free of all regulation aren't going to be happy," said Gil Luria, a managing director at Wedbush Securities who has written about virtual currency. "If you're trying to replace an existing financial system, then you need to have all the features that are required of that financial system."

The few employers who pay in Bitcoin will have to report those wages just like any other payment made with property, and Bitcoin income will be subject to the normal federal income withholding and payroll taxes, the I.R.S. said.

Shortly after the announcement, Senator Tom Carper, Democrat of Delaware, praised the agency's decision. The guidance "provides clarity for taxpayers who want to ensure that they're doing the right thing and playing by the rules when utilizing Bitcoin and other digital currencies," he said.

A version of this article appears in print on 03/26/2014, on page B1 of the NewYork edition with the headline: I.R.S. Takes a Position on Bitcoin: It's Property.

13.07 | 0 komentar | Read More

Well: Exercising for Healthier Eyes

Phys Ed

Gretchen Reynolds on the science of fitness.

Age-related vision loss is common and devastating. But new research suggests that physical activity might protect our eyes as we age.

There have been suggestions that exercise might reduce the risk of macular degeneration, which occurs when neurons in the central part of the retina deteriorate. The disease robs millions of older Americans of clear vision. A 2009 study of more than 40,000 middle-aged distance runners, for instance, found that those covering the most miles had the least likelihood of developing the disease. But the study did not compare runners to non-runners, limiting its usefulness. It also did not try to explain how exercise might affect the incidence of an eye disease.

So, more recently, researchers at Emory University in Atlanta and the Atlanta Veterans Administration Medical Center in Decatur, Ga., took up that question for a study published last month in The Journal of Neuroscience. Their interest was motivated in part by animal research at the V.A. medical center. That work had determined that exercise increases the levels of substances known as growth factors in the animals' bloodstream and brains. These growth factors, especially one called brain-derived neurotrophic factor, or B.D.N.F., are known to contribute to the health and well-being of neurons and consequently, it is thought, to improvements in brain health and cognition after regular exercise.

But the brain is not the only body part to contain neurons, as the researchers behind the new study knew. The retina does as well, and the researchers wondered whether exercise might raise levels of B.D.N.F. there, too, potentially affecting retinal health and vision.

To test that possibility, the researchers gathered adult, healthy lab mice. Half of these were allowed to remain sedentary throughout the day, while the other animals began running on little treadmills at a gentle rodent pace for about an hour a day. After two weeks, half of the mice in each group were exposed to a searingly bright light for four hours. The other animals stayed in dimly lit cages. This light exposure is a widely used and accepted means of inducing macular degeneration in animals. It doesn't precisely mimic the slowly progressing disease in humans, obviously. But it causes a comparable if time-compressed loss of retinal neurons.

The mice then returned to their former routine — running or not exercising — for another two weeks, after which the scientists measured the number of neurons in each animal's eyes. The unexercised mice exposed to the bright light were experiencing, by then, severe macular degeneration. Almost 75 percent of the neurons in their retinas that detect light had died. The animals' vision was failing.

But the mice that had exercised before being exposed to the light retained about twice as many functioning retinal neurons as the sedentary animals; in addition, those cells were more responsive to normal light than the surviving retinal neurons in the unexercised mice. Exercise, it seems, had armored the runners' retinas.

Separately, the researchers had other mice run or sit around for two weeks, and then measured levels of B.D.N.F. in their eyes and bloodstreams. The runners had far more. Tellingly, when the scientists injected still other mice with a chemical that blocks the uptake of the growth factor before allowing them to run and exposing them to the bright light, their eyes deteriorated as badly as among sedentary rodents. When the mice could not process B.D.N.F., exercise did not safeguard their eyes.

Taken together, these experiments strongly suggest that "exercise protects vision, at least in mice, by increasing B.D.N.F. in the retina," said Jeffrey Boatright, an associate professor of ophthalmology at Emory University School of Medicine and a co-author of the study.

But obviously, mice are not people, so whether exercise can prevent or ameliorate macular degeneration in human eyes is "impossible to know, based on the data we have now," said Machelle Pardue, a research career scientist at the Atlanta Veterans Administration Medical Center, who is the senior author of the study. She and her colleagues are trying to find ways to determine the impact of exercise on human eyes. But such experiments will take years to return results.

For now, she and Dr. Boatright said, people who are concerned about their vision, and especially those with a family history of retinal degeneration, might want to discuss an exercise program with their doctor. "As potential treatments go," she said, "it's cheap, easy and safe."

