DealBook: Authorities Find 1nsider Trading Case Tied to Phil Mickelson 1s Slow to Take Shape

Brendan Mcdermid/ReutersFederal investigators wonder if the investor Carl Icahn, pictured, provided stock tips to the gambler William Walters that were passed to others, including the golfer Phil Mickelson.

In the summer of 2011, a series of winning stock trades raised immediate red flags for financial regulators.

The traders — a cross-section of investors including the championship golfer Phil Mickelson and the high-rolling gambler and golf course owner William T. Walters — collectively reaped several million dollars betting on the consumer products company Clorox and one other stock, according to people briefed on the matter who spoke anonymously because they were not authorized to discuss the investigation.

The trades, options contracts to buy Clorox stock, came just days before the billionaire investor Carl C. Icahn announced an unsolicited takeover bid for the company that drove up the stock price. And trading records indicated that the bets came not just from Mr. Mickelson but also from at least one other investor connected to Mr. Walters and the golfing world, one of the people briefed on the matter said. That investor, another person said, is not now under investigation.

Darron Cummings/Associated PressPhil Mickelson

The previously unreported details about the size and scope of the trading, emerging a day after a federal insider trading investigation first came to light, might seem to stack up in the government's favor. As federal authorities examine whether Mr. Icahn leaked details of his Clorox bid to Mr. Walters, the people said, they are exploring a theory that Mr. Walters might have passed the information to Mr. Mickelson.

And yet, nearly three years after the trades flashed some telltale signs of possible insider trading, a case has yet to materialize.

A recounting of the government's tactics, described in interviews with people briefed on the matter, provides a case study in the hurdles of building an insider trading investigation. Even after the United States attorney's office in Manhattan racked up a perfect record under Preet Bharara — more than 80 insider trading convictions and no defeats — a case can wither without a smoking-gun email, a loose-lipped cooperating witness or wiretapped conversations.

In the case of Clorox, the authorities initially planned to secure cooperation from one of Mr. Icahn's top employees, the people briefed on the matter said, but shifted gears when they lacked the leverage to do so.

The focus then turned to Mr. Mickelson, whom authorities hoped to scare into cooperating. As one of America's most popular athletes, Mr. Mickelson had much to lose under the glare of the government's spotlight.

But when the F.B.I. approached Mr. Mickelson — first pulling him off a plane at Teterboro Airport in New Jersey last year, the people said, and then confronting him on Thursday at a golf tournament in Ohio — Mr. Mickelson had little to offer. In the airport discussion last year, which lasted no more than an hour, the people said, Mr. Mickelson pledged to cooperate but explained that he did not know Mr. Icahn and had no clue that the stock tips might have been improper. On Thursday, Mr. Mickelson said, he instructed F.B.I. agents to "speak to my lawyers."

Mr. Mickelson, Mr. Walters and Mr. Icahn have not been accused of any wrongdoing. Even if Mr. Icahn did leak secret information about his firm's intentions with Clorox, he may have done so legally. It would have been illegal if he breached a duty of confidentiality to his own investors.

Through his agent, Mr. Mickelson released a statement saying that he had "done absolutely nothing wrong." At the golf tournament on Saturday, Mr. Mickelson said, "I'm really not going to say anything more until sometime in the near future," adding that "I'll cooperate as much as I can with the F.B.I."

In an interview, Mr. Icahn said "I don't give out inside information," adding that "for 50 years I have had an unblemished record." Mr. Icahn argued that any suggestion he had done anything wrong was "irresponsible."

Mr. Walters, reached on Friday evening, said, "While I don't have any comment, pal, I'll talk to you later."

The insider trading investigation is not the first time that Mr. Walters, often considered the most successful sports bettor in the country, has drawn federal scrutiny. In 1992, he was acquitted of illegal gambling charges. Since then, the Nevada attorney general has charged Mr. Walters with money laundering stemming from his gambling operation, but courts dismissed that case.

Now Mr. Walters, better known as Billy, is at the center of the insider trading investigation.

A year after the 2011 Clorox trades, Mr. Walters and Mr. Mickelson placed trades in Dean Foods, the people briefed on the matter said, just before the food and beverage company announced its quarterly earnings and a public stock offering for a subsidiary. The authorities, who have not found any connection between Mr. Icahn and the Dean Foods trading, are investigating whether Mr. Walters had a source inside the company itself.

For the Clorox trades, Mr. Walters provides authorities with a possible link between Mr. Icahn and Mr. Mickelson. Mr. Icahn, a frequent visitor to Las Vegas with a number of business interests there, acknowledges knowing Mr. Walters but says he has no connection to Mr. Mickelson. Mr. Walters, for his part, has crossed paths with Mr. Mickelson at golf tournaments.

"With this breaking in the media, the government's next step will likely be sending out grand jury subpoenas to the parties for all documents, emails and text messages," said Reed Brodsky, a partner with Gibson Dunn & Crutcher and a former federal prosecutor.

In recent months, authorities have pored over phone records, the people briefed on the matter said, seeking to line up Mr. Icahn's calls to Mr. Walters with the trading in Clorox. But phone records provide only circumstantial leads.

A relentless investigation of Steven A. Cohen, a hedge fund billionaire, turned up phone records showing that just after he spoke to an employee who possessed inside information, Mr. Cohen placed a major trade. Federal prosecutors ultimately indicted Mr. Cohen's hedge fund, SAC Capital Advisors, but never charged the billionaire himself.

In some ways, the investigation into Mr. Icahn echoes the pursuit of Mr. Cohen. While authorities are interested in those who traded on Clorox, the ultimate focus is a Wall Street titan.

In the case of Clorox, authorities have some additional hurdles. For example, they have struggled to establish that Mr. Icahn and Mr. Walters were close enough that the financier might jeopardize his long-running career to share secrets about his Clorox strategy with an acquaintance like Mr. Walters.

There is little in the public record linking the two men to business deals — and even less that suggests they socialized together in Las Vegas.

The most visible connection is a mobile data provider called Voltari, where Mr. Icahn's son is a director and whose largest shareholders are firms controlled by Mr. Icahn. A small Nevada company controlled by Mr. Walters and his business partners was an early-stage investor in the company, though that hardly suggests that Mr. Icahn would alert Mr. Walters to inside information.

Federal authorities may also be grappling with whether Mr. Icahn, even if he did leak the information, violated the law. Under the laws that govern insider trading, it is not illegal to leak secrets about a future trade.

For such a leak to cause a legal problem, a bidder for Clorox would, for example, have had to breach a duty of confidentiality to his or her own investors.

And in certain cases, even if there is no duty of confidentiality, someone who is mounting a takeover bid may not leak "material, nonpublic information" about a tender offer. But in the case of Clorox, Mr. Icahn never submitted a tender offer.

The confluence of golf and an insider trading investigation is hardly new. The golf course has become something of an ideal scene for consummating many a big corporate deal. Wall Street investment banks often hold golf outings for investors, analysts and executives.

In 2001, the S.E.C. and federal prosecutors charged a San Diego man with making $137,485 in illegal profits from a stock tip he got while golfing with the director of a company that was in the middle of merger negotiations. Last year, an executive at KPMG, one of the country's largest accounting firms, was accused of leaking tips to a frequent golf partner. The San Diego man and the KPMG executive both pleaded guilty.

As for Mr. Mickelson, a three-time winner of the Masters golf tournament, he has played through the distractions.

But he finds himself in something of a slump just as he enters a critical period in his playing career: the run-up to an attempt to complete a career Grand Slam by winning the United States Open. It is the first time since 2003 that he has gone this far into a P.G.A. Tour season without a victory.

At the Ohio tournament on Saturday, the crowd cheered Mr. Mickelson, saying, "Good luck, Phil," and, "You're the man, Phil." From his fellow golfer Robert Garrigus, Mr. Mickelson received some playful ribbing.

"How's it going, Phil?" he asked. Mr. Mickelson, letting out a laugh, replied, "Been an interesting evening."

Mr. Garrigus added in jest that "I'm not sure I want to talk to you now."

Karen Crouse contributed reporting.

A version of this article appears in print on 06/01/2014, on page A21 of the NewYork edition with the headline: Regulators Find Insider Trading Case Tied to Golf Star Is Slow to Take Shape .
source : http://rss.nytimes.com/c/34625/f/640316/s/3b082e24/sc/24/l/0Ldealbook0Bnytimes0N0C20A140C0A50C310Cregulators0Efind0Einsider0Etrading0Ecase0Etied0Eto0Ephil0Emickelson0Eis0Eslow0Eto0Etake0Eshape0C0Dpartner0Frss0Gemc0Frss/story01.htm

DealBook: Regulators Find 1nsider Trading Case Tied to Phil Mickelson 1s Slow to Take Shape

Brendan Mcdermid/ReutersFederal investigators wonder if the investor Carl Icahn, pictured, provided stock tips to the gambler William Walters that were passed to others, including the golfer Phil Mickelson.

