$$$Gay Banker crunches numbers. [Things I Can't Tell Boyfriend Number 1]

$$$Married Wall Street'r seeks similarly attached for a relationship "without BS." [Craigslist]

$$$Trump on drugs . [The Trump Blog]

CNBC is reporting that talks between Citigroup and Amaranth have fallen apart. It had been reported that Citigroup was considering a large stake in the fund. The collapse of these negotiations—and the possibility that they collapsed because Amaranth is in even worse condition than its managers have let on—is likely to prompt even more redemption notices from investors.

Amaranth continues to claim that it plans to stay in business but many employees are reportedly not even showing up to work. One friend of ours at a prominent Wall Street firm tells us he's already had two Amaranth resumes cross his desk.

A couple of our readers complained that they were being deprived of the Merrill banker getty down and dirty on the beach with Daniella Cicarelli video because their firm blocks the website hosting it. So we're embedding it right here for even easier access. We apologize in advance for the terrible soundtrack.

One thing we noticed on our second viewing is that Daniella seems to be wearing the same bathing suit bottom in the video as she is in the picture we linked to below. Shouldn't her investment banker boyfriend spring for a second suit?

Not surpisingly, Thomas Hudson doesn't mention a word about the SEC investigation that many reports indicate prompted this weeks mass resignations at Pirate Capital. Instead, he makes it sound like it was a decision he made to bring the fund back to its "roots."

Click here to download a pdf of the whole letter Hudson sent to Pirate Capital investors.

And thanks to the folks at finalternatives.com for hooking us up with the letter.

We deplore this kind of privacy invasion. What is happening to the world when a super hot brazillian MTV personality cannot have sex with her boyfriend on a public beach in privacy?

The hottest topic on many Brazilian voters' minds isn't this weekend's presidential election. It's the video of a Merrill Lynch & Co. banker having a sexual encounter on a Spanish beach with an ex-girlfriend of Brazilian soccer star Ronaldo.

The video showing MTV host The hottest topic on many Brazilian voters' minds isn't this weekend's presidential election. It's the video of a Merrill Lynch & Co. banker having a sexual encounter on a Spanish beach with an ex-girlfriend of Brazilian soccer star Ronaldo.

The video showing MTV host Daniella Cicarelli, 27, a triathlete and model, with Renato Malzoni Filho, 33, a private banker at Merrill in Sao Paulo, has crashed computers on trading floors in Sao Paulo and Rio de Janeiro. The topic dominates office and party chat more than the future of President Luiz Inacio Lula da Silva, who is forecast to win a new term, said Brazilian gossip columnist Ricardo Boechat.

"This has become a sensation, and it's much more exciting than the election,'' Boechat said. "In Brazil, people find it hard to resist anything with a rich, handsome young man and a gorgeous young woman.''

The video, shot by a paparazzo, appears in many versions, including some with soundtracks or subtitles. It begins with the couple kissing on a beach in the resort town of Tarifa on Spain's southern coast, then slowly moving away from sunbathers and surfers toward a more secluded spot. There the couple -- he in a green, tight Speedo-style swimming brief and she in a string bikini -- stand by the water's edge and engage in a range of sexual acts as they enter the ocean.

Just kidding. Here's a link to the video.

Sex Video of Merrill Banker, MTV Host Eclipses Brazil Election [Bloomberg]

DealBook this afternoon provides a good guide to who blamed whom for the excesses of Hewlett-Packard's leak investigation. You get a good picture of why lawmakers seemed so frustrated yesterday by just comparing what Pattie Dunn said to what the executives at the company are saying.

Patricia Dunn

Position: Chairwoman

Still at the firm? No

What she says: Said she did not supervise the investigation and that, until six months ago, she believed that private phone records could be obtained legally by simply calling the phone company and asking for them. Suggested that she relied on Hewlett-Packard chief financial officer Bob Wayman for his “recommendations as to how the security issues at the board level […] could best be handled.” (See Bob Wayman, below.)

Bob Wayman

Position: Chief financial officer

Still with the firm? Yes

What he says: An H.P. spokesman told Reuters that “to the best of our knowledge, Bob Wayman had no involvement whatsoever in this leak investigation.”

He Said, She Said, and They Won’t Say [DealBook]

Opening Bell this morning mentioned that Hewlett-Packard somehow managed to get a deal done amidst all the leak investigation hoopla. In case you missed it, they bought the luxury gaming pc company Voodoo. This morning, Voodoo’s founder put up an item on his blog describing how the deal got done.

Project Vampire is about to Fly... [Rahul Sood's Blog]

If yesterday’s non-stop DealBreaker coverage of the Hewlett-Packard hearings didn’t quite satisfy your needs, you can hop on over to C-Span’s web presence for these two videos. Here’s the first clip. And here’s the second.