Dr. Boatright agreed, adding that eye researchers have been trying for some time to find a way to externally deliver growth factors or drugs to aging eyes, but the available methods typically involve injections into the retina, a process that is complicated, chancy, pricey, and fundamentally objectionable.

Now, though, "it's beginning to look like we may have this other method" — exercise — "that costs almost nothing and results in you making your own growth factors, which is so much safer and more pleasant than having a needle stuck into your eyeball," he said, getting no disagreement from me.

13.07 | 0 komentar | Read More

DealBook: $80 Million for 6 Weeks for Cable Chief

Updated, 8:55 p.m. | Robert D. Marcus became chief executive of Time Warner Cable at the start of the year. Less than two months later, he agreed to sell the company to its largest rival, Comcast, for $45 billion.

For that work, he will receive nearly $80 million if the deal closes, a severance payment that amounts to more than $1 million a day for the six weeks he ran the company before agreeing to sell.

"It's not unprecedented, but it is rare and troubling," said Robert Jackson Jr., an associate professor at Columbia Law School. "There's something stunning about such big paydays for such a small amount of work."

The extraordinarily large exit package is just one more example of corporate America rewarding executives with outsize sums for sometimes minimal amounts of work, and it comes despite the growing debate over income inequality in America.

"The numbers are already big now between executives and regular people," said David F. Larcker, a professor at Stanford Law School. "This exacerbates those comparisons."

So-called golden parachutes are common features in the employment contracts for public company executives, and they often reach stratospheric heights. And though Mr. Marcus is in line to receive a huge sum, his payout will not be anywhere close to the largest golden parachutes of all time.

When John Welch left General Electric in 2001, he reaped rewards of more than $417 million, according to GMI Ratings, a corporate governance research firm.

Dozens of executives have received exit packages larger than $150 million, including Lee R. Raymond, who received $321 million when he left Exxon Mobil in 2005, and William McGuire, who took home $286 million upon leaving the UnitedHealth Group in 2006.

But the payment to Mr. Marcus, 48, which was disclosed in a regulatory filing on Thursday, is nonetheless spectacular because he was chief executive for such a short period, while Mr. Welch, Mr. Raymond and Mr. McGuire had been at their companies for years.

Most of the payment due Mr. Marcus is part of the so-called change of control clause in his contract, which is set off when a company is sold. Such golden parachutes can be among the biggest paydays for executives.

Perhaps the largest package was the $214 million John A. Kanas received after selling North Fork Bancorporation to Capital One Financial in 2006. That same year, James M. Kilts, chief executive of Gillette, received $185 million when Procter & Gamble bought his company. And in 2011, Sanjay Jha, chief executive of Motorola Mobility, was in line for $65.7 million after he sold his company to Google.

Other change of control clauses, which have not yet been invoked, are even bigger.

The chief executive of the mall developer the Simon Property Group would receive $245 million should his company change hands on his watch, according to the Standard & Poor's ExecuComp database. Steve Wynn of Wynn Resorts would receive $239 million if his casino company were sold. And David M. Zaslav, chief executive of Discovery Communications, would get $232 million if his collection of cable networks found a buyer.

Compensation experts contend that golden parachutes can be in the best interests of shareholders. Without one, a chief executive might not want to sell the company and lose his salary.

What is more, many golden parachutes are structured to reflect the total value of salary, bonuses and stock options that executives would receive over the duration of their employment.

But critics see the packages as distorting influences that create incentives for chief executives to sell their companies.

"I don't understand how these payments can be thought to align the interests of C.E.O.s with shareholders," Mr. Jackson said.

Executives can receive golden parachutes not only when they sell their companies, but also when they retire, and even when they are fired.

In January, Henrique de Castro was ousted as chief operating officer of Yahoo after clashing with the chief executive, Marissa Mayer. Despite his subpar performance during his 15-month tenure, Mr. de Castro walked away with at least $88 million and as much as $109 million.

Golden parachutes first appeared in the 1970s and proliferated in the 1980s. And while recent regulation has given shareholders a voice through say-on-pay votes, it has not damped executives' enthusiasm for big paydays.

Time Warner Cable shareholders can express their displeasure with the package when they vote on the deal, which they are almost certain to approve. But even if they voice their disapproval of the golden parachutes, it will not change a thing. Such votes are nonbinding.