In the summer of 2011, a series of winning stock trades raised immediate red flags for financial regulators.

The traders — a cross-section of investors including the championship golfer Phil Mickelson and the high-rolling gambler and golf course owner William T. Walters — collectively reaped several million dollars betting on the consumer products company Clorox and one other stock, according to people briefed on the matter who spoke anonymously because they were not authorized to discuss the investigation.

The trades, options contracts to buy Clorox stock, came just days before the billionaire investor Carl C. Icahn announced an unsolicited takeover bid for the company that drove up the stock price. And trading records indicated that the bets came not just from Mr. Mickelson but also from at least one other investor connected to Mr. Walters and the golfing world, one of the people briefed on the matter said. That investor, another person said, is not now under investigation.

Darron Cummings/Associated PressPhil Mickelson

The previously unreported details about the size and scope of the trading, emerging a day after a federal insider trading investigation first came to light, might seem to stack up in the government's favor. As federal authorities examine whether Mr. Icahn leaked details of his Clorox bid to Mr. Walters, the people said, they are exploring a theory that Mr. Walters might have passed the information to Mr. Mickelson.

And yet, nearly three years after the trades flashed some telltale signs of possible insider trading, a case has yet to materialize.

A recounting of the government's tactics, described in interviews with people briefed on the matter, provides a case study in the hurdles of building an insider trading investigation. Even after the United States attorney's office in Manhattan racked up a perfect record under Preet Bharara — more than 80 insider trading convictions and no defeats — a case can wither without a smoking-gun email, a loose-lipped cooperating witness or wiretapped conversations.

In the case of Clorox, the authorities initially planned to secure cooperation from one of Mr. Icahn's top employees, the people briefed on the matter said, but shifted gears when they lacked the leverage to do so.

The focus then turned to Mr. Mickelson, whom authorities hoped to scare into cooperating. As one of America's most popular athletes, Mr. Mickelson had much to lose under the glare of the government's spotlight.

But when the F.B.I. approached Mr. Mickelson — first pulling him off a plane at Teterboro Airport in New Jersey last year, the people said, and then confronting him on Thursday at a golf tournament in Ohio — Mr. Mickelson had little to offer. In the airport discussion last year, which lasted no more than an hour, the people said, Mr. Mickelson pledged to cooperate but explained that he did not know Mr. Icahn and had no clue that the stock tips might have been improper. On Thursday, Mr. Mickelson said, he instructed F.B.I. agents to "speak to my lawyers."

Mr. Mickelson, Mr. Walters and Mr. Icahn have not been accused of any wrongdoing. Even if Mr. Icahn did leak secret information about his firm's intentions with Clorox, he may have done so legally. It would have been illegal if he breached a duty of confidentiality to his own investors.

Through his agent, Mr. Mickelson released a statement saying that he had "done absolutely nothing wrong." At the golf tournament on Saturday, Mr. Mickelson said, "I'm really not going to say anything more until sometime in the near future," adding that "I'll cooperate as much as I can with the F.B.I."

In an interview, Mr. Icahn said "I don't give out inside information," adding that "for 50 years I have had an unblemished record." Mr. Icahn argued that any suggestion he had done anything wrong was "irresponsible."

Mr. Walters, reached on Friday evening, said, "While I don't have any comment, pal, I'll talk to you later."

The insider trading investigation is not the first time that Mr. Walters, often considered the most successful sports bettor in the country, has drawn federal scrutiny. In 1992, he was acquitted of illegal gambling charges. Since then, the Nevada attorney general has charged Mr. Walters with money laundering stemming from his gambling operation, but courts dismissed that case.

Now Mr. Walters, better known as Billy, is at the center of the insider trading investigation.

A year after the 2011 Clorox trades, Mr. Walters and Mr. Mickelson placed trades in Dean Foods, the people briefed on the matter said, just before the food and beverage company announced its quarterly earnings and a public stock offering for a subsidiary. The authorities, who have not found any connection between Mr. Icahn and the Dean Foods trading, are investigating whether Mr. Walters had a source inside the company itself.

For the Clorox trades, Mr. Walters provides authorities with a possible link between Mr. Icahn and Mr. Mickelson. Mr. Icahn, a frequent visitor to Las Vegas with a number of business interests there, acknowledges knowing Mr. Walters but says he has no connection to Mr. Mickelson. Mr. Walters, for his part, has crossed paths with Mr. Mickelson at golf tournaments.

"With this breaking in the media, the government's next step will likely be sending out grand jury subpoenas to the parties for all documents, emails and text messages," said Reed Brodsky, a partner with Gibson Dunn & Crutcher and a former federal prosecutor.

In recent months, authorities have pored over phone records, the people briefed on the matter said, seeking to line up Mr. Icahn's calls to Mr. Walters with the trading in Clorox. But phone records provide only circumstantial leads.

A relentless investigation of Steven A. Cohen, a hedge fund billionaire, turned up phone records showing that just after he spoke to an employee who possessed inside information, Mr. Cohen placed a major trade. Federal prosecutors ultimately indicted Mr. Cohen's hedge fund, SAC Capital Advisors, but never charged the billionaire himself.

In some ways, the investigation into Mr. Icahn echoes the pursuit of Mr. Cohen. While authorities are interested in those who traded on Clorox, the ultimate focus is a Wall Street titan.

In the case of Clorox, authorities have some additional hurdles. For example, they have struggled to establish that Mr. Icahn and Mr. Walters were close enough that the financier might jeopardize his long-running career to share secrets about his Clorox strategy with an acquaintance like Mr. Walters.

There is little in the public record linking the two men to business deals — and even less that suggests they socialized together in Las Vegas.

The most visible connection is a mobile data provider called Voltari, where Mr. Icahn's son is a director and whose largest shareholders are firms controlled by Mr. Icahn. A small Nevada company controlled by Mr. Walters and his business partners was an early-stage investor in the company, though that hardly suggests that Mr. Icahn would alert Mr. Walters to inside information.

Federal authorities may also be grappling with whether Mr. Icahn, even if he did leak the information, violated the law. Under the laws that govern insider trading, it is not illegal to leak secrets about a future trade.

For such a leak to cause a legal problem, a bidder for Clorox would, for example, have had to breach a duty of confidentiality to his or her own investors.

And in certain cases, even if there is no duty of confidentiality, someone who is mounting a takeover bid may not leak "material, nonpublic information" about a tender offer. But in the case of Clorox, Mr. Icahn never submitted a tender offer.

The confluence of golf and an insider trading investigation is hardly new. The golf course has become something of an ideal scene for consummating many a big corporate deal. Wall Street investment banks often hold golf outings for investors, analysts and executives.

In 2001, the S.E.C. and federal prosecutors charged a San Diego man with making $137,485 in illegal profits from a stock tip he got while golfing with the director of a company that was in the middle of merger negotiations. Last year, an executive at KPMG, one of the country's largest accounting firms, was accused of leaking tips to a frequent golf partner. The San Diego man and the KPMG executive both pleaded guilty.

As for Mr. Mickelson, a three-time winner of the Masters golf tournament, he has played through the distractions.

But he finds himself in something of a slump just as he enters a critical period in his playing career: the run-up to an attempt to complete a career Grand Slam by winning the United States Open. It is the first time since 2003 that he has gone this far into a P.G.A. Tour season without a victory.

At the Ohio tournament on Saturday, the crowd cheered Mr. Mickelson, saying, "Good luck, Phil," and, "You're the man, Phil." From his fellow golfer Robert Garrigus, Mr. Mickelson received some playful ribbing.

"How's it going, Phil?" he asked. Mr. Mickelson, letting out a laugh, replied, "Been an interesting evening."

Mr. Garrigus added in jest that "I'm not sure I want to talk to you now."

Karen Crouse contributed reporting.

source : http://rss.nytimes.com/c/34625/f/640316/s/3b082e24/sc/24/l/0Ldealbook0Bnytimes0N0C20A140C0A50C310Cregulators0Efind0Einsider0Etrading0Ecase0Etied0Eto0Ephil0Emickelson0Eis0Eslow0Eto0Etake0Eshape0C0Dpartner0Frss0Gemc0Frss/story01.htm

Business School, Disrupted

If any institution is equipped to handle questions of strategy, it is Harvard Business School, whose professors have coined so much of the strategic lexicon used in classrooms and boardrooms that it's hard to discuss the topic without recourse to their concepts: Competitive advantage. Disruptive innovation. The value chain.

But when its dean, Nitin Nohria, faced the school's biggest strategic decision since 1924 — the year it planned its campus and adopted the case-study method as its pedagogical cornerstone — he ran into an issue. Those professors, and those concepts, disagreed.

The question: Should Harvard Business School enter the business of online education, and, if so, how?

Universities across the country are wrestling with the same question — call it the educator's quandary — of whether to plunge into the rapidly growing realm of online teaching, at the risk of devaluing the on-campus education for which students pay tens of thousands of dollars, or to stand pat at the risk of being left behind.