We were so busy with Hewlett-Packard and Pirate Capital updates yesterday that we completely overlooked the USA Today story on ethics at Harvard Business School. Time was that teachers were held accountable for the ethics of their students. Think Socrates.

There’s a serious question, however, about whether these ethics classes do any good. Lawyers have to pass a nation-wide ethics test. And look how much good that does.

Bad Harvard grads are poster boys for ethics classes [USA Today]

The Pirate Capital saga continues. Earlier this week, at least seven staffers jumped ship for comfortable ports.

Today Bloomberg is reporting that at least some of the departed are not happy with the letter from fund founder Thomas Hudson explaining the losses.

Hudson disclosed yesterday that analysts Zachary George and David Lorber resigned on Sept. 26, and Carl Klein, the firm's fixed-income portfolio manager, quit the next day. Hudson then fired analysts David Muccia and Matthew Goldfarb, according to his letter.

The letter didn't give a reason for the staff departures and Hudson declined to comment. Stephanie Tran, Peter Desloge, Glenn Haberfield and Chadd Kirk are still at Pirate Capital working with Hudson.

"What Hudson wrote in the letter to investors is a blatant mischaracterization of the circumstances of our departure,'' Goldfarb and Muccia said yesterday in a telephone interview. "We are currently exploring appropriate legal remedies.

Pirate Capital's Hudson Says He's Determined to Improve Returns [Bloomberg]

Okay. Look. At some point you are going to get this guy's resume. And you'll totally have to hire him. Because, let's face it, he is a champ.

Brock Fantasia is the only remaining person in the JPMorgan analyst class of 2002 to still work at JPMorgan, which is in no way testament to the work environment at JPMorgan. In fact, Brock likes to think of himself as the Highlander of his analyst class, wielding an indestructible claymore of corporate finance.

After “totally wrecking” (in his own words) the Analyst-to-Associate program in the M&A group, Brock was briefly moved to the Natural Resources group, due to increased deal flow in the M&A group. Brock graduated from the prestigious University of Pennsylvania Wharton with a degree in Finance and is working in investment banking until he can find a buy-side job. Brock has been interviewing for buy-side jobs throughout the past 3 years and has not been a “good fit” anywhere, despite his ever-burgeoning skill-set. [Editor's P.S.,- Some of this is true. But only some of it. Previous Ask Brocks are here. Send your questions to : brock AT dealbreaker DOT com]

Shalom! Brock here, so let’s Brock out with your stock out.

You may have noticed last Friday that several of your Jewish, semi-Jewish, or born-again Jewish colleagues at the bank left early, or were even absent, without even pretending to be orthodox. No, the Jews on Friday weren’t rushing off to see the matinee of All the King(David)’s Men, The (Broken) Covenant or even Jet Li’s Fearless, they were rushing off to celebrate the Jewish holiday of Rosh Hashanah. Friday afternoon was one of those rare periods in which one comes to appreciate the vast cultural diversity of investment banking, through countless hours of offloaded work. As I sat there Friday night toiling away on an extremely meaningful profile of the B2B Publishing industry, I questioned the dwindling of my deal team. Funny, I always thought my associate Saul Goldblumenthalenfeldberg was a goy. Maybe he was faking, which takes me to my advice for this week: if you work for an investment bank, pretend that you are Jewish.

Rosh Hashanah literally translates to “Head of the Year,” which is why Jamie Dimon celebrates it wearing a yarmulke emblazoned with a golden dollar-sign. Dimon, in another bold stroke of cost-cutting genius, removed all means of leavening bread from JPMorgan dining facilities, including 18-minute stoppers on all ovens, serendipitously ensuring that all JPMorgan starches are pro-Israel. Sans leavening agents, Dimon mistakenly believes that this will cut down on company medical expenses incurred by yeast infections, rampant among middle management, especially VPs and staffers, who are known to pee a little bit every time a managing director says something. On a side note, Dimon is considered an official member of the tribe by many New York Talmudic scholars in his inspired rabbinical attempts to actually circumcise JPMorgan. For Dimon, the removal of the corporate foreskin is the only way to reduce over-head.

Crime/Fraud/Legal/Investigations/Inquiries:
French national assembly approves cut in the state’s stake in Gaz de France, clearing the way for a planned merger with Suez [legal]
Hardball: GM wants billions from Renault-Nissan? Well, maybe they’ll just go to Ford instead [legal]
Sears extends bid for Sears Canada [legal]
Bank of America admits Manhattan branch allwed money laundering [legal]
Bernie Ebbers wants to take his appeal to the Supreme Court [legal]
SEC accuses three former executives of RenaissanceRe Holdings, a reinsurance company based in Bermuda, of accounting fraud [legal]
August A. Busch IV president and chief executive of Anheuser-Busch [legal]
H-P general counsel resigns [legal]

