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Family Office of Google’s Eric Schmidt Buys Lehman Estate’s Stake in D.E. Shaw
Apr 23, 2015 | The Wall Street Journal
By Juliet Chung
The family office of Google Inc. ’s Eric Schmidt bought a 20% stake in New York hedge-fund firm D.E. Shaw Group from the estate of Lehman Brothers Holdings Inc., the parties said Thursday. It sold for roughly $500 million, a discount from the price of at least $750 million to $800 million Lehman paid... -
Family Office of Google’s Eric Schmidt Buys Stake in Hedge Fund D.E. Shaw
Apr 23, 2015 | The New York Times - Dealbook
By Alexandra Stevenson
The family office for the Google chairman Eric E. Schmidt has purchased a large stake in the $36 billion hedge fund, D. E. Shaw. The 20 percent stake is one of the last vestiges of the bankrupt Lehman Brothers, a prime asset that the estate had been shopping around for more than a year. Hillspire, the family office that serves as an investment... -
Google’s Schmidt Buys 20% in Hedge Fund D.E. Shaw
Apr 23, 2015 | Bloomberg
By Saijel Kishan and Katherine Burton
Eric Schmidt, the billionaire chairman of Google Inc., bought a 20 percent stake in $36 billion hedge fund manager D.E. Shaw that was previously held by Lehman Brothers Holdings Inc. No price was disclosed. Schmidt bought the stake through Hillspire LLC, the investment firm that manages his wealth, according to ... -
Barclays Wins Latest Round in Legal Fight Over Lehman Sale
Apr 23, 2015 | The Wall Street Journal
By Patrick Fitzgerald
A federal judge denied Lehman Brothers Inc.'s bid to carve out $1.3 billion from an earlier court decision that awarded $4 billion in disputed assets to Barclays PLC stemming from the U.K. bank's purchase of Lehman's brokerage business. Judge Katherine B. Forrest of the U.S. District Court in New York said Wednesday that... -
Former Trader Says Taped Conversations Show Lehman Owes Him Bonus
Apr 23, 2015 | The Wall Street Journal
By Joseph Checkler
A former Lehman Brothers star trader secretly recorded several conversations that he says prove Lehman owes him more than $83 million in bonuses for his work done mostly in 2008, even though he received a similar amount when Barclays PLC bought Lehman. Testifying on the second day of a trial over whether Lehman owes... -
US Fears a European Sequel to Lehman Brothers
Apr 23, 2015 | Financial Times
By Gillian Tett
Another week, yet another wave of Greek drama. But as investors speculate about a possible Greek default, they should take note of a striking split that has opened up between America and Europe. On the eastern side of the Atlantic, policy makers are now at pains to suggest that a Greek default, or even a eurozone ... -
The 99 Percent: Why Are They Barely Treading Water?
Apr 23, 2015 | The New American
By Thomas R. Eddlem
...Take, for instance, the fate of Lehman Brothers CEO Dick Fuld. (Lehman Brothers was a securities company specializing in investment banking, trading, and underwriting new issues of stocks and bonds.) Fuld was the first CEO of Lehman Brothers after American Express spun off its investment banking division and made it an independent...
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Family Office of Google’s Eric Schmidt Buys Lehman Estate’s Stake in D.E. Shaw
Apr 23, 2015 | The Wall Street Journal
By Juliet Chung
The family office of Google Inc. ’s Eric Schmidt bought a 20% stake in New York hedge-fund firm D.E. Shaw Group from the estate of Lehman Brothers Holdings Inc., the parties said Thursday.
It sold for roughly $500 million, a discount from the price of at least $750 million to $800 million Lehman paid, according to people familiar with the matter. Lehman, a securities firm, bought the stake in 2007 and collapsed in September 2008 during the height of the last financial crisis.
The lower price partially reflects the restrictive terms of the deal Lehman originally negotiated that the new owner was expected to assume, according to people familiar with the matter.
Lehman’s 2007 deal with D.E. Shaw was part of a wave of precrisis deals from banks looking to buy their way into the hedge-fund business. Since then, banks have pulled back from the business partly because of regulatory pressures. Investment groups have stepped into the void, raising billions of dollars or using their own balance sheets to buy stakes.
Mr. Schmidt’s family office, Hillspire LLC, began discussing a potential purchase of the stake about a year ago. Hillspire is run by former Treasury official and hedge fund executive Chuck Chai, and manages more than $5 billion of Mr. Schmidt’s and his family’s wealth. It has been a D.E. Shaw investor for at least five years, according to a person familiar with the matter.