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes — create online courses, but not in a way that undermines the school's existing strategy. "A company must stay the course," Professor Porter has written, "even in times of upheaval, while constantly improving and extending its distinctive positioning."

For Clayton Christensen, whose 1997 book, "The Innovator's Dilemma," propelled him to academic stardom, the only way that market leaders like Harvard Business School survive "disruptive innovation" is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school — about $20,000 to $30,000 a course — a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania.

"Do it cheap and simple," Professor Christensen says. "Get it out there."

But Harvard Business School's online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory. Called HBX, the program will make its debut on June 11 and has its own admissions office. Instead of attacking the school's traditional M.B.A. and executive education programs — which produced revenue of $108 million and $146 million in 2013 — it aims to create an entirely new segment of business education: the pre-M.B.A. "Instead of having two big product lines, we may be on the verge of inventing a third," said Prof. Jay W. Lorsch, who has taught at Harvard Business School since 1964.

Starting last month, HBX has been quietly admitting several hundred students, mostly undergraduate sophomores, juniors and seniors, into a program called Credential of Readiness, or CORe. The program includes three online courses — accounting, analytics and economics for managers — that are intended to give liberal arts students fluency in what it calls "the language of business." Students have nine weeks to complete all three courses, and tuition is $1,500. Only those with a high level of class participation will be invited to take a three-hour final exam at a testing center.

"We don't want tourists," said Jana Kierstead, executive director of HBX, alluding to the high dropout rates among MOOCs. "Our goal is to be very credible to employers." To that end, graduates will receive a paper credential with a grade: high honors, honors, pass.

"Harvard is going to make a lot of money," Mr. Ulrich predicted. "They will sell a lot of seats at those courses. But those seats are very carefully designed to be off to the side. It's designed to be not at all threatening to what they're doing at the core of the business school."

Exactly, warned Professor Christensen, who said he was not consulted about the project. "What they're doing is, in my language, a sustaining innovation," akin to Kodak introducing better film, circa 2005. "It's not truly disruptive."

'Very Different Places'

Professor Christensen did something "truly disruptive" in 2011, when he found himself in a room with a panoramic view of Boston Harbor. About to begin his lecture, he noticed something about the students before him. They were beautiful, he later recalled. Really beautiful.

"Oh, we're not students," one of them explained. "We're models."

They were there to look as if they were learning: to appear slightly puzzled when Professor Christensen introduced a complex concept, to nod when he clarified it, or to look fascinated if he grew a tad boring. The cameras in the classroom — actually, a rented space downtown — would capture it all for the real audience: roughly 130,000 business students at the University of Phoenix, which hired Professor Christensen to deliver lectures online.

Why had his boss, Mr. Nohria, given him permission to moonlight? "Because we didn't have an alternative of our own" online, Mr. Nohria explained.

The dean had taken a wait-and-see approach — until 18 months ago, when his own university announced the formation of edX, an open-courseware platform that would hitch the overall university firmly to the MOOC bandwagon.

He said he remembered listening to an edX presentation at an all-university meeting. "I must confess I was unsure what we'd be really hoping to gain from it," he said. "My own early imagination was: 'This is for people who do lectures. We don't do lectures, so this is not for us.' " In the case method, concepts aren't taught directly, but induced through student discussion of real-world business problems that professors guide with carefully chosen questions.

"Nitin and I are close friends, and we've talked about this repeatedly," Professor Porter said. "I think the big risk in any new technology is to believe the technology is the strategy. Just because 200,000 people sign up doesn't mean it's a good idea." Though Professor Porter published "Strategy and the Internet" in the Harvard Business Review in 2001, before the advent of MOOCs, the article makes his sternest warning about the perils of online recklessness: "A destructive, zero-sum form of competition has been set in motion that confuses the acquisition of customers with the building of profitability."

Mr. Nohria ultimately chose for the business school to opt out of edX. But this decision forced a question: What should the school do instead? "People came out in very different places," Mr. Nohria said. "Very different places."

One morning, he sat down for one of his regular breakfasts with students. "Three of them had just been in Clay's course," which had included a case study on the future of Harvard Business School, Mr. Nohria said. "So I asked them, 'What was the debate like, and how would you think about this?' They, too, split very deeply."

Some took Professor Christensen's view that the school was a potential Blockbuster Video: a high-cost incumbent — students put the total cost of the two-year M.B.A. at around $100,0000 — that would be upended by cheaper technology if it didn't act quickly to make its own model obsolete. At least one suggested putting the entire first-year curriculum online.

Others weren't so sure. " 'This disruption is going to happen,' " is how Mr. Nohria described their thinking, " 'but it's going to happen to a very different segment of business education, not to us.' " The power of Harvard's brand, networking opportunities and classroom experience would protect it from the fate of second- and third-tier schools, a view that even Professor Christensen endorses — up to a point.

"We're at the very high end of the market, and disruption always hits the high end last," said Professor Christensen, who recently predicted that half of the United States' universities could face bankruptcy within 15 years.

Mr. Nohria states flatly, "I do not believe our M.B.A. program is at risk." He concluded that disruption is not always "all or nothing," and cited the businesses of music and retailing as examples. "In the music business, all record stores are gone," he said, while in retailing, "it's not like Amazon has eliminated everything; after those debates, my feeling was that we're going to be more in that category."

Still, Mr. Nohria said, he wanted some insurance. "Our beliefs can always turn out to be wrong," he said. Harvard Business School could not afford to stand on the sidelines. So last summer, he said, he asked the business school's administrative director, "What would you say if we started a little skunk works around this technology?"

'Hollywood' at Harvard

That skunk works, in a low-slung building 300 yards from campus, is not little. It buzzes with 35 full-time staff members — Wharton's online efforts, by comparison, employ one-half of one staffer, Mr. Ulrich said — who are scrambling to complete a proprietary platform that, after this summer's limited go-round, could support much larger enrollments.

"Here's Hollywood," Ms. Kierstead said on a recent tour, passing an array of video equipment that's hauled around to film business case-study protagonists on location. Nearby, two digital animators worked on graphics for Professor Christensen's forthcoming course. Another staff member handled financial aid.

To run HBX with Ms. Kierstead, Mr. Nohria tapped Bharat Anand, 48, a strategy professor who had been researching how traditional media companies have coped, or haven't, with digital disruption. "I think about those cases a lot," said Professor Anand, who is also Mr. Nohria's brother-in-law.

The dean handed him a sheet of six guiding principles, including these: HBX should be economically self-sustaining. It should not substitute for the M.B.A. program. It should seek to replicate the Harvard Business School discussion-based style of learning. This was no easy assignment, Professor Anand conceded.

"What is competitive advantage?" he asked, invoking Professor Porter's signature theory. "It comes from being fundamentally different. We teach this all the time. But saying it is one thing. Putting it into practice is hard. When everyone is going free, everyone is going with a similar type of platform, it takes courage to do your own thing."

On campus, Harvard business students face one another in five horseshoe-shaped tiers with oversized name cards. They fight for "airtime" while the professor orchestrates discussion from a central "pit."

"We don't do lectures," Mr. Nohria said. "Part of what had already convinced me that MOOCs are not for us is that for a hundred years our education has been social."

The challenge was to invent a digital architecture that simulated the Harvard Business School classroom dynamic without looking like a classroom. In a demonstration of a course called economics for managers, the first thing the student sees is the name, background and location — represented by glowing dots on a map — of other students in the course.

A video clip begins. It's Jim Holzman, chief executive of the ticket reseller Ace Ticket, estimating the supply of tickets for a New England Patriots playoff game: "Where I have a really hard time is trying to figure out what the demand is. We just don't know how many people are on the sidelines saying, 'Hey, I'm thinking about going.' "

It's a complex situation meant to get students thinking about a key concept — "the distinction between willingness to pay and price," Professor Anand said. "Just because something costs zero doesn't mean people aren't willing to pay something." A second case study, on the pay model of The New York Times, drives the point home.

Then a box pops up on the screen with the words "Cold Call." The student has 30 seconds to a few minutes to type a response to a question and is then prodded to assess comments made by other students. Eventually there is a multiple-choice quiz to gauge mastery of the concept. (This was surprisingly time-consuming to develop, Professor Anand said, because the business school does not give multiple-choice tests.)

At a faculty meeting in April, Professor Anand demonstrated the other two elements of HBX: continuing education for executives and a live forum. He unveiled the existence of a studio, built in collaboration with Boston's public television station, that allows a professor to stand in a pit before a horseshoe of 60 digital "tiles," or high-definition screens with the live images and voices of geographically dispersed participants. "I'm proud of our team, and how carefully they've thought about it even before they've done it," Professor Porter said.

The Clashing Models

Not everyone was so impressed. Professor Christensen, for one, worried that Harvard was falling into the very trap he had laid out in "The Innovator's Dilemma." "I think that we've way overshot the needs of customers," he said. "I worry that we're a little too technologically ambitious."