M&A: [? = not yet closed, problems with the deal, lingering questions, etc.]
Microsoft + eBay:?
Martinsa + Fadesa Inmobiliaria: ?
News Corp + two weekly paper groups

For Sale/ LBOs/ Going Private/ Auctions/ Offerings:
Nabi Biopharmaceuticals, bowing to pressure from Daniel Loeb’s Third Point hedge fund, is putting itself on the block [For sale]
Shareholders okay Univision deal [Sold]
What’s Icahn got planned for Federated? [Buying?]
William Ackman buying shares of McDonalds [Proxy fight?]
Vince Sportswear sold [Sold]
STMicroelectronics may be takeover target [LBO]
Royal & Sun Alliance sells US biz to Arrowpoint Capital [Sold]

People & Moves:
Amaranth lets energy trader Mark Hunter go [Fired]

Miscellaneous:
H-P hearing preview [Private equity]
Pension fund says private equity fees are too high [League tables]
Apollo plans European Mez fund [Private JH?equity]

China lets yuan rise a bit on dollar (China Daily)
You wouldn't exactly call it a floating currency, or anything like that, but the Chinese government is slowly letting the Yuan appreciate against the Greenback. The currency broke through the all-important -- but entirely psychological -- 7.9/dollar mark, a crucial level if we're ever going to reverse the trade deficit. And how important is this number? According to local economist Brad Setser, the RMB/dollar is the most important price in the world, more important than the price of oil or the treasury rate. All kudos to Hank Paulson for going over there and giving them what for about currency appreciation. But wait, doesn't this mean we'll have to start paying more for stuff made in China? Um... yay?

EU law violated in US banking data transfer scandal (EUobserver.com)
Remember that little mess from a few months ago, when the New York Times revealed that the US was monitoring the SWIFT international money transfer system? Right, you remember, the one that caused some politicians to suggest that the Times had engaged in treason. Even the Journal got into the act of Times bashing. Now Belgium's prime minister is saying that the system was a violation of Belgian law, though he acknowledged that SWIFT (based in Belgium) was in a legal "no-mans land". It's not clear whether Europe is really upset about the SWIFT breach or all of the European business execs on US jails. Let's just say, if I were America, I wouldn't be taking any stopovers in Europe for the time being... you know, just to be safe.

Wal-Mart employee health coverage downsized (CNNMoney)
Another day, another ludicrous article about Wal-Mart. As we mentioned recently, the company announced that it would lower the premiums on health insurance for its employees while raising the deductible. It sort of balances yet out, and might not seem like a big deal, but it's good for employees. It means the healthy ones get to keep more of their money, while the sick ones end up paying the same amount. Maybe the sick ones end up paying a little more, but that's ok, because they see the doctor more, so there's a logic to it. Because it's insurance though, it still does what insurance is supposed to do, which is to protect the individual from an unexpected calamity that wipes them out financially. But the critics, of course, see the whole thing as shameful, saying that the increased deductible "all but negates" the lower premiums. What does "all but negate" mean? And yes, it sort of should negate the lower premium. From Wal-Mart's stance, it says the majority of its insured employees wouldn't hid this deductible in the year, so the plan will save them money. The horror.

U.S. Fugitive in Options Case Displeased by His African Jail (NYT)
The more we hear about Kobi Alexander, the more we realize that he's pretty lame as far as fugitives go. After having the gall to try and get bail (ha!), he's now complaining about the quality of the food in his Namibian jail. We imagine it sucks too, but then again, that's the price you pay for fleeing to a country that doesn't even have an extradition treaty with the US. He could've gone to Italy or France if he'd wanted, where the food is probably better, but then he'd probably already be back in Brooklyn facing charges. And he's been spending the last several weeks at this resort and casino in Namibia. Ok, maybe he knew he was bound to get caught, and wanted to spend his last days of freedom in style. But if he were a serious fugitive, he'd have gone out into the country, and dropped off the grid, as opposed to staying at resort.

$$$Nick Maounis's unfortunate yearbook picture, circa band-geek years. [Wall $treet Folly]

$$$25 yo banker seeks date to the Latin Grammy Awards; rice and beans beforehand. [Craigslist]

$$$"ATTRACTIVE BANKER FOR SEXY LATE NIGHT OWL"; I can't think of anything offensive to say about owls. yet. [Craigslist]

Which private investment and advisory firm founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman took the company Raytheon Hawker 800 to the embarrassingly déclassé (we're talking on the MySpace level) Southwest Florida Int'l Airport?

Which Forbes 400 octogenarian from Philadelphia flew her Gulfstream V to Luton (UK) Airport, phamaldehide and all?

Which Oracle CEO-- who Indian-gave Harvard $115 mm last year-- made the trip to San Fransisco Int'l on his Bombardier Global Express?

Both Pattie Dunn and chief executive Mark Hurd denied knowing about the techniques of Hewlett-Packard’s investigation, including pretexting and attaching tracer software in an email.

