Wall Street Breakfast: RBC Accused of Massive 'Wash' Trading Scheme

by: Wall Street Breakfast
Wall Street Breakfast
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Top Stories
CFTC accuses RBC of massive 'wash' trading scheme. The CFTC has charged Royal Bank of Canada (NYSE:RY) of engaging in a "wash trading scheme of massive proportions" by using stock index futures contracts to reap tax benefits from its shareholdings. RBC has called the claims "absurd" and "meritless," and although the scheme allegedly involved hundreds of millions of dollars, the bank said the proceedings will not be a financially material event.

Molson Coors bets €2.65B on East European beer market. Molson Coors Brewing (NYSE:TAP) has agreed to buy StarBev from CVC Capital for €2.65B ($3.5B) in a deal that will allow Molson to expand in central and eastern European beer markets, which have "strong historical trends and upside potential as the region returns to its pre-economic-crisis growth rates."

Groupon again catches SEC attention. The SEC is taking yet another look at Groupon (NASDAQ:GRPN) following the company's first revisions as a public firm, though it's not yet a formal investigation. Felix Salmon provides an account of "What happened at Groupon," which you can read on Seeking Alpha here.

Top Equities News
SEC poised to charge Goldman over another mortgage bond deal. The SEC is likely to soon bring charges against Goldman Sachs (NYSE:GS) over a mortgage-bond deal called the Fremont Home Loan Trust. The suspicion is that Goldman may have known the loans were even worse than advertised. One example: Goldman claimed 0.01% of the mortgages were underwater, but an audit found 23.5% were at the time the deal was pitched.

Olympus gets investment offers but could go it alone. Beleaguered Olympus (OTCPK:OCPNY) has confirmed it has received capital alliance offers from its peers, including from Sony (NYSE:SNE), Fujifilm and Terumo Corp. However, Olympus President Hiroyuki Sasa believes the company may be able to recover from its $1.7B fraud scandal without accepting the money. It's a tough ask, given that Olympus may need an extra ¥240B ($2.93B) to ¥330B to boost its capital ratios to 30%-40%.

Oracle, Google set for another trial after talks break down. Oracle (NASDAQ:ORCL) and Google (NASDAQ:GOOG) have reached an "irreconcilable impasse" in settlement negotiations, U.S. Magistrate Judge Paul Grewal ruled yesterday. Grewal said he won't convene any further settlement conferences in Oracle's patent and copyright lawsuit against Google over programming language Java. The trial is set to begin on April 16.

EU probes Motorola after Apple, Microsoft complaints. The EU has started two investigations into Motorola Mobility (NYSE:MMI) after complaints from Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) that Motorola sets unfair fees for the use of its patents. The EU will especially look at whether Motorola has "failed to honor its irrevocable commitments" over IP that it has said is essential for "standard-compliant products."

Dell spent $1B on Wyse. Dell (NASDAQ:DELL) paid around $1B to acquire Wyse Technology, Bloomberg reports, well above the $350M-$400M estimate of ISI's Brian Marshall. Marshall likes the deal, as it helps Dell offset slumping sales of traditional PCs by bolstering its PC virtualization offerings, although he doesn't expect it to have a huge top-line impact.

Rise in stocks boosts CEO take-home pay. A rally in shares helped lead to a 10% rise in the take-home pay of CEOs in 2011, consultants estimate, as company bosses benefited from the vesting of low-priced stock options and restricted stock they received in 2007-2009. Qualcomm's Paul Jacobs did especially well, with his pay jumping to $35M from $8.5M in 2010.

Top Economic & Other News
Moody's expresses concern over "2-speed" Chinese economy. China's state firms are performing better than their private-sector counterparts, Moody's has said, pointing to a "two speed economy" where government-owned companies have easier access to credit and are therefore squeezing out other parts of the economy. The divergence is "clearly of concern, as state-owned firms are less productive," Moody's said.

Spain: Damned if it does, damned if it doesn't. "The government is facing a lose-lose situation," Spanish economy minster Luis de Guindos has said, as markets will penalize the country for not going far enough with austerity and also for going too far. "It's an absurd idea," he replied to the question of whether Spain will need the assistance of one of Europe's rescue vehicles.

Student debt burden takes in senior citizens. The problem of student loans is not confined to the young: Americans 60 and older owe about $36B, of which over 10% is delinquent, a recent NY Fed study shows. Some of the debt is because people studied later in life or co-signed for loans for their children or grandchildren, but some of it is also an overhang from when they were young.

Where To Go Next
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Four Companies With IPOs This Week

Today's Markets:
In Asia, Japan -0.6%. Hong Kong +1.3%. China +0.5%. India +0.7%.
In Europe, at midday, London -0.2%. Paris -0.4%. Frankfurt -0.2%.
Futures at 7:00: Dow -0.1%. S&P -0.2%. Nasdaq -0.1%. Crude -0.7% to $104.47. Gold -0.1% to $1678.60.

Tuesday's economic calendar:
Auto sales
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:45 ISM New York Business Index
10:00 Factory Orders
2:00 PM FOMC minutes