He also feared that HBX was tied too closely to the business school.

"There have been a few companies that have survived disruption, but in every case they set up an independent business unit that let people learn how to play ball in the new game," he said. IBM survived the transition from mainframe computers to minicomputers, and then from minicomputers to personal computers, by setting up autonomous teams in Minnesota and then in Florida. "We haven't got the separation required."

Professor Porter has expressed the opposite view. Companies that set up stand-alone Internet units, he wrote in 2001, "fail to integrate the Internet into their proven strategies and thus never harness their most important advantages." Barnes & Noble's decision to set up a separate online unit is one of his cautionary tales. "It deterred the online store from capitalizing on the many advantages provided by the network of physical stores," he said, "thus playing into the hands of Amazon."

Here is where the two professors' differences come to a head. In the Porter model, all of a company's activities should be mutually reinforcing. By integrating everything into one, cohesive fortification, "any competitor wishing to imitate a strategy must replicate a whole system," Professor Porter wrote.

In the Christensen model, these very fortifications become a liability. In the steel industry, which was blindsided by new technology in smaller and cheaper minimills, heavily integrated companies couldn't move quickly and ended up entombed inside their elaborately constructed defenses.

"If Clay and I differ, it's that Clay sees disruption everywhere, in every business, whereas I see it as something that happens every once in a while," Professor Porter said. "And what looks like disruption is in fact an incumbent firm not embracing innovation" at all.

In other words, it's not that U.S. Steel was destined to be undone by minimills. It's that its managers let it happen.

"The disrupter doesn't always win," argued Professor Porter, who nonetheless called Professor Christensen "phenomenal" and "one of the great management thinkers."

Who will win the coming business school shakeout? Professor Porter acknowledged that it's a multidimensional question.

Most schools offering MOOCs do so through outside distribution channels like Coursera, a for-profit company that has Duke, Wharton, Yale, the University of Michigan and several dozen other schools in its stable. EdX, of which Harvard was a co-founder with the Massachusetts Institute of Technology, counts Dartmouth and Georgetown among its charter members.

"These will come to have considerable power," predicted Jeffrey Pfeffer, a professor of organizational behavior at the Stanford Graduate School of Business. He pointed to the aircraft industry: "In order to get into China, Boeing transferred its technology to parts manufacturers there. Pretty soon there's going to be Chinese firms building airplanes. Boeing created their own competition." Business schools, he said, "are doing it again; we are creating our own demise."

Professors as Online Stars

The worry is all the more acute at midtier schools, which fear that elite business schools will move to gobble up a larger share of a shrinking pie.

"Would you rather watch Kenneth Branagh do 'Henry V,' or see it at a community theater?" asked Mr. Ulrich at Wharton. "There are going to be some instructors who become more valuable in this new world because they master the new medium. We'd rather be those guys than the people left behind."

This raises a still more radical case, in which the winners are not any institution, new or old, but a handful of star professors. One of Professor Porter's generic observations — that the Internet increases the "bargaining power of suppliers" — suggests just that. "It's potentially very divisive in a way," he acknowledged. "We're all partners; we all get paid roughly the same. Anything that starts to fracture the enterprise is a sobering prospect."

François Ortalo-Magné, dean of the University of Wisconsin's business school, says fissures have already appeared. Recently, a rival school offered one of his faculty members not just a job, but also shares in an online learning start-up created especially for him. "We're talking about millions of dollars," Mr. Ortalo-Magné said. "My best teachers are going to find platforms so they can teach to the world for free. The market is finding a way to unbundle us. My job is to hold this platform together."

To that end, he has changed his school's incentive structure, which, as in most of academia, was based primarily on the number of research articles published in elite journals. Now professors who can't crack those journals but "have a gift for inspiring learning," he said, in person or online, are being paid as top performers, too. "We are now rewarding people who have tenure to give up on research," Mr. Ortalo-Magné said.

Mr. Ortalo-Magné spins out the possibilities of disruption even further. "How many calculus professors do we need in the world?" he asked. "Maybe it's nine. My colleague says it's four. One to teach in English, one in French, one in Chinese, and one in the farm system in case one dies."

What is to stop a Coursera from poaching Harvard Business School faculty members directly? "Nothing," Mr. Nohria said. "The decision people will have to make is whether being on the platform of Harvard Business School, or any great university, is more important than the opportunity to build a brand elsewhere.

"Does Clay Christensen become Clay Christensen just by himself? Or does Clay Christensen become Clay Christensen because he was at Harvard Business School? He'll have to make that determination."

source : http://rss.nytimes.com/c/34625/f/640316/s/3b079261/sc/33/l/0L0Snytimes0N0C20A140C0A60C0A10Cbusiness0Cbusiness0Eschool0Edisrupted0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm

Technophoria: The Enduring Promise of a Thinner You

Just in time for bikini season, the syndicated "Rachael Ray Show" featured a new beauty machine with a girly-sounding name: the LiLa Strawberry Laser.

Advertised for quick slimming, the device involves low-level laser diode panels that are belted around a person's waist for a series of 10-minute sessions.

"This thing right over here," Ms. Ray said on a segment last month, pointing to a white console and treatment belt, "well, it claims that it can reduce your waistline by inches in just one 20-minute treatment."

"Whoooaaa!" the audience responded.

Ms. Ray introduced Candace, a young woman in a black sports bra and shorts, who was apparently unhappy with a slight convexity to her abdomen. Candace had just had her photo and measurements taken by Dr. David E. Halpern, a plastic surgeon from Tampa, Fla., who offers the device in his practice. Now he gave her the Strawberry treatment for 20 minutes.

"How many inches total has she lost?" Ms. Ray asked afterward.

"Eight inches off her circumference in the four areas measured," Dr. Halpern reported — including, he added, about two inches off her lower abdomen. (He is a scientific adviser to LiLa Enterprise, a company in Suwanee, Ga., that distributes the device.)

On screen, a "before" profile photo of Candace with a slightly protruding abdomen appeared, next to a live video shot of her, taken from farther away, where she appeared more svelte. The audience clapped excitedly. "This is really remarkable," Ms. Ray enthused.

Body-conscious consumers often jump on the latest technology that promises easy slimming, only to discard it for the next thinning gimmick. Inventions advertised as new technology to whittle waistlines have been around for decades. Vibrating belts were introduced in the 1920s, and massage rolling machines in the '40s.

Today, the audience for superficial fat-zapping is largely composed of people hoping to transform themselves without the medical risks and recovery time entailed by invasive surgeries like tummy tucks and liposuction. The aesthetic medical industry has its own name for the category: "noninvasive body contouring."

Devices in this category typically hit the skin with cold or thermal energy, in an effort to disrupt and diminish underlying fat cells. The machines can cost from $60,000 to about $110,000 — and that doesn't include recurring use fees that some companies charge doctors for replacement treatment heads. Capital expenditures on the machines in the United States are expected to top $200 million by 2019, compared with around $73 million this year, according to projections from the Decision Resources Group, a health care analytics company. A session can cost consumers from $200 to several thousand dollars, depending on the type of device and the extent of the area to be treated.

"Physicians know there are patients who are willing to spend more money on noninvasive procedures than they would on an invasive procedure like liposuction," April Lee, an aesthetics industry analyst at Decision Resources, told me. "As long as there is new technology, there will be people willing to try it."

Oddly, the treatments aren't aimed at the seriously overweight. Experts told me the ideal candidates are those who are already reasonably fit, exercise regularly, eat sensibly and just want to address an unwanted nubble here or there.

"If you are trying to lose 10 to 15 pounds, this is not for you," says Dr. Mathew M. Avram, a dermatologist at Massachusetts General Hospital. "This is just sculpting areas to improve the appearance."

The Food and Drug Administration vets the machines, but that doesn't guarantee their effectiveness. For those manufacturers able to prove that their gizmos are comparable to devices that have already received federal clearance, the agency does not typically require rigorous, long-term scientific proof of benefit.

In fact, some methods for corroborating machines' fat-busting claims in marketing — like before-and-after photos, or tape measures — can be quite unreliable. A person inhaling and sucking in her abdomen could have a waistline that is several inches smaller than when she is exhaling.

The F.D.A. has cleared the Strawberry Laser to reduce the waistline temporarily by hitting fat cells under the skin with low-level laser energy, causing cells to release their lipids. Consumers typically have eight sessions per treated region and are encouraged to exercise afterward to further the process.

Some medical experts are skeptical. Dr. Mark L. Jewell, a plastic surgeon in Eugene, Ore., who is a past president of the American Society for Aesthetic Plastic Surgery, contends that low-level laser devices are unlikely to result in significant changes since they emit about as much energy as a hand-held laser pointer.

"This defies reasonable thinking that in 20 minutes you could lose eight inches," Dr. Jewell said of the "Rachael Ray" segment. (Dr. Jewell has conducted research for a different kind of device, Liposonix, which uses high-intensity focused ultrasound energy and for which more modest waistline-reduction claims are made.)