Dunn had a pretty rough time in front of the committee. She testified for more than four hours before a group of lawmakers whose attitudes ranged from skeptical to hostile. The subcommittee seems to have spent most of its energy questioning Dunn because by the time Hurd’s time came around, the panel appeared to have lost some of its fire.

Or, you know, maybe it was just because she’s a woman.

And, as we were writing this item, the hearing just wrapped up for the day.

Hewlett-Packard Chief Hurd Says Leaks Weren't His Top Priority [Bloomberg]

Kobi Alexander must not live in the same reality as the rest of us. In our reality, fugitives discovered hiding out on a distant continent don’t get released on bail when they are caught. In Kobi’s reality, the fugitives totally get set loose. Especially if they promise they’ll come back!

So which reality does controls the Namibian courts? We’ll find out on October 2nd, when Kobi has his bail hearing. Until then, Kobi is going to be staying in jail.

Comverse Ex-CEO Alexander Has Namibia Case Postponed [Bloomberg]

We’re asked a lot about how you can get started in hedge funds. Here’s your chance. According to Bloomberg’s updated report, Pirate Capital may be looking for an analyst to replace the four who resigned or were fired this week. Get those resumes together and send them up to Norwalk!

Here’s Bloomberg’s quick summary of who walked the plank this week, and who is still aboard Captain Thomas Hudson’s ship.

The letter said analysts Zachary George and David Lorber resigned on Sept. 26, and Carl Klein, the firm's fixed-income portfolio manager, quit the next day. Hudson then fired analysts David Muccia and Matthew Goldfarb, the letter said.

Still at Pirate are Stephanie Tran, Peter Desloge, Glenn Haberfield and Chadd Kirk, according to the letter. Hudson said he may hire one analyst.

Pirate Capital Says Half of Investment Staff Resigns [Bloomberg]

The New York Post has a story today on the daughter-marrying hedge-fund manager Bruce McMahan. There’s not a lot new in the story but it serves as a useful confirmation that this really happened .

It’s a bit easier of a read that the original New Times story too, so if you missed yesterday’s item you might as well start with this one.

One of our favorite parts of this story is that running a multi-billion dollar hedge fund is apparently a step-down on the ambition ladder for McMahan. He started out trying to found his own country. A country made of trash.

After graduating from the University of Southern California in 1960, he planned to sink a mothballed World War II ship off the California coast.

Then he'd pile on concrete, clay, landfill and garbage - to create an island outside American territory.

There, he and his partners were going to corner the world market on abalone fishing - and not have to pay a penny in taxes.

The plan never got off the ground - and it's not mentioned in his official biographies.

After bumming around Europe for six years, he washed up on Wall Street, at PaineWebber. He later moved to Bear Stearns where he became a partner.

He branched out on his own in 1980, when he started his own trading firm and fund.

A Father Who 'Married' His Daughter [New York Post]

+ +

Having burned all of our bridges with Connecticut, we really had to dig deep to come up with today’s installment of our twelve-part series, “Bro’ing Out With Bankers: The Commute” (today is part II; hunker down—we’ll get there, and we’ll do it together or so help me God I’ll pull this car over and you can walk). Yes, after crossing every town in Fairfield County off the dry erase board (like we care!) that ‘Breaker editor John Carney had so lovingly—albeit while hopped up on amphetamines and pure hate—printed out in his best cursive, we had our work cut out for us. We scraped the bottom of the barrel and Williamsburg by way of the New York Water Taxi was what we—John—decided upon. Per usual, this was not a trip we wanted to take alone. Unfortunately, Pete was busy lying in a pool of (what we can only hope was) his own vomit and all of our other friends either A. Claim to have jobs or B. Are egomaniacal pricks whose Pavlovian conditioning decrees that they only stand at attention when in the presence of either Junior Mint-toting hookers or women that remind them of their mothers (we’re looking at you, Tom, in particular; Joe Kelley, you’re also being watched), with a few—Rothbard—who encapsulate both, however, statistically speaking, constitute a very small percentage of the group—though you know we never say no to a Venn Diagram and we’ll include this one after the jump.

In the grand tradition of continuing to make money off of dead businesses in the eBay aftermarket (see here), a reader notes that Amaranth swag is now up for auction here.

The seller's description:

Get yourself a peice of the biggest hedge fund loss in history, Bloomberg news most ever searched item. Bought for marketing, sold here for memorabilia. Luxury large beach towel, quality polo shirt in 'Amaranth Green' and logo baseball cap, as worn by the infamous Brian Hunter himself. Halloween costumes? This is the chance to get into something really scary.Office partys, christmas parties, amuse your fellow traders or dealers. A percentage of profits made are guaranteed to maybe, perhaps,possibly, erm....might do, probably won't, not on your nelly, no 'kin chance, be donated to the impoverished hedge fund traders. The TRADERS.....THINK OF THE TRADERS.....WON'T SOMEONE JUST THINK OF THE TRADERS!!

