FINANCIAL SERVICES

SEC: FORMER CITI EXECUTIVES DIVERTED FUNDS

Two former Citigroup executives were accused by an American regulator of diverting to the bank tens of millions of dollars that should have been used to reduce costs for mutual-fund investors. A former chief executive of Citigroup Asset Management, Thomas Jones, and a former senior vice president of Smith Barney Management LLC, Lewis Daidone, were named in a complaint filed yesterday by the Securities and Exchange Commission in U.S. District Court in Manhattan.

Mr. Jones and Mr. Daidone renegotiated a more favorable transfer-agent contract with First Data Investment Services Group and then kept the savings for Citigroup’s asset-management arm instead of passing the discount along to the mutual funds, the SEC said.

– Bloomberg News

E*TRADE TO BUY HARRISDIRECT

E*Trade Financial Corporation agreed to acquire the Harrisdirect online-brokerage business of Bank of Montreal, accelerating the consolidation of the online-investing industry in America.

In the deal, New York-based E*Trade is paying $700 million in cash for Harrisdirect. The pact follows news of another big online-trading transaction, in which Ameritrade Holding Corporation in June agreed to acquire the TD Waterhouse USA operations of Canada’s Toronto-Dominion Bank.

E*Trade had sought a merger with Ameritrade but a deal between the two rivals didn’t materialize, leading observers to wonder what E*Trade’s next move would be. An analyst at Fox-Pitt, Kelton Incorporated, David Trone, said in a research note that he expected E*Trade would pursue another deal as it faced the prospect of a larger Ameritrade. The Waterhouse and Harrisdirect deals follow calls for more mergers in the online-brokerage industry.

– Dow Jones Newswires

RETAIL

WAL-MART HIRES MINORITY-OWNED FIRMS TO LEAD BOND SALE

Wal-Mart Stores Incorporated, the world’s biggest retailer, has hired minority-owned securities firms to help lead a bond sale for the first time.

Wal-Mart announced the $800 million five-year note sale yesterday, the same day it is asking an American court to reduce the scope of a lawsuit accusing it of discriminating against 1.6 million female employees. Wal-Mart said it doesn’t discriminate and is fighting the case, the biggest class-action lawsuit ever. “It’s strictly coincidence,” a Wal-Mart spokeswoman, Linda Blakley, said yesterday in a telephone interview from the company’s headquarters in Bentonville, Ark. “We’re doing this because it is right for the company and right for the firms.” Ramirez & Company and Utendahl Capital Partners LP are the lead managers of the offering along with Goldman Sachs, Ms. Blakley said.

– Bloomberg News

WHIRLPOOL RAISES OFFER FOR MAYTAG TO $2.6B

DES MOINES, Iowa – Whirlpool Corporation, clearly liking what its due diligence of Maytag Corporation discovered, offered yesterday to acquire the smaller rival for cash-and-stock valued at $3 a share more than it had contemplated three weeks ago. The world’s largest appliance maker said it was willing to pay $2.6 billion for Maytag, including $977 million in debt assumption. Maytag stakeholders would receive $20 in cash and stock for each of their shares, with a collar put on the value of Whirlpool shares.

– Dow Jones Newswires

PRIVATE EQUITY FIRMS MAY BUY SAKS

Shares of Saks Incorporated rose 10% earlier yesterday following a report that a number of private-equity firms are interested in buying the company. Bon-Ton Stores and Cerberus Capital Management may partner in a bid for the company in the range of $28 to $30 a share, Women’s Wear Daily reported yesterday, citing “financial sources in the investment community.”

The trade publication said “speculation is heating up” that bidding for the company’s northern department store chains will “enter a new phase between the third week of August and Labor Day, and that the process will lead to offers to buy Saks Fifth Avenue Enterprises as well.”

Other firms interested in buying Saks include Bain Capital Partners, Thomas H. Lee Partners, and Apollo Management, the according to the trade publication.

– Dow Jones Newswires

ENTERTAINMENT

DECISION EXPECTED IN OVITZ CASE

WILMINGTON, Del. – A decision is expected to be issued this afternoon in the long-running legal fight over Michael Ovitz’s brief but expensive tenure as second-in-command to Walt Disney CEO Michael Eisner in the mid-1990s.

Chancellor William Chandler III of Delaware’s Court of Chancery will rule on whether Disney’s board of directors did its job when Mr. Eisner hired his good friend as Disney’s president nearly a decade ago. Mr. Ovitz found himself out of a job after a little more than a year as Eisner’s second-in-command at the entertainment giant. Shareholders sued to recoup $140 million in exit pay that cushioned Mr. Ovitz’s departure, in a case that bounced around the Delaware courts for years before coming to trial in 2004. If they win, they are asking damages of about $262.3 million, which includes interest from December 1996 through March 2005.

Corporate lawyers are eagerly awaiting the ruling from Chancellor Chandler, top judge of a corporate law tribunal that sets the standard for board behavior in Delaware, where many of the nation’s largest companies are incorporated.

– Dow Jones Newswires

CURRENCIES

YEN REBOUNDS DESPITE PLANS FOR ELECTION

The yen rebounded from its lowest in a week against the dollar on speculation Japan’s economy will extend its expansion even if Prime Minister Koizumi loses national elections scheduled for next month. The Japanese currency advanced from an intraday low of 112.62 per dollar, its weakest since August 1, as Mr. Koizumi responded to the defeat of his plan to sell the nation’s postal service by calling a ballot for September 11. – Bloomberg News

WALL STREET

NASDAQ TO PULL OUT OF SYSTEM THAT LINKS MARKETS

Nasdaq, the no. 2 American stock market, plans to pull out of a 28-year-old system that links major American markets, potentially helping expand its trading of securities listed on the New York Stock Exchange. Nasdaq’s withdrawal from the Intermarket Trading System, a common platform allowing exchanges to route orders for some stocks, may force markets such as the NYSE to develop their own private linkages with the same speed and efficiency of Nasdaq’s system. The departure, pending an approval from the SEC, will occur around June 2006.

– Bloomberg News