Mark Patterson, president of LiLa Enterprise, the distributor of the Strawberry Laser, said the results reported on "Rachael Ray" were typical of the device.

"We say 'two inches or more in 20 minutes or less,' " he told me.

The leading procedure in the "noninvasive body contouring" category is called CoolSculpting. It is intended to freeze fat cells and prompt them to die off. Dermatologists at Mass General came up with the idea after pondering case reports of toddlers who developed divots in their cheeks after sucking on ice pops. (Dr. Avram is a scientific adviser to Zeltiq Aesthetics, the company behind the device.)

A CoolSculpting treatment involves clamping and cooling a section of fat about the size of a stick of butter for one to three hours. After 12 weeks, the fat layer of each treated area has typically diminished by about 20 percent or more, according to company-financed studies on pigs and humans. In very rare cases, people have developed lumps of fat after the procedure. For the moment, at least, consumers seem convinced. Zeltiq reported net revenue of $111.6 million last year, compared with $76.2 million the year before.

Of course, the next ostensible fat buster is already on the horizon. A drug company in California is developing a fat-melting injection to be aimed, at least initially, at people seeking to downsize a double chin.

source : http://rss.nytimes.com/c/34625/f/640316/s/3b07011d/sc/5/l/0L0Snytimes0N0C20A140C0A60C0A10Cbusiness0Cthe0Eenduring0Epromise0Eof0Ea0Ethinner0Eyou0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm

DealBook: 1nvestor, Bettor, Golfer: 1nsider Trading 1nquiry 1ncludes Mickelson, 1cahn and William T. Walters

Sam Greenwood/Getty ImagesThe investigation is focusing on trading in two different stocks by Phil Mickelson, above, and the gambler William Walters.

The divergent lives of a championship golfer, a high-rolling gambler and a billionaire investor have collided in a federal insider trading investigation.

Federal authorities are examining a series of well-timed trades made by the golfer Phil Mickelson and the gambler William T. Walters, people briefed on the investigation said, focusing on trading in two different stocks. The authorities are also questioning what role, if any, the investor Carl C. Icahn may have had in sharing information about one of the stocks: the consumer products company Clorox.

Mr. Mickelson, a three-time winner of the Masters golf tournament and one of the country's highest-earning athletes, placed his Clorox trade in 2011, the people briefed on the investigation said. Mr. Walters, an owner of golf courses who is often considered the most successful sports bettor in the country, made a similar trade about that time, the people added.

Mr. Icahn, a 78-year-old billionaire and one of the best-known investors in the world, was mounting a takeover bid for Clorox around the time that Mr. Mickelson and Mr. Walters placed their trades.

Heidi Gutman/CNBCAuthorities are said to wonder if trades by a golfer and a gambler were prompted by illegal information from the investor Carl Icahn.

The F.B.I. and Securities and Exchange Commission, which are leading the inquiry along with federal prosecutors in Manhattan, are examining whether Mr. Icahn leaked details of his Clorox bid to Mr. Walters, the people briefed on the investigation said. One theory, the people said, is that Mr. Walters might have passed that information to Mr. Mickelson.

Around the time of the trading, the S.E.C. sent Mr. Icahn a routine request for information about his dealings in Clorox, the people briefed on the matter said. Federal authorities, whose investigation has dragged on for more than two years without yielding definitive evidence of insider trading, are also examining phone records to see whether Mr. Walters spoke to Mr. Icahn shortly before the trades. Mr. Icahn's bid for Clorox ultimately failed. Mr. Mickelson, Mr. Walters and Mr. Icahn have not been accused of any wrongdoing. Mr. Icahn, even if he did leak secret information about his firm's intentions with Clorox, may have done so legally. It would be illegal if he breached a duty of confidentiality to his own investors.

In a separate strand of the investigation, federal authorities are looking into trading in Dean Foods that has no apparent connection to Mr. Icahn, the people briefed on the matter said. Mr. Walters and Mr. Mickelson placed the trades around August 2012, according to the people, just before the food and beverage company announced its quarterly earnings and a public offering of stock for one of its subsidiaries. The authorities are investigating whether Mr. Walters had a source inside the company itself — and whether others who know Mr. Walters may have traded on the information as well.

Mr. Walters, reached on Friday evening, said, "While I don't have any comment, pal, I'll talk to you later."

In an interview, Mr. Icahn said "I don't give out inside information," adding that "for 50 years I have had an unblemished record." Mr. Icahn, who acknowledged knowing Mr. Walters but said he never met or spoke to Mr. Mickelson, argued that any suggestion he did anything wrong is "irresponsible."

Representatives for Mr. Mickelson did not respond to a request for comment. Federal authorities declined to comment.

For two years, authorities had little to go on besides trading records and a hunch. Then last year, F.B.I. agents approached Mr. Mickelson at Teterboro Airport in New Jersey, one of the people briefed on the matter said, asking the celebrity golfer to discuss his trading.

It is unclear whether Mr. Mickelson knows Mr. Icahn or provided any evidence implicating him or Mr. Walters in the trading. It is possible that the investigations will not produce any charges.

But if the investigation proceeds, it could undermine the reputation of one of America's most popular athletes in Mr. Mickelson, who has won five major championships over a two-decade career. And for Mr. Icahn, the investigation might complicate one of the longest running and most successful careers on Wall Street.

Mr. Icahn made his foray into finance as a stockbroker in the 1960s. He later became a professional agitator, haranguing the country's biggest companies to give him a board seat.

Long before activist investing was in vogue, Mr. Icahn was waging war with executives at companies like Motorola, RJR Nabisco and United States Steel, pushing for corporate changes to increase shareholder value. In the 1980s, Mr. Icahn became synonymous with an era of corporate raiding, leading a hostile takeover of Trans World Airlines.

In recent years, his strategy has mellowed some. Mr. Icahn has become something of an elder statesman on Wall Street, often appearing on the CNBC business channel, at investing conferences and even on Twitter, though he continues to pursue headline-grabbing takeover bids for companies like Clorox.

Mr. Icahn laid the groundwork for a Clorox takeover in early 2011, when he disclosed in a regulatory filing that his various investment firms began amassing shares in the consumer goods manufacturer, thinking the stock was undervalued. Shares of Clorox rose about 6 percent in February 2011, after Mr. Icahn disclosed his stake.

The shares jumped again a few months later after he announced an unsolicited takeover bid for the company. In a letter to Clorox, Mr. Icahn proposed buying the company for $76.50 a share and noted that his firms were Clorox's largest investor.

In the days leading up to Mr. Icahn's bid, there was unusual trading activity in shares of Clorox and options to buy the stock, according to published reports at the time. Successful options trading that comes ahead of corporate deals can be a red flag for regulators.

The investigation into the Clorox trading began at the Financial Industry Regulatory Authority, or Finra, Wall Street's self-regulatory group that monitors suspicious trades. In 2011, the people briefed on the matter said, Finra traced a series of well-timed Clorox trades to Mr. Walters and Mr. Mickelson, just as Mr. Icahn was aiming to gain a foothold on the company's board.

Ultimately, Clorox rebuffed Mr. Icahn's overture. By September 2011, Mr. Icahn withdrew the bid.

Because the bid failed, it is unclear what inside information, if any, Mr. Icahn may have been privy to other than the trading strategy of his own firm, Icahn Enterprises. If Mr. Icahn provided Mr. Walters a heads-up about his activities in connection with the takeover bid, it is not necessarily a violation. Under the laws that govern insider trading, it is not illegal to leak secret information about a future trade.

For such a leak to be illegal, Mr. Icahn most likely would have had to breach a duty to keep the information confidential. Since Mr. Icahn never joined the Clorox board, he probably owed no duty to the company or its shareholders.

Yet if any potential bidder for Clorox breached a duty of confidentiality to his or her own investors, then that could present a legal problem. And in certain cases, even if there is no duty of confidentiality, a little-known securities rule might prevent someone who is mounting a takeover bid to leak "material, nonpublic information" about the offer.

It is unclear how well acquainted Mr. Icahn and Mr. Walters are, but they have crossed paths in Las Vegas. Mr. Icahn is no stranger to the city. Over the years, Mr. Icahn has invested in Las Vegas real estate and is chairman of Tropicana Entertainment, a casino company based in the city. Regulatory filings also show that a small Nevada company controlled by Mr. Walters and his business partner was an early investor in the mobile data provider Voltari, whose largest shareholders include Mr. Icahn's investment firms.

Mr. Mickelson and Mr. Walters have participated in the Pebble Beach Pro Am golf tournament during which professional golfers partner with amateurs and celebrities. Mr. Walters won the tournament in 2008.

Mr. Walters, better known as Billy, has drawn federal scrutiny off and on for years. In 1992, he was acquitted of illegal gambling charges. Years later, the Nevada attorney general charged Mr. Walters with money laundering stemming from his gambling operation. The case resulted in three indictments; courts dismissed each one.