Amaranth: 6 Billion Dollars Later and This is All That's Left [eBay]

Pirate Capital has been hit with redemption notices from at least three fund of funds, with more expected, according to a DealBreaker source. The redemptions are said to be prompted by poor performance in recent months.

The fund has lost its marketing department as well as their analysts, according to the source. Among those we're told have left the fund is Zachary George, who featured so prominently in last year’s New York Magazine story (and is pictured in the item directly below this one.

“It's a bloodbath,” the source says.

The best (unconfirmed detail) we've heard is that just last week Pirate Capital had a boatcruise that left from Chelsea Piers. At the end of it, we're told they handed out baseball caps emblazoned with the motto "SURRENDER THE BOOTY." Emphasis now decidedly on Surrender.

Update: Bloomberg confirms: "Pirate Capital LLC said five of its ten investment professionals resigned and it will close its funds to new investments, according to a letter to investors."

Update II: Reuters has more details.

Thomas Hudson, founder of the $1.7 billion fund, said in the letter that two analysts, Zachary George and David Lorber, have resigned from the firm. On Wednesday, fixed income portfolio manager Carl Klein resigned, said Hudson. Later on Wednesday, Hudson said he asked for the resignations of two other analysts, according to the letter.

"Effective Oct. 1, we are closing the funds to new investors," said Hudson in the letter. "I have no intention of liquidating positions or closing the firm. On the contrary, I fully intend to refocus, streamline and navigate the portfolio back to the positive performance I began the firm with."

Now CNBC's David Faber is reporting that all or most of Pirate Capital's analysts have left the fund following a dispute about handling the SEC investigation announced on Tuesday.

Zachary George, where are you?

Send tips to tips (at) dealbreaker (dot) com.

We've been hearing today that Pirate Capital might be imploding. Commenters have told us that "all of Pirate's analysts quit" and claimed that the SEC raided its offices this morning. Several calls this morning to people at Pirate Capital went directly to voicemail, and messages left went unreturned. A few moments ago we reached an actual human being at Pirate.

"No comment," the actual human being said. When asked to identify herself, actual human being said, "Well, I'm just a temp."

So the temps are handling press calls? That doesn't seem like a good sign.

On Tuesday, the Wall Street Journal reported that the SEC is investigating whether activist hedge fund violated securities laws by failing to properly disclose it was selling stocks.

If you've got anything on Pirate Capital please email us at tips (at) dealbreaker (dot) com. Thanks!

[Ed.--You may remember Pirate Capital as the smallish hedge fund ($200 mil under management) that was the primary narrative thread in this New York Magazine cover story, wherein they claimed 32% returns. Here's how they apparently explained hedge fund investings to the reporter:

To run money, which is how managers refer to what they do, requires little more than a few computers. Zach’s boss likes to say, “I could run $100 million by myself.” The theory is that they’ve got an almost athletic gift for investing. They’re the type who can, as one manager did, call the direction of the market correctly 22 days in a row.

SEC probes Pirate Capital over stock sales - WSJ [Reuters]

It was a bit shocking this morning when CNBC cut away from the Hewlett-Packard hearings in the middle of Patricia Dunn answering the first question the subcommittee asked her. Our first thought was that something really big must be breaking if they are going to pull away from Dunn's testimony so suddenly.

So what were they pulling away for? Power Lunch's field trip to the Four Seasons! Forget the biggest business news story of the morning, CNBC has a fluffy feature they've been hyping all week.

Bloomberg stayed on the hearings, of course. As did CSPAN.

But CNBC doesn't like to have its lunch interuptted by pesky stuff like business news.

Can we take a break from all this Hewlett-Packard business for a minute and talk about MySpace? We first heard about MySpace when one of our favorite rock-and-roll lawyers posted a bulletin to her friendster account announcing, “I’m outta here! Check me out on MySpace suckers!”

In the couple of years since then MySpace has gone from a niche space for emo kids and the bands they love to a genuine cultural phenomenon. And it's done this despite the fact that its search function is nearly useless and its user interface is completely heinous.

Yesterday RBC Capital analyst Jordan Rohan said that he believed MySpace could be worth $15 billion. This provoked gawking of disbelief from many observers, and flashbacks to 1999 for others.

Paul Kedrosky, however, has an even more cynical take. On his Infectious Greed blog he warns readers not to take the $15 billion valuation seriously. It was just analyst posturing, trying to get attention.

Like Henry Blodget during the bubble did with Amazon, and other analysts did with Qualcomm and others, putting up oversized estimates of a company's value is a marketing exercise for an analyst, not an exercise in financial valuation. The number doesn't matter; it is simply a piece of red meat to attract the media pack, like me saying, Draper-style, that one of my portfolio companies is worth a billion dollars (which it is, of course).

