It wasn’t a good week for the already tattered legacy of Eliot Spitzer, and no, we’re not talking about the tabloid headlines about the latest exploits of his sometime paramour Ashley Dupre.

For one thing, the lawsuit against former American International Group CEO Maurice “Hank” Greenberg, one of Spitzer’s highest profile prosecutions as New York Attorney general, looks a little closer to ending with a whimper. The Wall Street Journal reported that Greenberg was in talks with Andrew Cuomo, Spitzer’s replacement, though it wasn’t clear how advanced they were or whether they would lead to a resolution of the case.

For another, Spitzer’s regulatory legacy is under fire from two different financial sectors he successfully tangled with in his AG days.

Insurance brokerages, which gave up billions of dollars in commissions they used to take from insurers in return for steering business their way as a result of one key Spitzer reform, are crying foul. The ban on so-called contingent commissions was never applied universally and should either be imposed uniformly or lifted, according to leading players like Marsh & McLennan, Aon and Willis Group.

Turning to another industry where Spitzer’s political downfall was met with quiet rejoicing, Wall Street is increasingly questioning the sweeping reforms to sell-side research that investment banks were forced to accept to settle another Spitzer suit.  At least that’s what former E.F. Hutton president George Ball, who is now president of mid-market bank Sanders Morris Harris, did in an interview with Reuters.

“What happened five years ago was a little like a couple rushing to get married in Las Vegas,” Ball said in an interview. “If you do something in haste, after awhile you can see where some parts are unnecessary or just unwise.”

To be sure, Spitzer wasn’t alone in advocating those reforms, aimed at isolating analysts from pressure from the investment banking side of their firms. They were also endorsed by the SEC. 

But Ball is part of a rising chorus on Wall Street arguing that the reforms, which they say have fueled an erosion in research coverage, went too far.  Frank Quattrone, the star investment banker who fended off obstruction of justice charges for four year, told a Stanford University audience that the Spitzer reforms were making it tougher than necessary for start-ups to go public.

Is there a flavor of opportunism to all this? Maybe, but the grumblings from Wall Street added insult to injury for Spitzer after a state ethics panel filed charges against three of his former aides over accusations they leaked to newspapers information about arch-nemesis Joe Bruno’s travel on state aircraft.

Not to mention those photos of Dupre, who the New York Post helpfully identifed as Eliot’s “gal” heading to meet a new “pal” in a Manhattan hotel.

(Photo by Reuters)

Morgan Stanley’s money managers, entrusted with navigating the world’s financial markets with all kinds of sophisticated strategies, evidently have a little problem with long division.

On Thursday the big Wall Street bank announced that its investment management division snapped up a bigger stake in Brookfield Infrastructure Partners (BIP) than intended. Nearly twice as much.

Morgan received shares of BIP during the January spin-off by Toronto-based Brookfield Asset Management and then bought additional shares in the market. 

Yet what in March was reported to be a 12.6 percent stake in the infrastructure firm was, in reality, a 23.3 percent stake, according to a press release Thursday. That pushes it over the 20 percent threshold for regulatory disclosure requirements. Morgan Stanley blamed the mistake on bad data.

“The foregoing calculation was based on third party market data sources, which stated the issuer had approximately 39.2 million units outstanding,” Morgan said in the statement. Only recently, the firm said, did it learn BIP only had just 23.3 million units.

As a result, Morgan said it will now sell some of its 5.2 million BIP units to get below 20 percent. Using rough numbers, Reuters estimates Morgan needs to sell 530,000 units.  BIP units fell 2 percent on early NYSE trading.

Next time, maybe the firm will look at Brookfield’s financial reports. Or pick up the phone. Morgan Stanley declined to comment beyond its statement.

(Reuters photo)

The first lawsuits are flying but Roche’s experienced dealmakers are unlikely to put more cash on the table just yet.

While it seems clear $89 a share won’t do it – the market has already pushed Genentech stock to $95 and some analysts are talking well over $100 – the Basel-based drugs giant can afford to bide its time. With 56 percent of the biotech company already in his pocket, Chairman Franz Humer is ready to play a long game.