The stake is passive, meaning Hillspire will share in the roughly $36 billion firm’s profits but won’t have any say in its management. The return for D.E. Shaw across its funds this year was 8.4% through March, according to a person familiar with the matter. ENLARGE Eric Schmidt. Photo: Getty Images
“As a long-standing investor in the D.E. Shaw group’s funds, I have the highest regard for their team and the firm that they’ve built,” Mr. Schmidt said in a statement Thursday.
The deal was partly attractive to D.E. Shaw because Hillspire is viewed as a longer-term investor, and doesn’t have the regulatory disclosure requirements that public companies do. Meanwhile, the stake, which has been a profitable investment for the Lehman estate, is expected to generate steady income for Hillspire...
For full story:
http://www.wsj.com/articles/family-office-of-googles-eric-schmidt-buys-lehman-estates-stake-in-d-e-shaw-1429812241
The Lehman estate had been looking to sell its D.E. Shaw stake since late 2013, but the passive role that Lehman had originally negotiated, among other restrictions, diminished the interest of some prospective buyers, according to people familiar with the matter.
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Family Office of Google’s Eric Schmidt Buys Stake in Hedge Fund D.E. Shaw
Apr 23, 2015 | The New York Times - Dealbook
By Alexandra Stevenson
The family office for the Google chairman Eric E. Schmidt has purchased a large stake in the $36 billion hedge fund, D. E. Shaw.
The 20 percent stake is one of the last vestiges of the bankrupt Lehman Brothers, a prime asset that the estate had been shopping around for more than a year. Hillspire, the family office that serves as an investment vehicle for Mr. Schmidt, bought the stake for an undisclosed price.
“I’ve always regarded Eric as a kindred spirit — someone who shares our belief in the power of groundbreaking innovation, analytical rigor, and extraordinarily gifted employees,” David E. Shaw, the founder of D. E. Shaw, said in a statement.
Mr. Schmidt has been a longtime investor in D. E. Shaw, he said in a statement.
D.E. Shaw is known for once employing Lawrence H. Summers, who went on to serve as President Obama’s economic policy adviser. It uses quantitative trading strategies, harnessing computers to help scour data to find opportunities to trade.
For more than a year, Goldman Sachs bankers working for the Lehman estate had struggled to drum up interest in the stake, which the bank bought a year before it collapsed. At the time, the biggest hurdle for prospective buyers was not the price — which was said to be between $550 million and $800 million — but the terms of the stake itself, according to people who were briefed on the matter last year.
Blackstone Group, Dyal Capital and Affiliated Managers Group were among the investment firms that considered buying the stake.But ultimately the others firms declined, some because of the terms of the agreement that were negotiated in early 2007. Lehman paid about $800 million and a contingency based on future performance for the stake. As part of the deal, Lehman paid a large upfront sum and then additional payments in 2009 and 2012...
For full story:
http://www.nytimes.com/2015/04/24/business/dealbook/eric-schmidts-family-office-buys-stake-in-de-shaw.html?_r=0
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Google’s Schmidt Buys 20% in Hedge Fund D.E. Shaw
Apr 23, 2015 | Bloomberg
By Saijel Kishan and Katherine Burton
Eric Schmidt, the billionaire chairman of Google Inc., bought a 20 percent stake in $36 billion hedge fund manager D.E. Shaw that was previously held by Lehman Brothers Holdings Inc. No price was disclosed.
Schmidt bought the stake through Hillspire LLC, the investment firm that manages his wealth, according to a statement Thursday. The stake is passive and there won’t be any changes to management or operations of New York-based D.E. Shaw, the companies said.
“I’m excited to invest in an enterprise that has so successfully used technology to deliver superior risk-adjusted returns across asset classes globally,” Schmidt, 59, said in the statement.
D.E. Shaw was founded in 1988 by David Shaw, 64, a former Columbia University computer science professor. The hedge fund, which specializes in using computer models to identify money-making opportunities, has branched out to oversee credit, infrastructure and venture capital. Lehman bought its holding in March 2007, more than a year before the investment bank went bankrupt. D.E. Shaw oversaw $29 billion when Lehman purchased the stake.
Schmidt said he’s been a longstanding investor in D.E Shaw’s hedge funds. He’s worth $8.8 billion, according to the Bloomberg Billionaires Index. High Fees
D.E. Shaw charges clients among the highest fees in the industry. Clients pay as much as 3.5 percent of assets and a levy on profits of as much as 35 percent, according to a government filing...