The most surprising thing about RBC analyst Jordan Rohan's comment that MySpace could be worth $10-$20 billion in a few years is that he deemed this assessment "audacious"--and the press seemed to agree. Why is this audacious? In little more than two years, MySpace has come out of nowhere to become the 7th biggest site in the U.S. Per NetRatings, it now has 50 million monthly users--closing in on half of Yahoo!'s domestic user base--and it is still growing at a fantastic rate (a reported 250,000 sign-ups a day). MySpace recently signed a $900 million multi-year search deal with Google, showing that the revenue is starting to follow. Etc. Given all this, the theory that, in a few years, MySpace could be worth less than half of what Yahoo is worth with its now-battered valuation seems eminently reasonable. On its current trajectory, in fact, MySpace could end up being worth a lot more.

Read that again and tell us that’s not the sound of a true believer speaking.

MySpace and the Analyst Posturing Game [Infectious Greed]

Could MySpace Be Worth $15 Billion? Easy [Internet Outsider]

Congresswoman DeGette is getting somewhere with her questions. She’s asking about the creation of a fictional disgruntled employee named “Jacob” in a “covert operation” directed against a reporter.

DeGette asks Dunn about Jacob. Dunn says that while she “initiated” the investigation at the board’s request, she did not want to get involved in approving or disapproving its operations. This was a management issue in her view. When staff members approached her for approval of Operation Jacob, she directed them to management.

Who at management? Mark Hurd!

That’s right. Pattie just stuck the “responsibility for investigative methods” scarlet letter on the CEO and chairman of H-P. Ka-pow!

Next up, under questions from Congressman Joe Brown, Pattie says that she initiated the investigation through the company's CFO, telling the subcommittee that he had oversite over all the functions at the company that would have been involved in the investigation.

It's all management fault! Take that H-P shareholders!

Subcommittee chairman Ed Whitfield begins the questioning with the obvious point: Come on, Pattie, you look like a smart girl. Did you really think your investigators accessed to private phone records without using deceit or fraud? Where did you think these things were publicly available?

Dunn’s answers were, let us say, unpersuasive.

The real action comes when Congresswoman Diana DeGette gets her turn. She asks Dunn a couple of questions, and when she decides Dunn is giving her the runaround, she cuts her off and moves on to questioning Sonsini. Bet it’s been a long time since anyone talked to Dunn like that. You aren’t in the board room anymore Pattie!

Former Hewlett-Packard chairwoman Patricia Dunn opens the second panel with a statement defending the need for an investigation into board room leaks. She backs away from taking responsibility for the investigation, however, saying she undertook it at the request of other board members, delegated it to others, and was deceived about the methods of the investigation.

“I’m neither a lawyer or an investigator,” she tells the committee, explaining she relied on others to assess the legality of the investigation.

Now for some non-substantive observations. Pattie has presence. She speaks with confidence, and you can see why someone would want her as the chair of a board of directors. Also, she’s pretty. When the camera pans out, you can see that she wears her tan suit well.

Larry Sonsini is up next. He spends most of his statement decrying pretexting, calling it “probably illegal” and saying it should be made “clearly illegal.”

Non-substance: Larry looks like the archetypical lawyer. Blue pin-striped suit, look of serious concern on his face. He’s handsome in his own way, exuding power and intelligence.

Fred Adler, a Hewlett-Packard security official, gives the third and final opening statement. He says he hopes his testimony will help “clarify the law.” Translation: what we did was not clearly illegal. It’s the fault of vague laws. Not H-P.

Non-substance: Watching Freddy speak after Pattie and Larry is illuminating. You sense immediately that he is not the executive type. His eyes lack that “master of the universe” confidence. He’s more or less a cop.

The first panel is at the witness table before the House committee looking into the leak investigation at Hewlett-Packard. The star witness is resigned-as-of-this-morning general counsel Ann Baskins (pictured left). Or she would be the star if she didn’t take the Fifth Amendment. Each witness declined to make an opening statement, a sure sign they will invoke their fifth amendment rights.

And sure enough, starting with Baskins, that’s exactly what they are doing. As the committee chair asks them a question about their actions in connection with the investigation, they each invoke the fifth amendment, confirm that they intend to invoke the fifth amendment to any questions asked and then are released from the committee.

Baskins, however, actually answered one question, confirming that she had resigned from Hewlett-Packard.

Next panel please!

[Next Up: Dunn, Sonsini and Adler. Prediction: No Fifth Amendment here. Pattie will come out swinging against board room leaks.]

We'll be posting a lot on the Hewlett-Packard hearings today, keeping you updated on the action. We're expecting it to get pretty hot.

Some predictions: Probably a half dozen or so witnesses will take the fifth amendment. Patricia Dunn will avoid responsibility. Larry Sonsini will get all lawyerly. Mark Hurd will, well, actually we're not sure what he's going to do. The suspense is killing us!