Genentech, which says Roche’s bid for the remaining 44 percent is “unsolicited and unexpected”, has formed a special committee of its three independent directors to assess the proposal. They will be engaging outside advisors, suggesting a lengthy process ahead. 

At the end of the day, most analysts believe a deal looks inevitable and Roche will end up sweetening its current $43.7 billion offer.

 The question is, by how much?

GM has had a rough few weeks, with its share price racing down hill and increasingly frequent questions about solvency. So we note with interest the second sign in two days that the auto giant is looking to pump up its position in higher growth markets abroad. Russian car maker GAZ said today it plans to create a $1 billion joint venture with GM. The director of GAZ’s light vehicles unit, Leonid Dolgov, said the venture will produce around 300,000 cars per year, allowing the partners to compete with French rival Renault in Russia, Europe’s largest car market. Yesterday, a source told us Chinese pickup truck maker Hebei Zhongxing Automobile was in talks with GM and major Chinese automaker FAW Group to explore opportunities for cooperation, including possible equity ties. The source gave no specifics about Zhongxing’s discussions with GM, which runs two ventures with China’s top automaker, SAIC Motor, making cars and minivans. These are hardly high-gear moves, but could amount to welcome pay-offs if things in the U.S. continue to stall.

U.S. investment bank JP Morgan has held talks with potential partners about forming a consortium to break up British mortgage lender HBOS, The Daily Telegraph newspaper reported. National Australia Bank, named by the Telegraph as a potentially interested party, played down the report, while a UK industry source said HBOS had not received an approach. “We’re not sure this is a clever time to make acquisitions,” NAB Chief Executive John Stewart told reporters on Friday, shortly after NAB announced a further A$830 million ($798 million) in losses from its exposure to U.S. mortgages. Without naming a source, the Telegraph said JP Morgan had also approached private equity firms and may talk to Spain’s Banco Santander about a deal that would resemble the break up of ABN AMRO by a group of three banks last year.

The chief of U.S. hedge fund Harbinger Capital Partners, the largest shareholder of Cleveland-Cliffs, has begun pushing the iron ore pellet maker to put itself up for sale, The Wall Street Journal said. Phil Falcone, who wants Cleveland-Cliffs to take advantage of the steel boom, reckons the company could fetch as much as $130 a share, or about $14 billion, the paper said, citing a person close to Harbinger. The move comes a week after Cleveland-Cliffs said it agreed to acquire coal miner Alpha Natural Resources for about $8.3 billion to expand its coal assets and capitalize on the boom in the global steel industry. In a regulatory filing made after the deal announcement, Harbinger Capital, which owns about 18.36 percent of Cleveland-Cliffs common stock, expressed concerns about whether the Alpha deal was in the best interests of shareholders.

Other deals of the day:

* Korea Development Bank, Hana Bank and Kookmin Bank are providing a $400 million bridging loan for LS Cable Ltd’s acquisition of Nasdaq-listed wire and cable maker Superior Essex, banking sources said.

* Daimler, the world’s biggest maker of commercial vehicles, plans to spend billions of dollars to take a stake in Russian truckmaker Kamaz, a source familiar with the situation told Reuters.

* Nuclear operator British Energy has agreed to be taken over by French utility Electricite de France for around 775 pence per share, a source briefed on the matter said.

* Chinese state-owned commodities trading house Sinosteel has extended its offer for shares in Australian iron ore prospector Midwest Corp by a month to Aug. 25, it said in a regulatory filing.

* U.S. hedge fund Harbinger plans to bid for British satellite communication firm Inmarsat, pending regulatory approval, and combine the group with its SkyTerra business.

* French retailer Casino said it had raised its stake in Brazil’s CBD to 35.3 percent from 32.9 percent after it acquired 5.6 million voting shares at 22.9 Brazilian real ($14.52) per share.

* French IT consulting group Capgemini said it had agreed to buy Dutch IT services group Getronics PinkRoccade’s (GPR) Business Application Services BV (BAS) unit in the Netherlands.