Despite the scrutiny, Mr. Walters firmly belongs to the Las Vegas elite, a generous philanthropist who epitomizes the city's unconventional brand of capitalism. He bought up golf courses — his Bali Hai Golf Club has hosted what it calls the "sexiest golf tournament" in the world, featuring female caddies — and auto dealerships. He also helped finance political campaigns.

In 2011, "60 Minutes" captured Mr. Walters's high-roller status. The anchor, Lara Logan, remarked that "It's hard to find anyone better at winning than Billy Walters."

But during the segment, Mr. Walters complained that his stock picks had not fared as well as his sports bets. He discussed how the worst "crooks" he met were on Wall Street, not in the casinos or betting parlors, mentioning that the most money he lost was on stocks like Enron.

Alexandra Stevenson, Azam Ahmed and Peter J. Henning contributed reporting.

A version of this article appears in print on 05/31/2014, on page A1 of the NewYork edition with the headline: Investor, Bettor, Golfer: Inquiry Into Big Names .
source : http://rss.nytimes.com/c/34625/f/640316/s/3b026df5/sc/24/l/0Ldealbook0Bnytimes0N0C20A140C0A50C30A0Cinsider0Etrading0Einquiry0Eincludes0Emickelson0Eand0Eicahn0C0Dpartner0Frss0Gemc0Frss/story01.htm

$2 Billion for Clippers? 1n Time, 1t May Be a Steal for Steve Ballmer

Men with vast fortunes who have bought professional teams as toys are not uncommon. Whether they considered the franchises sound investments is almost beside the point.

The latest major player in the business is Steve Ballmer, the former Microsoft chief executive, who agreed on Thursday to pay $2 billion for the Los Angeles Clippers — nearly four times as much as the previous record price for an N.B.A. franchise.

On Friday, the league said that in light of the sale, it would withdraw its pending charges against the current owner, Donald Sterling.

Could the team possibly be worth that much, fans immediately wondered — or is Mr. Ballmer, whose net worth is estimated at $19 billion, simply indulgent?

In time, the $2 billion bid that seems shocking today may be viewed as a relative bargain.

There was a time when $10 million was considered an outrageous sum to buy the Yankees. It was 1973, the Bronx was crumbling, and George Steinbrenner's purchase (for about $50 million in today's dollars) made jaws drop. Jerry Jones's $140 million outlay for the Dallas Cowboys in 1989 had the same effect, as did the 2012 sale of the Los Angeles Dodgers for $2.15 billion.

Mr. Ballmer, like Mr. Steinbrenner, Mr. Jones and others before him, may be betting that sports will continue to be a growth industry, bringing expanding revenue from broadcast rights, ticket sales and sponsorship deals.

"Everyone looking at this is looking at the future of the N.B.A. and the upcoming TV deals," said Sal Galatioto, the president of Galatioto Sports Partners. He added, "It does significantly boost the price of large-market N.B.A. teams, and all N.B.A. teams."

The Clippers are the 13th-most valuable franchise in the N.B.A., according to calculations by Forbes, which estimated that the team generated $128 million in revenue last year. Nearly 40 percent of that came from fees for television rights — the driving force for major sports deals these days.

The deal for the Dodgers, for example, was largely predicated on the prospect that the new owners — investors from Guggenheim Partners — could set up a local sports network. They did that last year, in an $8 billion, 25-year arrangement with Time Warner Cable.

The Clippers' local cable television contract, for $18 million a year, is nearing renewal, and projections suggest that the team could get as much as $60 million a year. Mr. Ballmer would also benefit from the N.B.A.'s next round of national television deals, which begins in the 2016-17 season. The teams are expected to receive substantially more than the $30 million a year each one currently gets.

The Clippers are a scarce asset, another factor that might have enticed Mr. Ballmer. Clubs in big-market cities like New York and Los Angeles, and cornerstone franchises like the New England Patriots and the Dallas Cowboys, are in position to generate significantly higher bids because there are so few available.

The Clippers are not a cornerstone team, but they are in Los Angeles. And after decades as a doormat, they are on the upswing, with stars like Chris Paul and Blake Griffin. Their more glamorous local rivals, the Lakers, are down.

Assuming his purchase is approved by the N.B.A., Mr. Ballmer, 58, is likely to enjoy significant personal financial benefits. When an investor purchases a sports team, he can attribute a large part of the purchase price to the player contracts he is acquiring. As those contracts expire, their depreciation can offset income.

Given how low interest rates are, he could finance part of the purchase of the team relatively inexpensively, and he could later bring in minority shareholders to recoup some of his purchase.

Still, there are no guarantees that the Clippers will make a profit for Mr. Ballmer. Rob Tilliss, who runs Inner Circle Sports, which advised one of the other bidders, said that there were reasons to be optimistic about the Clippers' financial outlook but that the $2 billion offer was based on wishful assumptions that would all have to come true for Mr. Ballmer to get his money back.

"If you believe in the growth of the league, you believe in the TV rights renewals and you want to be the big guy in L.A., it makes sense," Mr. Tilliss said. "But I can't make the economic argument for you."

The bid was three and a half times the amount the team was recently valued at by Forbes. It was also 20 percent more than the next closest offer. Some analysts said Mr. Ballmer might have purposely submitted a bid that would far surpass those of the other contenders — including a group with Oprah Winfrey — so he could swiftly end the auction and win the support of Rochelle Sterling, who co-owns the Clippers with her husband.

Mr. Ballmer took a similar approach when he ran Microsoft, paying what some analysts thought were obscene amounts for companies. In 2011, for example, Microsoft paid $8.5 billion for Skype, more than tripling what eBay had paid for the company several years earlier.

The team Mr. Ballmer is hoping to buy has never made it past the second round of the N.B.A. playoffs and does not have its own arena, a significant financial handicap.

Mr. Ballmer made one previous attempt at buying a stake in an N.B.A. team. Last year, his group's bid to buy the Sacramento Kings failed; the group had planned to move them to Seattle. Now he stands to play the role of savior and could lobby from within the league to expand to Seattle.

"This comes on the heels of Ballmer going through a wretched fight for the Kings, and he's leaving Microsoft and wondering about what to do next," said Marc Ganis, who advises owners and potential owners. "Now he'll be a hero for stepping up to take over a franchise that the nation wants taken away from Donald Sterling. He will ride in on his shiny steed."

source : http://rss.nytimes.com/c/34625/f/640316/s/3afe4b0b/sc/13/l/0L0Snytimes0N0C20A140C0A50C310Csports0Cbasketball0Csteven0Ea0Eballmers0E20Ebillion0Eplay0Efor0Eclippers0Eis0Ea0Ebig0Ebet0Eon0Ethe0Enba0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm

DealBook: 1nsider Trading 1nquiry 1ncludes Mickelson and 1cahn

The divergent lives of a championship golfer, a high-rolling gambler and a billionaire investor have now collided in a federal insider trading investigation.

Federal authorities are examining a series of well-timed trades made by the golfer Phil Mickelson and the gambler William T. Walters, people briefed on the investigation said, focusing on trading in two different stocks. The authorities are also questioning what role, if any, the investor Carl C. Icahn may have had in sharing information about one of the stocks: the consumer products company Clorox.

Mr. Mickelson, a three-time winner of the Masters golf tournament and one of the country's highest-earning athletes, placed his Clorox trade in 2011, the people briefed on the investigation said. Mr. Walters, an owner of golf courses who is often considered the most successful sports bettor in the country, made a similar trade about that time, the people added.

Mr. Icahn, a 78-year-old billionaire and one of the best known investors in the world, was mounting a takeover bid for Clorox around the time that Mr. Mickelson and Mr. Walters placed their trades.

The F.B.I. and Securities and Exchange Commission, which are leading the inquiry along with federal prosecutors in Manhattan, are examining whether Mr. Icahn leaked details of his Clorox bid to Mr. Walters, the people briefed on the investigation said. One theory, the people said, is that Mr. Walters might have passed on that information to Mr. Mickelson.

Seeking additional leads in the investigation, which has dragged on for two years without yielding definitive evidence of insider trading, the S.E.C. sent Mr. Icahn a request for documents about his dealings in Clorox, people briefed on the matter said. Authorities are also examining phone records to see whether Mr. Walters spoke to Mr. Icahn, whose bid for Clorox ultimately failed, shortly before the trades.

Mr. Mickelson, Mr. Walters and Mr. Icahn have not been accused of any wrongdoing. Mr. Icahn, even if he did leak secret information about his firm's intentions with Clorox, may have done so legally. It would be illegal if he breached a duty of confidentiality to his own investors.

In a separate strand of the investigation, federal authorities are looking into trading in Dean Foods that has no apparent connection to Mr. Icahn, the people briefed on the matter said. Mr. Walters and Mr. Mickelson placed the trades around August 2012, according to the people, just before the food and beverage company announced its quarterly earnings and a public offering of stock for one of its subsidiaries. The authorities are investigating whether Mr. Walters had a source inside the company itself — and whether others who know Mr. Walters may have traded on the information as well.