But we don't want you to be left out. Or to have to rely on CNBC's coverage. You can watch the hearings without commercial interuption on C-Span 3 today. Or you can play along at the office by listening to the hearings live right here.

We have no idea whether University of Florida Warrington College of Business lecturer is actually high in the two videos that turned up on Boing Boing. He sure sounds at least a little bit baked. But maybe he’s just really, really relaxed and totally goofy.

If he is high, we’ve got the feeling that this could be a new trend: twosed* business school professors. Somehow we doubt it will catch on at Wharton, however. Smoking up in Philadelphia just isn’t the same as smoking up in San Diego or Gainesville.

*[Editors Note: The word “twos” is our new favorite drug lingo. Here’s the official explantion from a good friend of DealBreaker: "Well, it started when we were in college. We'd roll joints. The person who rolled the joint would smoke first. The person who yelled "twos" first would be the person who got it next and that would determine the direction the joint was passed around in the circle. Pretty soon, smoking became getting twosed.” Please note, drugs are probably bad for you.]

Video: apparently-baked biz school prof who was soon fired [Boing Boing]

You know you want it.We’re bringing this back for the third day running. That’s right, you have yet another chance to take a moment to tell us a bit about yourself. You can even leave a comment in the reader survey to tell us what you really think!

And, yes, by popular demand, we’ve made Holly Valance the official mascot of the DealBreaker reader survey.

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Who are we kidding? There’s not going to be a quick summary of the news of today’s Hewlett-Packard action. We’re going to be sorting through the testimony of the various players at today’s congressional hearings for days to come. Just like everyone else.

Still, there’s some exciting news going into the hearings. Ann Baskins, H-P’s general counsel, has resigned. It’s said she’ll be taking the Fifth at the hearings, as will some of the investigators.

Pattie Dunn is going to testify that she had no reason to believe the investigation used illegal methods. Expect some tough questions on that one. Questions like: so you thought stealing the phone records of your board members was legal?

They’re in the hearing room right now. Some lawmakers are jabbering. It’s on!

Crime/Fraud/Legal/Investigations/Inquiries:
French national assembly approves cut in the state’s stake in Gaz de France, clearing the way for a planned merger with Suez [legal]
Hardball: GM wants billions from Renault-Nissan? Well, maybe they’ll just go to Ford instead [legal]
Sears extends bid for Sears Canada [legal]
Bank of America admits Manhattan branch allwed money laundering [legal]
Bernie Ebbers wants to take his appeal to the Supreme Court [legal]
SEC accuses three former executives of RenaissanceRe Holdings, a reinsurance company based in Bermuda, of accounting fraud [legal]
August A. Busch IV president and chief executive of Anheuser-Busch [legal]
H-P general counsel resigns [legal]

M&A: [? = not yet closed, problems with the deal, lingering questions, etc.]
Microsoft + eBay:?
Martinsa + Fadesa Inmobiliaria: ?
News Corp + two weekly paper groups

For Sale/ LBOs/ Going Private/ Auctions/ Offerings:
Nabi Biopharmaceuticals, bowing to pressure from Daniel Loeb’s Third Point hedge fund, is putting itself on the block [For sale]
Shareholders okay Univision deal [Sold]
What’s Icahn got planned for Federated? [Buying?]
William Ackman buying shares of McDonalds [Proxy fight?]
Vince Sportswear sold [Sold]
STMicroelectronics may be takeover target [LBO]
Royal & Sun Alliance sells US biz to Arrowpoint Capital [Sold]

People & Moves:
Amaranth lets energy trader Mark Hunter go [Fired]

Miscellaneous:
H-P hearing preview [Private equity]
Pension fund says private equity fees are too high [League tables]
Apollo plans European Mez fund [Private equity]

Chicago greets 1st Wal-Mart, but wonders where's Elmo? (Reuters)
After a lot of controversy and white-knuckle Alderman meetings, Chicago saw its first Wal-Mart open yesterday. By all accounts it was a smashing success. Shoppers lined up around the corner to get a chance to go into the store, and it was revealed that 15,000 people applied for the 400 positions to be had. What's not to like? Well Reuters founds something. Much to the chagrin of some shoppers, Wal-Mart did not have the hot toy TMX Elmo in stock. The company insists that it's at the mercy of the toy's maker for new shipments, but the not-so-subtle implication is that Wal-Mart is shafting its poor customers by not allocating any TMX Elmos to stores in poor neighborhoods. Or, perhaps the insinuation is that the store wouldn't have seen the lines that it did, had it not been for the expectation of a fresh stock of TMX Elmos. We'll be reporting as more word breaks.

Paris Auto Show to Preview 60 New Models (AP)
...and none of them will ever be seen on the road. That's right, auto shows are like fashion shows. It's the same reason you can't go into Macy's and buy that one-armed dress you saw at a London fashion show, or the seven-foot tall hat that one model was wearing. The clothes aren't made to be sold; they're made to be talked about, and shown on E! And so, at the Paris Auto Show, the premier event in the world (though we were always partial to the Geneva one, just a matter of taste) the world's struggling car makers will slap on a happy face, talk about fuel cells, talk about innovation, and perhaps show a car of the future. But you're still gonna be buying cars that get 19 mpg for some time. Better learn to enjoy what we got.

Mobile ESPN Is to End Venture, Seek New Strategy (WSJ)
Aww damn, now I can't get late breaking news, up-to-the-minute sports clips and highlights from Sportscenter on my phone. And how am I going to update my fantasy team with one push of a button!? After less than one year in business, ESPN has concluded that its foray into being a cell phone company was a total failure Despite constantly flogging itself on ESPN (the TV channel), the service never really took off... at all. That's ok though, we just hope the news doesn't stop the Bloomberg TV channel from doing its own mobile phone operations. Although, the screen size -- even on a Treo or Blackberry -- maybe a little small for the information its gonna pack onto the screen.

HP General Counsel Resigns (Business Wire)
As has been pretty much expected from the beginning, Ann Baskins, HP's General Counsel has resigned, effective immediately. Baskins had a 24-year career with the company, which all came crashing down when it got into the whole identity fraud business. So far, most of the attention has been on Dunn and Hurd, but from the beginning, the sharper eyes at identified Baskins as the one who could be in trouble. In fact, if charges ever end up being brought against people at HP (still waiting on that) Baskins could be in trouble.

$$$Butlers are people, too. And they have just as much a right to take part in insider trading as you do. Maybe even more. [Wall $treet Folly]

$$$Business dinners. As long as you don't fuck any waiters in front of your client, you're good to go. (Exceptions can, obviously, always be made). [Banker's Ball]

$$$If someone will fuck my boss, I'll get a 50k bonus at Christmas. Let's make a deal. [Craigslist]

It's just been one day since our "H-P Sympathy Watch" picked up on the "Patricia Dunn is the next Martha Stewart" trend. We had the feeling that this sort of thing was bubbling up from below. You could see it coming. The only solid evidence we had for the trend, however, was a post on the Conglomerate Blog titled "The Scapegoating of Patricia Dunn." It might have been a stretch to call one blog poast a trend but we try to stay ahead of the curve and spot trends as they develop.

Did we call it prematurely? Not at all. Today Conglomerate pushes the Martha meme even further.

I am interested in focusing on another potential "lesson from HP," raised by one of my colleagues at dinner last night. This colleague has had extensive experience as an affirmative action officer at a major university and as as an organizational scholar. She wondered whether the events at HP might be related to the fact that women were in charge. Of course, the investigations were spearheaded by Patricia Dunn, and one of the principal officers in charge of the investigations was General Counsel Ann Baskins.

Gender might figure into this story in several ways. For example, women who are outsiders to the clubby world of corporate directors may rely too much on formal procedures and not enough on informal mechanisms. Women leaders may feel the need to be overly tough or results-oriented to overcome stereotypes of weakness in a way that men don't. Or the reactions to mistakes by women might be more harsh, with less forgiveness for error, than reactions to men. I am not sure whether Viet Dinh's W$J commentary can be attributed fully to Tom Perkins, but the forgive-and-forget attitude toward Mark Hurd stands in stark contrast to the condemnatory attitude toward Patricia Dunn, especially since Hurd and Dunn consulted together on the investigations.

It's hard to know whether any of these speculations has traction, especially from this distance, but if Larry ever pursues a study of corporate governance scandals in the "good governance" era, I would suggest including gender as one of the variables.

Paul Atkins is our favorite SEC commissioner. When last we met him, Atkins was explaining how certain kinds of options timing schemes might not be quite the scandal they were being made out to be. Today he’s being quoted in the press saying that the Amaranth meltdown shows that the post-LTC risk controls work and no further regulation is needed.

"If you look at the latest one with Amaranth, it looked like the system worked as far as the prime broker getting nervous about exposure and taking steps to ensure it did not grow," Atkins told reporters during a tour of Europe.

"On the whole, from what I can see... the system worked."

Asked if new regulation was needed, Atkins said: "Not at all."

SEC's Atkins says risk system worked with Amaranth [Reuters]

When we last heard of Bruce McMahan, the president and CEO of the Argent funds, he was buying a watch that once belonged to Horatio Alger. Just another story of a hedge fund guy buying collectible art and artifacts. Kind of boring.

It turns out that there was a bit more to McMahan. Or less. McMahan married his 35-year-old daugher in 2004, according to a report in the Broward-Palm Beach New Times. The report says the fund manager initially seduced his daughter while showing her a video of Braveheart.