For full story:
http://www.bloomberg.com/news/articles/2015-04-23/google-s-schmidt-buys-20-in-hedge-fund-d-e-shaw-from-lehman
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Barclays Wins Latest Round in Legal Fight Over Lehman Sale
Apr 23, 2015 | The Wall Street Journal
By Patrick Fitzgerald
A federal judge denied Lehman Brothers Inc.'s bid to carve out $1.3 billion from an earlier court decision that awarded $4 billion in disputed assets to Barclays PLC stemming from the U.K. bank's purchase of Lehman's brokerage business.
Judge Katherine B. Forrest of the U.S. District Court in New York said Wednesday that Barclays was entitled to all of the so-called margin assets--some billions of dollars in cash and collateral--securing derivatives positions. The ruling is a win for Barclays, which purchased Lehman's brokerage business days after Lehman's 2008 collapse.
The legal fight over the sale began in 2009, when Lehman sued Barclays saying the British bank negotiated a secret discount when it bought Lehman's brokerage. A bankruptcy judge concluded that Barclays didn't receive an improper " windfall" from the sale, but that Lehman's brokerage was entitled to the approximately $4 billion in margin assets.
Both sides appealed, and the district court ruled that Barclays was entitled to both groups of assets. James W. Giddens, the trustee winding down Lehman's brokerage, appealed to the Second U.S. Circuit Court of Appeals, which last year affirmed the district court ruling.
"The issues raised by the trustee on this motion come too late," said Judge Forrest in a 17-page order. "Both appeals- -that of the bankruptcy court's order and that of this court--have occurred. And both appeals encompassed determinations that Barclays is entitled to all margin assets."
Judge Forrest's order, in effect, clarifies the earlier rulings that awarded all the margin assets to Barclays. The trustee had sought to narrow the scope of those decisions, arguing that only those assets that were securing open trading positions at the time of 2008 sale were included in the deal. Mr. Giddens has appealed the broader decisions awarding all the margin assets to Barclays to the U.S. Supreme Court.
A spokesman for Mr. Giddens said, "The trustee is reviewing the decision, and he continues to move ahead with winding down the estate and maximizing assets available for future distributions."
Previously, Mr. Giddens has said the decisions overturning the bankruptcy court ruling have frustrated the purpose of the liquidation by reducing the amount available for the estate by $4 billion...
For full story:
http://www.wsj.com/articles/barclays-wins-latest-round-in-legal-fight-over-lehman-sale-1429811245
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Former Trader Says Taped Conversations Show Lehman Owes Him Bonus
Apr 23, 2015 | The Wall Street Journal
By Joseph Checkler
A former Lehman Brothers star trader secretly recorded several conversations that he says prove Lehman owes him more than $83 million in bonuses for his work done mostly in 2008, even though he received a similar amount when Barclays PLC bought Lehman.
Testifying on the second day of a trial over whether Lehman owes its ex-employees bonus money, former top global rates trader Jonathan Hoffman said he taped the conversations as a note-taking method, without telling parties he was recording them.
In a negotiation with Rich Ricci, then the operating chief of Barclays’s investment bank, Mr. Hoffman told Mr. Ricci, “I guess I’m surprised that my contract isn’t just being made whole,” according to a recording of the 2008 conversation played in the courtroom Thursday.
The main question is whether Barclays paid Mr. Hoffman the $83 million bonus as part of honoring his Lehman contract, or as part of a new deal. Lawyers for James W. Giddens, the trustee winding down Lehman’s brokerage business, say Lehman owes Mr. Hoffman nothing since the trader’s Barclays contract was essentially the same as his Lehman deal and Barclays paid him the money.
During cross-examination, Mr. Hoffman told Hughes Hubbard & Reed LLP’s Savvas A. Foukas, a lawyer for Mr. Giddens, that once he realized Barclays wasn’t assuming his Lehman contract, he asked for something different from Barclays. “I’m not asking what you asked for sir, please answer my question,” Mr. Foukas said.
Mr. Hoffman eventually said, “I got paid for the work I did at Barclays.” His contract at Barclays was substantially similar to the Lehman deal.
Judge Shelley Chapman, the Lehman bankruptcy judge who is presiding over the trial, seemed more concerned about whether he got the bonus money and less concerned with who gave it to him.
The judge asked Mr. Hoffman if he would have been satisfied if Barclays simply gave him the Lehman bonus money and then started negotiating a new contract.
“If someone gave me $83 million, yes,” Mr. Hoffman said.
Later, Mr. Foukas asked Mr. Hoffman whether he would have been “happy” if Barclays declined to honor his Lehman contract, but still gave him the $83 million bonus.
“Not as happy as if I had worked at other places,” Mr. Hoffman said.
Mr. Hoffman made nearly $550 million in profits for Lehman during 2008, and his trading represented 10% of the bank’s total profit during 2007. So when Lehman collapsed, Barclays wasn’t his only option, he said. Earlier in the day, his lawyer, White & Case LLP’s Douglas Baumstein, asked about a meeting Mr. Hoffman had with Kenneth Griffin’s Citadel LLC, a well-known Chicago-based hedge fund.
“Were you confident you could get an offer from Citadel,” Mr. Baumstein asked. “I’m still confident I could get an offer from Citadel,” Mr. Hoffman replied.
When Mr. Baumstein later asked Mr. Hoffman what he wished he would have done differently, Mr. Hoffman said, “Worked for Millennium,” referring to Israel Englander’s Millennium Management LLC, a New York hedge fund with which Mr. Hoffman said he interviewed.
Judge Chapman later asked Mr. Hoffman, who also said he had a five-hour meeting with Steven A. Cohen at the Connecticut offices of SAC Capital Advisors, if the Barclays deal was the best deal on the table.
“I don’t think I took the best deal,” Mr. Hoffman said, although he suggested he didn’t get any other formal offers. He ended up working at Barclays for about five years, making about $1.25 billion in profits for the bank, he said. He said he is currently not working.
Mr. Giddens, the trustee, has reached settlements with many former Lehman employees seeking old bonus money. Judge Chapman set aside Wednesday, Thursday and Friday for a trial for Mr. Hoffman and three other employees. It is unclear when she might rule.
Even if the claims are accepted, the former employees would be paid at less than the full amount, since only customers of the brokerage received all they are owed. Mr. Hoffman and the others would be considered general unsecured creditors, who have thus far received about 27 cents on the dollar and could eventually get up to 40 cents, or more.
Lehman Brothers Holdings Inc., once the nation’s fourth-largest investment bank by assets under management, collapsed into the largest bankruptcy ever in September 2008 with $613 billion in liabilities...
For full story:
http://www.wsj.com/articles/former-trader-says-taped-conversations-show-lehman-owes-him-bonus-1429822735
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US Fears a European Sequel to Lehman Brothers
Apr 23, 2015 | Financial Times
By Gillian Tett
Another week, yet another wave of Greek drama. But as investors speculate about a possible Greek default, they should take note of a striking split that has opened up between America and Europe.
On the eastern side of the Atlantic, policy makers are now at pains to suggest that a Greek default, or even a eurozone exit, would not be disastrous; at last week’s International Monetary Fund meetings German officials argued that the chance of a Greek exit had already been priced into the markets, and that shocks could be contained.
But on the western side of the Atlantic, the mood is not sanguine. Earlier this week, Jason Furman, chairman of the US Council of Economic Advisers, publicly warned that a “Greek exit would not just be bad for the Greek economy, it would be taking a very large and unnecessary risk with the global economy just when a lot of things are starting to go right”. In private, US officials are expressing even more concern.
Why the transatlantic difference? In part, incentives. Countries such as Germany have spent the past three months fruitlessly negotiating with the new Greek government, and are now so frustrated they want to find ways to rationalise taking a hardball stance. The Americans, by contrast, are one remove away.
But the other factor is Lehman Brothers. When the broker collapsed seven years ago, US officials learnt a painful lesson about how small shocks can spiral out of control. Their European counterparts experienced that crisis too. But Wall Street traders and Washington bureaucrats saw contagion spread in a particularly immediate way, scarring their psyche. And some American officials suspect there are several key points about that 2008 debacle that could be very pertinent to Greece.
The first is that even if a risk has been well analysed — or even anticipated — this does not prevent unintended, nasty consequences. Think back to 2008. Six months before Lehman Brothers collapsed, there was a full-blown crisis at Bear Stearns that left regulators and bankers braced for another financial shock and scrambling to prepare. On the eve of the Lehman bankruptcy, for example, regulators were obsessively focused on controlling the risks posed by credit derivatives.
But in the event, regulators missed a trick: what sparked market turmoil when Lehman failed was not the credit derivatives contracts, but a legal issue that had previously been ignored, namely that the UK bankruptcy code ringfenced investor assets differently from New York’s.
A second Lehman lesson is that when one issuer fails, this knocks faith in others too. That is not just because investors start to worry about flaws at other entities, but due to wider policy uncertainty: when Lehman failed, the entire paradigm for finance suddenly seemed unpredictable. Hence the panic surrounding money market funds. And that highlights a third point: political turmoil matters. What really sent global markets into a tailspin in 2008 was that a couple of days after Lehman’s failure, the US Congress initially rejected the bank rescue package that Hank Paulson, then US Treasury secretary, had devised, creating policy uncertainty....
For full story:
http://www.ft.com/intl/cms/s/0/4b2001ca-e999-11e4-a687-00144feab7de.html#axzz3YCyh6BKC
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The 99 Percent: Why Are They Barely Treading Water?
Apr 23, 2015 | The New American
By Thomas R. Eddlem
"Since 1980, guess how much of the growth in income the 90% got? Nothing. None. Zero. In fact, it’s worse than that. The average family not in the top 10% makes less money than a generation ago.”
— Senator Elizabeth Warren (D-Mass.), in a January 7, 2015 speech to the AFL-CIOWarren’s source for this claim was the leftist Economic Policy Institute, based on data from French economist Thomas Piketty and French-American Professor Emmanuel Saez of the University of California at Berkeley.
Piketty has become something of a celebrity because of his trumpeting of data about the increasing divergence in income ratios between the poor and the richest Americans. He and most other leftists blame the free market for this divergence, even though the level of government intervention in the U.S. economy has never been greater.
...3. Crony Capitalism: TARP, Ex-Im Bank, Green Energy Tax Credits, Farm Subsidies
Another major reason the rich are getting richer and the poor and middle class are mired in economic stasis is because of crony corporate bailouts provided by the likes of the 2008 TARP bill, the Export-Import Bank, the Overseas Private Investment Corporation (OPIC), and a host of federal government programs that guarantee profits to politically connected corporations that take casino-style risks with everyone else’s dollars.
Take, for instance, the fate of Lehman Brothers CEO Dick Fuld. (Lehman Brothers was a securities company specializing in investment banking, trading, and underwriting new issues of stocks and bonds.) Fuld was the first CEO of Lehman Brothers after American Express spun off its investment banking division and made it an independent company largely owned by American Express shareholders, and he had a hand in taking Lehman Brothers public on the New York Stock Exchange in 1994 as its first independent CEO. While Fuld drove the company into the ground with investments in ever-more-risky credit-default swaps, he took in nearly $500 million in salary and bonuses. Even when the housing industry bubble was blowing up, Fuld took credit for increased profits and demanded a higher salary from his board. He took a salary of $20 million in 2007, the year before the Wall Street behemoth declared bankruptcy. When the bubble popped and his 110-year-old firm went bankrupt, tens of thousands of stockholders lost their entire investment. In the aftermath, Fuld packed his bags for the $13.75 million mansion he had just sold to his wife for a mere $100 (in order to shelter his wealth from lawsuits).
In the end, Fuld was handsomely rewarded for driving his company into the ground. Meanwhile, pension funds and mutual funds across the nation that had invested in Lehman Brothers took a major hit.
And in the whole scheme of things on Wall Street, Fuld actually did suffer a little bit — at least comparatively — for being a scam artist. He actually lost some of his millions as his stock shares shrunk to zero; taxpayer bailouts didn’t come on line until after the Lehman bankruptcy. Most major financial institutions and their executives got off far easier thereafter. Immediately following Lehman’s bankruptcy, Congress passed the $700 billion TARP bailout bill. With TARP, corporate profits were privatized and losses were socialized. The bill bailed out the biggest Wall Street gamblers with taxpayer dollars, and later General Motors and Chrysler Corporation as well. The $80 billion given to General Motors — most of which will never be repaid to the U.S. Treasury — was yet another case of a giant, politically connected corporation being bailed out by taxpayers. The sum of the GM bailout was so great that it would have been cheaper for taxpayers to give every GM employee $200,000 to go out and find a new job rather than do a bailout. It’s obviously no coincidence that most of the giant financial institutions bailed out through the TARP legislation were corporate members of the Council on Foreign Relations, an organization with a tiny membership of just a few thousand but which is a Washington-New York power axis of corporate executives, politicians, media, academia, and the military...
For full story:
http://www.thenewamerican.com/economy/commentary/item/20720-the-99-why-are-they-barely-treading-water
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