Mr. Walters, reached on Friday evening, said that "While I don't have any comment, pal, I'll talk to you later."

Mr. Icahn did not respond to a request for comment, while representatives for Mr. Mickelson did not return a request for comment. Federal authorities declined to comment.

For two years, authorities had little to go on besides trading records and a hunch. Then last year, F.B.I. agents approached Mr. Mickelson at Teterboro Airport in New Jersey, one of the people briefed on the matter said, asking the celebrity golfer to discuss his trading.

It is unclear whether Mr. Mickelson knows Mr. Icahn, or provided any evidence implicating him or Mr. Walters in the trading. It is possible that the investigations will not produce any charges.

But if the investigation proceeds, it could undermine the reputation of one of America's most popular athletes in Mr. Mickelson, who has won five major championships over a two-decade-long career. And for Mr. Icahn, the investigation might complicate one of the longest running and most successful careers on Wall Street.

Mr. Icahn made his foray into finance as a stockbroker in the 1960s. He later became a professional agitator, haranguing the country's biggest companies to make room for him on their boards.

Long before activist investing was in vogue, Mr. Icahn was waging war with executives at companies like Motorola, RJR Nabisco and U.S Steel, pushing for corporate changes to increase shareholder value. In the 1980s, Mr. Icahn became synonymous with an era of corporate raiding, leading a hostile takeover of Trans World Airlines.

In recent years, his strategy has mellowed some.. Mr. Icahn has become something of an elder statesman on Wall Street, often appearing on the CNBC business channel, at investing conferences and even on Twitter, though he continues to pursue headline-grabbing takeover bids for companies like Clorox.

Mr. Icahn laid the groundwork for a Clorox takeover in early 2011, when he disclosed in a regulatory filing that his various investment firms began amassing shares in the consumer goods manufacturer, believing the stock was undervalued. Shares of Clorox rose roughly 6 percent in February 2011, after Mr. Icahn disclosed his stake.

The shares jumped again a few months later after he announced an unsolicited takeover bid for the company. In a letter to Clorox, Mr. Icahn proposed buying the company for $76.50 a share and noted that his firms were Clorox's largest investor.

In the days leading up to Mr. Icahn's bid, there was unusual trading activity in shares of Clorox and options to buy the stock, according to published reports at the time. Successful options trading that comes ahead of corporate deals can be a red flag for regulators.

The investigation into the Clorox trading began at the Financial Industry Regulatory Authority, or Finra, Wall Street's self-regulatory group that monitors suspicious trades. In 2011, the people briefed on the matter said, Finra traced a series of well-timed Clorox trades to Mr. Walters and Mr. Mickelson, just as Mr. Icahn was aiming to gain a foothold on the company's board.

Ultimately, Clorox rebuffed Mr. Icahn's overture. By September 2011, Mr. Icahn withdrew the bid.

Because the bid failed, it is unclear what inside information, if any, Mr. Icahn may have been privy to other than the trading strategy of his own firm, Icahn Enterprises. If Mr. Icahn provided Mr. Walters a head's up about his activities in connection with the takeover bid, it is not necessarily a violation. Under the laws that govern insider trading, it is not illegal to leak secret information about a future trade.

For such a leak to be illegal, Mr. Icahn most likely would have had to breach a duty to keep the information confidential. Since Mr. Icahn never joined the Clorox board, he probably owed no duty to the company or its shareholders.

Yet if any potential bidder for Clorox breached a duty of confidentiality to his or her own investors, then that could present a legal problem. And in certain cases, even if there is no duty of confidentiality, a little-known securities rule might prevent someone who is mounting a takeover bid to leak "material, nonpublic information" about the offer.

It is unclear how well acquainted Mr. Icahn and Mr. Walters are, but Mr. Icahn is no stranger to Las Vegas. Over the years, Mr. Icahn has invested in Las Vegas real estate and is chairman of Tropicana Entertainment, a casino company based in the city. Regulatory filings also show that a small Nevada company controlled by Mr. Walters and his business partner were an early investor in mobile data provider Voltari, whose largest shareholders include Mr. Icahn's investment firms.

Mr. Mickelson and Mr. Walters, meanwhile, have participated in the Pebble Beach Pro Am golf tournament during which professional golfers partner up with amateurs and celebrities. Mr. Walters won the tournament in 2008.

Mr. Walters, better known as Billy, has drawn federal scrutiny off and on for years. In 1992, he was acquitted of illegal gambling charges.

Years later, the Nevada attorney general charged Mr. Walters with money-laundering stemming from his gambling operation. The case resulted in three indictments; courts dismissed each one.

Despite the scrutiny, Mr. Walters firmly belongs to the Las Vegas elite, a generous philanthropist who epitomizes the city's unconventional brand of capitalism. He bought up golf courses — his Bali Hai Golf Club has hosted what it calls the "sexiest golf tournament" in the world, featuring female caddies — and auto dealerships. He also helped finance political campaigns.

And he has embraced the high-flying lifestyle that comes with winning. Mr. Walters — who boasts that he has never had a losing year gambling — has homes in Las Vegas, southern California and Arizona. One of several companies he controls also owns a private jet, public records show.

In 2011, "60 Minutes" captured Mr. Walters's high-roller status. The anchor, Lara Logan, remarked that "It's hard to find anyone better at winning than Billy Walters."

But during the segment, Mr. Walters complained that his stock picks had not fared as well as his sports bets. He discussed how the worst "crooks" he met were on Wall Street, not in the casinos or betting parlors, mentioning that the most money he lost was on stocks like Enron and WorldCom.

source : http://rss.nytimes.com/c/34625/f/640316/s/3b026df5/sc/24/l/0Ldealbook0Bnytimes0N0C20A140C0A50C30A0Cinsider0Etrading0Einquiry0Eincludes0Emickelson0Eand0Eicahn0C0Dpartner0Frss0Gemc0Frss/story01.htm

After Losing Time 1nc. Business, Distributor to Close

The second-largest magazine wholesaler in the country, Source Interlink Distribution, which employs about 6,000 workers, will soon cease operations.

The shuttering is the result of a decision by Time Inc. last weekend to stop using Source Interlink as the distributor for its magazine because of unpaid fees.

"One of our largest suppliers has recently decided to cease supply and move in a different direction," Michael L. Sullivan, the company's chief executive, wrote in a letter to his other clients that was obtained and published on Thursday by Bob Sacks, an industry consultant who produces his own newsletter. "As such, it's with a heavy heart that I am writing to advise you that Source Interlink Distribution Company will be discontinuing all operations in the near future."

A spokeswoman said the company had no comment.

In a filing to the Securities and Exchange Commission on Tuesday, Time Inc. said it would not be able to collect $19 million of expected revenue from sales made to the discontinued wholesaler during the second quarter of 2014. It also said it would have to write off $7 million of what it called "receivables" that it had booked in previous quarters.

TNG, owned by the News Group, has agreed to take over most of Source Interlink's distribution duties for Time. Time Inc. said it would lose $1 million in transition costs.

Jill Davison, a Time Inc. spokeswoman, said that the regional markets that Source Interlink served — Southern California, Chicago and the Mid-Atlantic States — might face shortages of popular Time magazines like People and Sports Illustrated for up to 12 weeks. In the S.E.C. filing, Time Inc. estimated that this loss of sales could be around $4 million.

The battle between Time Inc. and Source Interlink, based in Bonita Springs, Fla., reflects the tremendous financial pressure that both magazine publishers and their distributors have been facing as the Internet has decimated newsstand sales and as retailers hand over prime shelf space to other products like candy and gum. In the last five years, the retail magazine business has shrunk 40 percent, to less than $3 billion. And while there were hundreds of magazine wholesalers in the 1990s, the industry has consolidated into just a few major players in recent years: Source Interlink, TNG and Hudson News.

Source Interlink had been trying to keep its head above water by offering clients like Walmart and Rite Aid a different payment model, one it described as a more modern and efficient way of doing business. Under this system, retailers would pay only for magazines that were actually bought. In the conventional system, retailers paid the wholesaler for an entire shipment and then received credit for returns weeks later.

On average, only 35 percent of a shipment is purchased, according to Bill Mickey, editorial director of Folio, which covers the magazine industry, and the rest might be returned. So the new system was appealing to retailers, but was costly for publishers, who would not be compensated for lost and stolen magazines, which can be up to 7 percent of shipments.

Source Interlink had been demanding higher fees from the publishers to help make up for revenue it was losing from retailers.

A few years ago, Time Inc. and Interlink were involved in a legal battle because Interlink had tried to raise the cost of distribution per magazine. Time and other publishers refused and Interlink sued them for antitrust violations. The suit was settled in 2009, but Time did not have to pay the increase.

source : http://rss.nytimes.com/c/34625/f/640316/s/3b01c156/sc/22/l/0L0Snytimes0N0C20A140C0A50C310Cbusiness0Cmedia0Cafter0Elosing0Etime0Einc0Ebusiness0Edistributor0Eto0Eclose0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm

U.S. Consumer Spending Drops Slightly

WASHINGTON — American consumers cut back on spending in April for the first time in a year, taking an unexpected pause after a big jump during the previous month. The results, however, are unlikely to derail an expected spring rebound in the economy.