Time Warner Cable and Comcast both declined to comment on the matter.

Should the deal close, Mr. Marcus will receive $56.5 million in stock, $20.5 million in cash and a $2.5 million bonus if Time Warner Cable meets its performance targets by the time of the deal's completion.

Mr. Marcus could argue that he did not go looking for a deal. Charter Communications began pursuing Time Warner Cable last year, when Mr. Marcus was the chief operating officer of the company. He earned $10.1 million in that job in 2012.

But in a rapid series of developments in January and February, Mr. Marcus negotiated to sell Time Warner Cable to Comcast, the largest cable operator in the country.

Mr. Marcus will not be the only Time Warner Cable executive in line for a big payday. Arthur T. Minson Jr., the chief financial officer, will receive severance pay of $27 million. Michael L. LaJoie, the chief technology officer, will receive $16.3 million. And Philip G. Meeks, the chief operating officer, will take home $11.7 million.

Left off the list of golden parachute recipients is Glenn Britt, who ran Time Warner Cable after its spinoff from Time Warner in 2009. Mr. Britt stepped down at the end of 2013, partly because of health issues, but not before he told Brian L. Roberts, the chief executive of Comcast, that combining their companies one day would be a "dream deal."

Executive compensation experts said that there were few ways to curb the practice of awarding golden parachutes, but that shareholders should voice their opinions nonetheless.

"If Time Warner Cable shareholders are sufficiently outraged, they can vote against it, and if executives are sufficiently embarrassed, it might discourage other C.E.O.s from doing the same thing," said Mr. Jackson. "But I'm not optimistic."

 

13.07 | 0 komentar | Read More

DealBook: In Hong Kong, Betting Big on Bitcoin

HONG KONG — By day, David Shin is an investment banker at a major financial firm. By night and in pretty much every other free minute, he is an entrepreneur looking to break into Hong Kong's growing Bitcoin scene.

Even as concerns swirl about the long-term viability of the virtual currency, Mr. Shin is raising money, courting clients and hiring staff to build a sort of stock exchange for Bitcoin-oriented companies. Mr. Shin, 38, plans to start his venture, CryptoMex, at the end of April.

"I believe Bitcoin will bring about a brave new world of money," he said. "The Internet started out as a revolutionary protocol, became more easy to use over time, and saw an explosive growth rate. The same is happening with Bitcoin."

Mr. Shin joins a growing field of technology experts, financial players and crypto-geeks who are betting that an unfavorable regulatory environment in mainland China has put this special administrative region — with its more laissez-faire attitude — on the edge of something big.

Bitcoin, digital money backed by no government and "mined" by computers performing complex algorithms, have been largely unregulated, creating a virtual Wild West of programmers and speculators. But as Bitcoin tries to gain greater mainstream acceptance, authorities around the world have begun eyeing it more cautiously, as they might a currency. The spectacular collapse of Mt. Gox, the Tokyo-based Bitcoin exchange, has only fanned regulators' concerns.

Regulatory moves in China have been among the more aggressive to date. In December, the Chinese authorities curtailed the use of Bitcoin by banks and payment processors, which helped halve the value of the virtual currency in two weeks. While the government said the general public was free to trade Bitcoin online, the broad fear is that China may eventually impose a sweeping ban on its use offline, as it did in 2009 to Q Coin, a virtual currency issued by Tencent.

But Hong Kong has so far remained relatively passive on the regulatory front. The former British colony has retained a separate political and economic system since it returned to Chinese rule, and the Hong Kong Monetary Authority, the city's de facto central bank, says it is not directly regulating Bitcoin, at least for now.

Entrepreneurs in Hong Kong are essentially playing regulatory arbitrage. Although firm data is scarce, China is widely seen as the world's second-largest market for Bitcoin, after the United States, and the restrictions have cooled its nascent Bitcoin scene. By virtue of proximity, businesses in Hong Kong are hoping to capture some of the demand.

"Like water, Bitcoin may take the path of least resistance and find its way into Hong Kong," said Michael Chau, a business professor at the University of Hong Kong. "Because of the city's proximity to China — and because it has become part of the country since 1997 — Hong Kong has the potential to absorb part of China's Bitcoin market."

The Chinese customer base of Laser Yuan, the founder of the Hong Kong-based exchange BitCashOut, doubled after the December notice. Three weeks ago, ANX, Hong Kong's largest Bitcoin exchange, opened what it said was the world's first brick-and-mortar store for the virtual currency, where customers can buy Bitcoin over the counter. It also set up a Bitcoin vending machine last week. Robocoin, a maker of Bitcoin automated teller machines, will set up its first A.T.M. in Hong Kong this spring, and plans 100 more around the world, none in China, said the company's chief executive, Jordan Kelley.

"We have hundreds and hundreds of Chinese businessmen and entrepreneurs contact us with the purpose of becoming Robocoin operators," Mr. Kelley said, adding that if China gave him the green light, the company would "have 200 A.T.M.s in China before the end of the year, if not more."

Mr. Shin said he first saw the promise of Bitcoin last year, when the coins were worth $25 apiece, compared with about $620 now. After raising $2.5 million, he and his business partners built IceDrill, an operation in Montreal where racks of speedy computers race to generate Bitcoin.

But he is now selling part of his stake in the Canadian mine and focusing on his start-up in Hong Kong, which he said could be "the capital of Bitcoin in Asia." Mr. Shin recently hired Jake Smith, a well-connected Bitcoin enthusiast who worked for Li Xiaolai — a Chinese investor who reportedly holds 100,000 coins — to get Chinese to buy into the companies listed on his platform.

"When the government comes out and puts constraints on Bitcoin in China, investors naturally look at Hong Kong — not Singapore, not Korea — for substitution," Mr. Shin said.

Hong Kong operates in a type of regulatory limbo, so uncertainty reigns as much as opportunity. If China clamps down further, Hong Kong may be forced to rethink its stance.

John Greenwood, chief economist at Invesco and architect of Hong Kong's exchange-rate system, said that whether the Chinese authorities would toughen measures depended on whether Bitcoin became so prevalent that it undermined China's capital controls.

"China's mainland residents can buy things with Bitcoin from Europe or North America or anywhere else in the world, or make transfers," Mr. Greenwood said. "It's a hole in the dike, a leakage from China's system of foreign-exchange control."

Entrepreneurs like Mr. Shin also face a legacy of past ventures that have proved problematic.

Two once-prominent Bitcoin crowdfunding platforms, BTCST and Bitfunder, are now defunct. BTCST, which offered Bitcoin-denominated securities that claimed to return up to 7 percent a week, has been charged by the United States Securities and Exchange Commission with fraud and with running a Ponzi scheme.

"The operating environment is much clearer," Mr. Shin said. "The Hong Kong government has acknowledged Bitcoin as a commodity, so we have clarity on both fronts here as well."

Then there is the need for better basic infrastructure and consumer awareness, a challenge for Bitcoin around the world.

For example, few businesses let customers make payments with the currency. In Hong Kong, they largely amount to a boutique hotel, a flower shop, a tailor, a music teacher and a Beijing-style crepe restaurant.

On the eve of the Chinese New Year in January, the three co-founders of the Bitcoin exchange ANX took to the bustling streets of the Lan Kwai Fong entertainment district to hand out 50,000 red envelopes, each carrying a little more than a dollar's worth of Bitcoin.

"I use Bitcoin to buy stuff online all the time," Ben Lau, an online marketer, said as he stood on the sidewalk using his smartphone to scan the QR code — an image that works like a bar code — on the voucher he had just received.

But Mr. Lau was in the minority. Even months after Bitcoin leapt into the limelight, most passers-by had little idea about what it does, and some associated it with drugs and fauds.

When the after-work crowd diminished, the co-founders went to a nearby bar to check on rumors that it had recently started accepting Bitcoin. A few beers later, Ken Lo, managing director of ANX, waved for the bill and asked to pay in the virtual currency.

"A customer's friend thought our bar had a matching name — Bit Point — with Bitcoin, so he helped us set this up," said Gaga Lam, the bar's manager. "We haven't really tried it out yet."

Her iPad Mini displayed the website of BitPay, the Bitcoin payment processor in which Asian billionaire Li Ka-shing was an early investor. But the group ended up paying with a credit card after a few unsuccessful tries.

"We can do better than that," Mr. Lo said, referring to his company's Bitcoin payment solution. "We clear faster than the banks, our transaction fee is lower than credit card companies, and there would be no chargebacks. And Bitcoin fans will flock to your bar in droves."

A version of this article appears in print on 03/20/2014, on page B1 of the NewYork edition with the headline: Placing Their Bets on Bitcoin.

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