Consumer spending, which accounts for 70 percent of overall economic activity, fell 0.1 percent in April, the Commerce Department said on Friday. The drop was the first in 12 months. But it followed a 1 percent surge in March spending, which was the biggest increase in more than four years.

"It is obvious that after an unseasonably colder January and February, consumers came out with a vengeance in March," Chris Christopher, an economist at IHS Global Insight, said in a note to clients. "So, April's poor showing on the spending front is payback for a strong March."

Also on Friday, the University of Michigan said that its index of consumer sentiment fell in May as Americans grew more pessimistic about future pay increases, though they remained optimistic about the broader economy. The index dropped to 81.9 this month from 84.1 in April.

Still, Richard Curtin, director of the survey, said that confidence in the first five months of this year had been at the highest level since 2007, before the recession began.

Nearly half of all households expect their inflation-adjusted income to decline over the next 12 months, the survey found. And among those that did anticipate gains, most expect increases of just 1 or 2 percent.

The figure from the Commerce Department reflects reductions in durable goods purchases and in services like utilities. While disappointed, analysts say the results do not change the broader upward trajectory of the economy and predict consumer demand to bounce back in May.

An "improving job market should support stronger spending in coming months," Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note.

The Commerce Department report also showed that income rose 0.3 percent in April after advancing 0.5 percent in March. That was the fourth consecutive monthly climb. The economy has been generating jobs at a solid pace in recent months, including a gain of 288,000 jobs in April, the strongest uptick in hiring in two years.

With spending down and Americans earning more, the saving rate rose in April to 4 percent of after-tax income, up from a saving rate of 3.6 percent in March.

Inflation, as measured by a gauge tied to spending, showed prices rising 1.6 percent from a year ago, up from a 1.1 percent year-over-year price gain in March. However, even with the increase, inflation remains below the Federal Reserve's 2 percent target.

In April, consumers reduced spending on durable goods like autos by 0.5 percent. The drop followed a big 3.6 percent jump in durable goods spending in March. Consumers spent more on nondurable goods, a slight 0.1 percent increase, while trimming spending on services by 0.1 percent. Spending on services, which includes utility bills, had been rising rapidly during the winter, reflecting higher heating costs because of the severe cold in many parts of the country.

Consumer spending remained strong through the first quarter, rising at an annual rate of 3.1 percent. But much of that strength came from increased health care spending, reflecting new enrollments through the Affordable Care Act.

source : http://rss.nytimes.com/c/34625/f/640316/s/3b01204f/sc/2/l/0L0Snytimes0N0C20A140C0A50C310Cbusiness0Ceconomy0Cus0Econsumer0Espending0Edrops0Eslightly0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm

Shortcuts: Tips for Those Who Set Their 0wn Salaries

Taylor Johnson works as a graphic designer, Mary-Kay Demetriou as a marketing consultant and Debra Kling as a color consultant. And they all work as negotiators.

The three are among the one-third of the American work force – about 42 million people, according to the Freelancers Union – who work independently. And as freelancing has increasingly evolved from a hobby or part-time work to a full-time job, those who learn how to price – and sell – themselves are the ones who succeed.

"Many people didn't wind up freelancing by choice, and how to bill and what to charge are not skills most people started with," said Laura Vanderkam, who writes and speaks about time management.

A first step is to determine the right rate for your profession and level of expertise. Talk to others, do market research and join professional organizations where pricing is often a hot topic of conversation.

Lindsay Van Thoen, in a blog for the Freelancers Union, a labor organization, suggested one method for setting an hourly rate, and developing longer-term economic goals — although she warned it's "a guide, not a rule."

Figure out what you want to make yearly and put that aside as a salary you pay to yourself. Then add expenses, such as purchases and overhead, plus the profit you hope to make above expenses. Ms. Van Thoen suggested 10 to 20 percent of your salary.

Divide all that by the number of billable hours you plan to work for a basic hourly rate.

If possible, get a budget from the client before crunching the numbers, she said. "There's nothing worse than doing all of your calculations, giving a client your price and then getting complete silence on the other end because your price is very different from what they expected," she said.

One of the perennial freelancer questions is whether an hourly rate or a flat fee is more advantageous. Both have pros and cons, but as people gain experience and confidence, they tend to change to a per-project system.

"I've moved away from hourly billing for many clients," Mr. Johnson, of Palo Alto, Calif., wrote by email. "My creative process often involves time strategizing over coffee, walking, driving and thinking. At times, I'll take a break from working on a project only to have a sudden flash of inspiration. It's these times away from my Mac that are often worth every billable penny. Billing in hourly (or even 30-minute) increments tends to discourage the creative process and limits my time to actual production time."

In addition, some part of each day – maybe an hour – should be spent on business development, Ms. Vanderkam said, such as networking and researching new projects, and that needs to be covered by your income.

"It's just like grocery shopping isn't just the time in the store, but making the list, driving there and putting away the groceries," she said.

Whether by the hour or by the project, you need to keep track of your time, and many apps are available to help.

Ms. Kling, who lives in Larchmont, N.Y., swears by Toggl, which allows her to easily see the exact minutes spent on each project – she's juggling 30 now — on her computer and mobile devices by using color coding for each job.

While "I'm not a stickler about hours," she said, "Toggl lets me see if the 10 minutes here and there I'm doing for a client add up." Sometimes she even gives a client the time sheet so they can understand that her pricing "is not voodoo." she said. "I don't just come up with a number."

She said Toggl, which is free but can be upgraded for $5 a month, also permitted her to see if she accurately estimated the amount of time she spent on a project and readjust in the future if need be.

Ms. Vanderkam, who has written about such apps, said Toggl was one of the most popular, but there were also tools that keep track of the unproductive hours as well as the productive ones.

RescueTime, for example, runs in the background, timing the minutes spent on various sites or applications. Those "five minutes" spent on Twitter or Facebook might, in reality, be an hour. It's free, but a $9-a-month upgrade also includes services like blocking distracting websites and more detailed reports and filters.

Other freelancers mentioned using Budgetic.com and Itrackmytime.com. Mr. Johnson said he used Roninapp.com, which starts at $15 a month, for invoices. Fanuriotimetracking.com, which also does invoices, costs $59 for purchase and a year of technical support.

Most of the apps have free trial periods, so try a few to see which works best for you.

While an app keeps tracks of the minutes, work is more than that. Freelancers need to know – and communicate – the value they add to a business beyond the nuts and bolts, said Mike McDerment, co-founder of FreshBooks, which sells accounting software for small businesses.

"People start by undervaluing their own work," said Mr. McDerment, who also wrote the free Portable Document Format book "Breaking the Time Barrier,"which addresses pricing strategies for freelancers.

"A lot of people start by saying 'I just hope I get the job,' " he said. But they need to transition to selling the idea that they are a valuable part of a team and "bring expertise and knowledge and talent," to a customer.

Or as Mr. Johnson said, "I'm getting my clients to understand they are paying for a design solution and not just actual production time. By understanding the creative process more, it allows them to better value the service I provide."

Of course, even with the best effort in the world, things go wrong. Ms. Demetriou, the Santa Monica, Calif., marketing consultant, thought she had everything covered when she started a project for a market research company. She provided a timetable, set her hourly rate, had an agreed-upon scope of work and a signed agreement, and kept in touch with her clients with status reports, as well as updating her work online.

But when she sent her first bill, she received a big surprise. She was told the deal was for only 10 hours of work and no money was available to pay the invoice in full.

"I had probably done 50, and they could have seen all along that I was doing way more than 10," she said.

Ms. Demetriou said she believed the budget of the department that hired her was cut between the time she was assigned the work and the time she billed.

"Even though companies are using a lot more freelance talent, they're not always sure how to manage it internally and externally," she said. "And budgets are constantly changing."

She learned a few valuable lessons from the experience: Even with a detailed scope of work, you need to ensure that your contract or agreement specifies the maximum amount a client will pay, something her contract did not include.

Bill early and often. She now bills every two weeks.

Also, if you do end up in a similar situation, negotiate. Ms. Demetriou suggested a payment plan, and agreed to prorate some hours at an administrative rate and some at the higher strategic rate. She did get more money than the company initially offered, although not as much as she felt she deserved.

All of the roles a freelancer must now play can seem overwhelming, but the trick is to build slowly. And if your business takes off, who knows? Perhaps one day you can put in for vacation time.

source : http://rss.nytimes.com/c/34625/f/640316/s/3afffd87/sc/7/l/0L0Snytimes0N0C20A140C0A50C310Cyour0Emoney0Cmoney0Etips0Efor0Efreelancers0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm