DealBook: Senator Calls for Inquiry Into Herbalife

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Two Obama proposals offer sensible changes to the background check system.

The most vulnerable suffer when technology contracts are bungled.

China Graft Inquiry Sweeps Up Billionaire Oil Entrepreneur

The entrepreneur, Hua Bangsong, 47, is “now assisting the relevant authorities in the P.R.C. in their investigations,” according to a filing made late Monday to the Hong Kong Stock Exchange by Mr. Hua’s company, Wison Engineering Services.

A crackdown on corruption in China has intensified in recent weeks, focusing on the oil industry. Mr. Hua’s company is one of the largest nonstate contractors to the oil and gas industry in China, and counts the China National Petroleum Corporation, or C.N.P.C., as one of its biggest customers.

Last week, four senior managers of C.N.P.C. and its subsidiary, PetroChina, were removed from their positions and placed under investigation on suspicion of what an official statement called “grave violations of discipline,” almost always a reference to corruption, bribe-taking or embezzlement.

The investigation appeared to escalate on Sunday when Jiang Jiemin, director of the powerful commission that oversees the government’s stakes in the largest nonfinancial state companies in China, was also cited on suspicion of “grave violations of discipline,” according to a statement on the Web site of the party’s Central Commission for Discipline Inspection. Mr. Jiang had been general manager, then chairman of C.N.P.C. until March.

Mr. Jiang, a full member of the party’s elite Central Committee, became the highest-ranking official to be publicly cited for scrutiny since President Xi Jinping came to power last November. Mr. Xi pledged to battle official corruption at levels high and low, taking down “tigers and flies.”

People with knowledge of the matter who cited senior officials said the investigations were centering on associates of Zhou Yongkang, one of China’s most senior leaders, who retired in November after five years in charge of the state security apparatus and had been a longtime oil executive and general manager of C.N.P.C.

In announcing that Mr. Hua, the entrepreneur, was assisting the investigations in China, Wison sought on Monday to defend its business ties to PetroChina.

“The company operates legally,” Wison said, adding that prior to its December listing on the Hong Kong stock market, it “completed the necessary compliance check.”

British Inquiry Ties 787 Fire to Beacon

Britain’s Air Accidents Investigation Branch, which also called for a broader safety review of similar devices in thousands of other passenger jets, made its recommendations on Thursday after finding signs of disruption in the battery cells of an emergency transmitter on a 787 Dreamliner that caught fire while parked at Heathrow Airport last week.

Most passenger jets do not have fire suppressant systems near the devices, which send out a plane’s location after a crash. If a fire occurred in flight, the British investigators said, “it could pose a significant safety concern and raise challenges for the cabin crew.”

Boeing’s innovative new plane, which cuts fuel costs by 20 percent, is crucial to the company’s future. But the 787 has faced a series of setbacks since its introduction in late 2011.

Another type of battery caught fire earlier this year, prompting the F.A.A. to ground the plane for several months. On Thursday, a Japan Airlines 787 was forced to return to Boston shortly after takeoff. The airline said an indicator had suggested maintenance might be needed on the fuel pump, and the pilots, who were headed for Japan, turned back as a precaution.

The British findings stirred up an immediate debate, as various players in the aviation community sought to determine if the emergency transmitters posed enough of a safety threat to temporarily dismantle or remove them.

Although Britain is still investigating the cause of the fire at Heathrow, Boeing said it supported the recommendations as “reasonable precautionary measures.” Honeywell Aerospace, which makes the 6.6-pound transmitters on the 787, said the proposals were “prudent,” though it remained “premature to jump to conclusions” about the cause of the fire.

Thomson Airways in England said it would remove the batteries from its 787s. Other carriers that use similar transmitters, from major airlines to corporate jets, were left to decide whether it was safe to keep using them. The F.A.A. decided it needed more time to evaluate the proposals, which could conceivably lead to the removal of the batteries or the transmitters from most of the planes made by Boeing, Airbus and the smaller companies that make regional and business jets.

Federal officials said the lack of definitive evidence about the cause of the fire — and the fact that none of the transmitters had been known to cause a fire in more than 50 million flight hours — suggested they should take more time in reviewing the matter.

While some industry officials were surprised that the agency did not embrace the British recommendations more readily, Hans J. Weber, the president of Tecop International, an aviation consultancy in San Diego, said: “That’s just the way bureaucrats work. There’s always so much harrumphing, like, ‘You can’t tell us what to do. We will make up our own mind.’ ”

Still, he said, American regulators could end up issuing an advisory to plane owners to at least inspect the transmitters.

Robert Mann, an aviation consultant in Port Washington, N.Y., said the agency has to consider what it would mean for safety if planes fly without the transmitters, which have been particularly helpful in locating the wreckage of smaller planes.

The British recommendations, contained in a three-page interim report on the fire investigation, provided the strongest evidence yet that the emergency locator transmitter played a significant role in the fire on the Ethiopian Airlines 787. The findings were good news for Boeing because the fire most likely centered on a generic piece of equipment that is on many types of planes rather than one of the new systems on the Dreamliner.

Inquiry Suggests Chance That Mechanical Failure Had Role in Crash

Investigators in the cockpit of the wreckage found the auto-throttle switches set to the “armed” position, meaning that the auto-throttle could have been engaged, depending on various other settings, she said. The disclosure is far from conclusive, but raises the clear possibility that there was a mechanical failure or that the crew misunderstood the automated system it was using.

The chairwoman, Deborah A. P. Hersman, also said that interviews of the three pilots who were in the cockpit at the time of impact showed that the speed indicator on the flat-panel displays in the cockpit had drifted down into a crosshatched area, meaning that the instruments were saying that the plane was moving too slowly.

At the dual controls, the pilot flying the plane was undergoing initial training as he upgraded from a smaller plane, and was supervised by a veteran pilot who was new as an instructor, Ms. Hersman said. The instructor told investigators that between 500 feet and 200 feet in altitude, the crew was also correcting from a “lateral deviation,” meaning that the plane was too far to the right or left (she did not specify which) and realized they were too low.

At 200 feet, the instructor pilot told investigators in an interview, he noticed they were too slow. “He recognized that the auto-throttles were not maintaining speed,” and began preparing the airplane to go around for another try. But it was too late.

Ms. Hersman made clear that the safety board was looking to see if there was a generic problem with the runway and the approach path. Her agency requested data from the Federal Aviation Administration, which operates the air traffic system, on other recent arrivals by Boeing 777s, and recent go-arounds, cases in which crews broke off the approach because of a problem.

As the investigation continued, others — including lawyers, passenger advocates and a pilots’ union — began jockeying for position.

The crash resulted in an unusual mix of deaths and injuries, said Robert A. Clifford, an aviation lawyer in Chicago, who pointed out that lawyers in his specialty are usually pursuing wrongful-death claims, not personal injury ones. Injured passengers will need legal help, he said.

But Hans Ephraimson-Abt, who leads the Air Crash Victims Families Group, and who frequently lobbies for passenger rights and represents the families of people killed, said that under the governing international law, those injured were covered by a no-fault provision. Under the 1999 Montreal Protocol, he said, “they are entitled to be reimbursed for all their property damages, and economic and noneconomic damages, including psychological counseling.” All that was required, he said, was to show medical bills or calculate lost earnings.

Mr. Ephraimson-Abt’s 23-year-old daughter was one of the 286 passengers on board Korean Air Lines Flight 007 when it was shot down by a Soviet fighter plane in 1983 after a crewman’s navigation error.

Mr. Clifford and other lawyers, however, have been making public statements since the crash about safety problems and stressing their expertise in pursuing claims.

On Tuesday, Mr. Clifford said that another party, not covered by the Montreal Protocol, could be vulnerable to claims: Boeing. The plane did not have an aural warning of low airspeed, he said, even though the safety board recommended 10 years ago that the Federal Aviation Administration convene a panel of experts to consider installing them. If the plane was unsafe, he said, the manufacturer could face suits.

A retired 777 captain, Chuck Hosmer, who flew for American Airlines and later Air India, said that many foreign carriers had a reluctance to land the plane manually, and thus lacked proficiency in the technique. The Asiana crew was attempting a manual landing on Saturday because an instrument landing system was out of service. And though there were four pilots on the Asiana plane, three of them very experienced in the 777, pilots in some cultures are reluctant to contradict a pilot at the controls, Mr. Hosmer said.

In fact, the safety board has investigated previous accidents in which cultural factors have reduced the effectiveness of the crew, and that is one of the areas of inquiry here, investigators said.

On Tuesday, a pilots’ union, the U.S. Airline Pilots Association, issued a statement critical of the safety board, asserting that the board’s quick release of “incomplete, out-of-context information” had “fueled rampant speculation about the cause of the accident” and created the impression that it was pilot error.

This article has been revised to reflect the following correction:

Correction: July 10, 2013

An earlier version of this article misidentified the retired 777 captain who flew for American Airlines and later Air India. He is Chuck Hosmer, not Robert Maurer.

Walgreen to Pay $80 Million Fine in D.E.A. Inquiry

Officials at the Drug Enforcement Administration described the fine as the biggest ever paid by a pharmacy chain. As part of the settlement, the license of a Florida facility used by Walgreen to distribute controlled drugs was revoked for two years.

D.E.A. officials said that many of the drugs dispensed at the facility made their way to the black market, including oxycodone, a strong narcotic that is also the active ingredient in OxyContin.

As part of the agreement, Walgreen agreed to establish better internal controls. It acknowledged that practices at a distribution facility and some of its pharmacies in Florida did not meet standards.

Over the last year, federal officials have taken actions against several major wholesalers of prescription painkillers, like Cardinal Health, as well as drugstores. Such drugs are involved in some 16,000 overdose deaths annually.

Federal officials have said that distributors of painkillers often turn a blind eye to suspiciously large orders for medications by pharmacies, and that drugstores fail to properly identify customers who intend to divert drugs to the streets.

Some distributors have sought to limit their liability by more closely monitoring distribution pipelines and cutting off customers. But patients say the crackdown has made it difficult for them to get needed medication, and some druggists complain that big distributors like Cardinal have clamped down on the amount of painkillers they can buy.

The black market has been rampant in Florida, where until recently hundreds of so-called pain clinics operated, including many where patients received prescriptions for opioids after cursory examinations. Since 2009, federal officials have brought charges against 59 doctors in connection with the illegal prescribing of painkillers.

In their action against Walgreen, federal officials said the chain had failed to properly account for the sales of painkillers or report suspicious sales. The Walgreen distribution facility in Florida once served as the largest supplier of prescription painkillers to pharmacies in that state, they said.

“National pharmaceutical chains are not exempt from following the law,” Mark R. Trouville, a D.E.A. special agent in charge, said in a prepared statement.

In a statement released Tuesday, Walgreen, based in Deerfield, Ill., said, “As the largest pharmacy chain in the U.S., we are fully committed to do our part to reduce prescription drug abuse.”

The company said that it expected that the financial impact of the settlement and associated costs would lower results in the third quarter by about 4 to 6 cents a share. In fiscal 2012, Walgreen had sales of $72 billion.

Another major distributor, AmerisourceBergen, disclosed last June that it faced a federal criminal inquiry into its oversight of painkiller sales. West Virginia officials filed a lawsuit against 14 drug distributors, including Cardinal and AmerisourceBergen. The companies have denied wrongdoing.

DealBook: France Expands Inquiry Into Tax Evasion at UBS

Michael Buholzer/ReutersThe Swiss bank UBS in Zurich.

8:41 a.m. | Updated

PARIS – UBS, the biggest Swiss bank, is the target of a widening tax evasion investigation in France, a spokeswoman for the Paris prosecutor’s office said on Friday, an indication that the lender’s problems with the French government are growing.

A French judge on Thursday placed UBS AG, the Swiss parent company, under formal investigation on suspicion that it illegally sold banking services to French citizens that helped them to set up secret accounts abroad, according to Agnès Thibault-Lecuivre, the spokeswoman for the Paris prosecutor’s office. The Swiss bank also was identified as an ‘‘assisted witness,’’ a less serious status, in a concurrent investigation of suspected money laundering and tax evasion, she said.

The expanded inquiry comes just a week after the bank’s local subsidiary, UBS France, was put under formal investigation on similar suspicions. In the French legal system, a formal investigation, sometimes compared to an indictment in the American system, can drag on for years, and does not necessarily lead to charges or trial. An assisted witness is required to answer prosecutors’ questions with a lawyer present, but is thought less likely to ultimately face charges.

Yves Kaufmann Lobato, a UBS spokesman in Zurich, sought to play down the significance of the latest development, noting that the investigation had been the subject of news reports since early last year.

‘‘We will continue working with the authorities in France within the applicable legal framework to arrive at a resolution to this matter,’’ he added, citing a bank statement.

The investigators are examining the question of whether bankers from the Swiss parent company broke a French law against “illicit solicitation” by actively approaching potential French clients.

According to a report on Friday in the French newspaper Le Monde, UBS bankers regularly sought to ingratiate themselves into networks of affluent people, mingling at sporting events and concerts in order to seek out possible clients for tax evasion. At least 353 French citizens suspected of evading taxes through UBS have been identified, and the French government has sought administrative assistance from the Swiss government in four cases, the newspaper reported, without citing its source.

Mario Tuor, a spokesman for the Swiss Federal Finance Ministry in Bern, declined to comment on the case, saying the details were confidential.

There is a broad push in the United States and Europe to stop offshore banks from aiding tax cheats. Switzerland – where the secrecy laws punish banks for revealing client data – has been in an uncomfortable spotlight. In France, President François Hollande has made ending tax evasion a top priority after his former budget minister, Jérôme Cahuzac, was found to have set up secret Swiss and Singapore accounts to hide some of his wealth.

UBS itself has been under international scrutiny since 2008, when the United States Justice Department threatened to indict it for conspiracy to defraud the Internal Revenue Service. In 2009, UBS eventually agreed to pay a $780 million fine to avoid prosecution, and turned over data on 4,450 client accounts held by United States citizens suspected of evading taxes.

Obama administration officials followed that case with a broad push to expose all the American accounts hidden behind Swiss banking secrecy laws. With about a dozen Swiss lenders facing the possibility of indictment in the United States, the Swiss government agreed last month on a framework for banks to hand over information on American clients, a deal it hoped would permanently end the threat of United States prosecution. That agreement still must be approved by the Swiss legislature.

UBS said on Friday that it ‘‘fully supports the strategy of Switzerland to limit itself to the management of declared assets.’’

‘‘We believe that Switzerland and the countries of the E.U. need to find a solution for the past,’’ according to a statement from the bank. ‘‘This is an industry issue that UBS has taken significant steps to resolve since 2009. UBS does not tolerate any activities intended to help its clients circumvent their tax obligations.’’

DealBook: SAC Says It Will Curb Cooperation With Insider Inquiry

9:00 p.m. | Updated The government’s insider trading investigation of the giant hedge fund SAC Capital Advisors entered a more contentious phase this week, with criminal authorities issuing a new round of subpoenas requesting information about the firm’s activities, according to lawyers briefed on the case.

The requests, which numbered more than a dozen, indicate that federal prosecutors and the F.B.I. are intensifying their efforts to build a case against the firm and its executives, including its billionaire founder, Steven A. Cohen, 56.

The government’s newly aggressive posture led to an unusual response from the hedge fund. On Friday, SAC told its investors in a letter that it was no longer fully cooperating with the investigation.

“While we have in the past told you of our cooperation with the government’s investigation, our cooperation is no longer unconditional,” the letter said.

Neither the firm nor Mr. Cohen has been charged with wrongdoing. The hedge fund owner has maintained that he has behaved appropriately at all times.

Still, over the last five years, SAC has been in the cross hairs of the government’s crackdown on illegal trading on Wall Street.

Nine former or current SAC employees have been tied to insider trading while at the fund; four of them have pleaded guilty. Earlier this year, SAC agreed to pay $616 million to settle two civil cases brought against it by the Securities and Exchange Commission, a move seen inside the firm as a major step toward resolving its role in the investigation.

But in recent days, the government signaled that its inquiry into the fund was far from over, if not escalating. The subpoenas asked for numerous trading records related to the buying and selling of specific stocks, as well as other documents, according to the lawyers.

The latest requests were frustrating for Mr. Cohen and his legal team, which led to the decision to take a tougher stand, lawyers briefed on the case said. SAC objected to certain aspects of the subpoenas.

As a result of the new requests, the fund decided that it could no longer provide its investors with updates on the inquiry.

A spokesman for SAC, Jonathan Gasthalter, declined to comment.

“In the past we have tried to be as transparent with you as possible about the state of the investigation, while balancing our desire for transparency with the need to keep the details of a sensitive investigation confidential,” SAC said in the letter sent on Friday to investors.

“During this period, however, the need for confidentiality will limit our ability to share with you details about how the investigation is progressing,” the letter said.

While SAC’s letter highlighted the more aggressive position taken toward the government, the fund also sought to allay its investors’ concerns about the state of the investigation. The firm said it expected that there would be “substantially more clarity” as to the outcome of the investigation in the coming months. It also said that its changed posture toward the inquiry would “not have a financial impact to our funds.”

SAC, which is based in Stamford, Conn., is fighting to keep its clients from withdrawing money from the $15 billion fund. It recently gave its investors an extension to decide whether to withdraw money, pushing back the deadline to June 3 from May 16. Earlier in the year, investors withdrew $1.7 billion from the fund, an amount that equals about 25 percent of the hedge fund’s outside money. (The balance of the fund, which is about $9 billion, consists mostly of Mr. Cohen’s fortune.)

The subpoenas and SAC’s response come as the fund awaits final resolution of the larger of the two civil settlements it struck with the S.E.C. earlier this year. In that case, SAC agreed to pay $602 million to resolve charges related to illegal trading in the pharmaceutical stock Elan and Wyeth. It neither admitted nor denied wrongdoing as part of the settlement.

The settlement requires the approval of the federal judge presiding over the case, Victor Marrero. Last month, he approved the agreement, but conditioned it on a pending decision from a federal appeals court in a case involving Citigroup. Judge Marrero raised concerns with the “neither admit nor deny” language that the regulatory agency includes in many of its settlements, an issue that the appeals court was expected to address in the Citigroup case.

Another concern for the hedge fund involves the two former SAC employees under indictment for insider trading: Mathew Martoma and Michael S. Steinberg. They are fighting the charges, but if either decided to plead guilty and cooperate, they could potentially help the government build its case.

Earlier this month, a judge set Mr. Steinberg’s trial for Nov. 18. Mr. Martoma, who was at the center of the Elan and Wyeth trades, has yet to receive a trial date.

Mr. Cohen directly participated in the questionable Elan and Wyeth trades, which were made in July 2008. Under the five-year statute of limitations for insider trading crimes, the authorities would have to file either criminal charges or a civil case against the hedge fund billionaire related to those trades by mid-July. The government has not said that Mr. Cohen knew any confidential information when he made those trades.

Despite the multitude of distractions, the SAC founder rubbed elbows with celebrities and socialites on Monday night at the Robin Hood Foundation’s annual gala in Manhattan. The benefit, which featured performances by Bono, Sting and Elton John, raised $72 million to fight poverty.

DealBook: Former BlackRock Manager Arrested in Insider Trading Inquiry

Mark Lennihan/Associated PressThe headquarters of BlackRock, the giant money manager, in New York.

LONDON – Mark Lyttleton, a former BlackRock fund manager, has been arrested in connection with an insider trading investigation in Britain, according to two people briefed on the matter.

The arrest on April 30 of Mr. Lyttleton, 41, and an unidentified 37-year-old woman comes as the British financial regulator, the Financial Conduct Authority, continues to clamp down on market abuse in London’s financial district after a series of recent scandals.

Mr. Lyttleton, who oversaw the firm’s underperforming UK Dynamic and BlackRock UK absolute alpha funds, left the firm on March 28 and has not been charged with any wrongdoing. His departure from BlackRock was not connected to the regulatory investigation, the people added, who spoke on the condition of anonymity because they were not authorized to speak publicly.

Under British law, individuals can been arrested as part of continuing investigations but they may not eventually face prosecution for potential wrongdoing. Any prospective indictments in the case would not be issued until late in 2013, at the earliest, one of the people said.

The Financial Conduct Authority of Britain said this month that two individuals had been questioned about insider trading and market abuse, and several homes and offices had been searched in Switzerland in connection with the investigation.

BlackRock confirmed on Tuesday that a former employee had previously been arrested by the City of London police on suspicion of insider trading. It said the accusations were related to personal activities by the individual and were not connected with dealings related to the firm’s clients.

“The alleged behavior is totally contrary to the firm’s principles and values,” BlackRock said in a statement on Tuesday. “The firm has been aiding and will continue to aid the authorities with their investigations.”

Spokesmen for the Financial Conduct Authority and BlackRock declined to comment further on the investigation. A representative for Mr. Lyttleton was not immediately available for comment.

Since the beginning of the financial crisis, British authorities have tried to shake off a reputation for light regulation by aggressively tackling market abuse allegations.

Over the last four years, the Financial Services Authority, the predecessor of the Financial Conduct Authority, successfully prosecuted 23 individuals for insider trading. Seven other people are facing prosecution on similar charges.

Europe Raids Oil Companies in Price Manipulation Inquiry

Investigators descended on some European offices of BP, Royal Dutch Shell and Platts, a division of the McGraw-Hill Companies that specializes in providing pricing for the oil industry. European authorities are looking into whether the companies may have “colluded in reporting distorted prices” in an effort “to manipulate the published prices of a number of oil and biofuel products.”

All of the companies said they were cooperating with the inquiry.

Shell said it was “assisting the European Commision in an enquiry into trading activities.” A spokesman said that the company’s offices in Rotterdam and London were “visited.”

Platts said that the European Commission had “undertaken a review” at its offices, at Canary Wharf in London. The raiders also visited BP’s oil trading operations on the lower floors of the same building. BP said in a statement the the company was “subject to an investigation.”

Regulators in Europe and the United States have long been worried about the system by which oil and gas prices are set, which can affect the prices consumers pay as well as costs for airline and trucking companies. The concerns reached a frenzied pitch in 2008 when oil prices hit record highs and then quickly plunged. Lawmakers in the United States and elsewhere questioned whether the prices were being distorted.

Authorities are focused in part on the price reporting system for oil and other petroleum products, which is dominated by a small group of companies like Platts. Such companies determine prices by polling traders and using other industry data.

In recent years, Platts has instituted a so-called electronic window through which a significant amount of oil is traded these days. At the end of the day, Platts determines prices based on the trades that go through this system, rather than by simply relying on polling companies.

There are concerns in the industry that companies could distort the prices through a blizzard of last-minute trades. “If you want access to liquidity you are forced to use the window,” said a senior oil trader. But he also said that the window, in theory, should be more accurate than prices determined just by polling traders because the prices were determined by actual trades.

The benchmarks, notably Brent crude, are enormously influential. Much of the world’s oil, particularly outside of the United States, is priced in relation to Brent, which is made up of a basket of North Sea crudes. These benchmarks are also often used in the large futures and derivatives markets.

As production in the North Sea has dwindled, the Brent price has been based on lower volumes of oil, prompting fears that it could be manipulated, possibly by the major players in the region. The Brent price is actually determined through assessing prices of a blend of four North Sea crudes.

In recent years, various regulatory agencies have investigated price setting but seem to have come up with little evidence of manipulation. People in the industry say, however, that the controversy around both oil and gas prices has made companies increasingly reluctant to supply prices for fear of becoming the targets of regulators or lawsuits.

In 2010, the Group of 20 economically most developed nations asked the International Organization of Securities Commissions to look into the potential for manipulation and whether tighter regulation was needed. After a two-year investigation, the price reporting agencies last fall agreed to adopt a series of principles to deal with conflicts of interests and other issues.

An 18-month trial period is under way. Compliance is to be monitored by an independent auditor. If the companies don’t go along, regulators may bar them from providing pricing benchmarks to exchanges, which is a source of revenue.

This article has been revised to reflect the following correction:

Correction: May 14, 2013

An earlier version of this article misstated the day of the raid. It was Tuesday, not Thursday.

F.D.A. Inquiry Leads Wrigley to Halt ‘Energy Gum’ Sales

The company said it had stopped new sales and marketing of Alert Energy Caffeine Gum “out of respect” for the F.D.A., which said it would investigate the health effects of added caffeine in foods just as Wrigley introduced Alert late last month. A stick of the gum is equivalent to half a cup of coffee.

“After discussions with the F.D.A., we have a greater appreciation for its concern about the proliferation of caffeine in the nation’s food supply,” Wrigley North America’s president, Casey Keller, said in a statement. “There is a need for changes in the regulatory framework to better guide the consumers and the industry about the appropriate level and use of caffeinated products.”

Mr. Keller said the company had stopped production and sales of the gum to give the agency time to regulate caffeine-added products.

Michael R. Taylor, F.D.A.’s deputy commissioner of foods, said Wrigley’s decision to stop production for now “demonstrates real leadership and commitment to the public health.” He said the company made the move after a series of discussions with the agency.

“We hope others in the food industry will exercise similar restraint,” Mr. Taylor said.

Food manufacturers have added caffeine to candy, nuts and other snack foods in recent years. Jelly Belly Extreme Sport Beans, for example, have 50 milligrams of caffeine in each 100-calorie pack, while Arma Energy Snx markets trail mix, chips and other products that have caffeine.

Major medical associations have warned that too much caffeine can be dangerous for children, who have less ability to process the stimulant than adults. The American Academy of Pediatrics says it has been linked to harmful effects on young people’s developing neurological and cardiovascular systems.

DealBook: Charmed Life Now Ensnared in a Trading Inquiry

8:55 p.m. | Updated

Friends of Michael S. Steinberg had always marveled at his good fortune.

In his mid-20s, he landed a job a SAC Capital Advisors, then a small hedge fund owned by Steven A. Cohen, who was fast developing a reputation on Wall Street as a stock trading wizard. As SAC posted stupendous returns year-after-year and became one of the world’s largest hedge funds, Mr. Steinberg earned tens of millions of dollars trading as a close associate of Mr. Cohen, and rose within the firm.

When Mr. Steinberg married at the Plaza Hotel a few years after joining SAC, his boss attended the black-tie affair. Mr. Steinberg and his family moved into an $8 million Park Avenue co-op and summered in the Hamptons. He also gave back, helping found Natan, a philanthropy that promotes Israel and Jewish culture.

Then, his charmed life came undone.

On Friday, Mr. Steinberg became the most senior SAC employee to be ensnared in the government’s multiyear insider trading investigation. F.B.I. agents showed up at his apartment on the Upper East Side of Manhattan and arrested him in the pre-dawn hours. Just the day before, Mr. Steinberg had returned from a vacation in Florida, where he and his family visited relatives and took a trip to Disney World.

Later on Friday, Mr. Steinberg, 40, in a black V-neck sweater and charcoal-gray slacks, appeared in Federal District Court in Manhattan and pleaded not guilty. Judge Richard J. Sullivan freed him on $3 million bail.

“Michael Steinberg did absolutely nothing wrong,” Barry H. Berke, a lawyer for Mr. Steinberg, said in a statement. “Caught in the cross-fire of aggressive investigations of others, there is no basis for even the slightest blemish on his spotless reputation.”

The arrest was the latest in a whirlwind of activity related to the government’s investigation of SAC. For years, federal agents have been building a case against the fund. This month, SAC agreed to pay $616 million to settle two civil insider trading actions brought by the Securities and Exchange Commission. On Thursday, a federal judge refused to approve the larger settlement of $602 million, raising concerns over a provision that lets SAC avoid an admission of wrongdoing.

Including Mr. Steinberg, nine current or former SAC employees have been linked to insider trading while at the company; four have pleaded guilty. Some of the former employees who have been implicated hardly knew Mr. Cohen, who operates a sprawling $15 billion fund with more than 1,000 employees across the globe.

But Mr. Cohen and Mr. Steinberg were close. Mr. Steinberg is one of SAC’s most veteran employees, though he was recently placed on leave soon after being tied to an earlier case. He joined SAC shortly after graduating from the University of Wisconsin. When he began at SAC, it was just Mr. Cohen and several dozen traders. For years, he sat near Mr. Cohen on the trading floor in the fund’s headquarters in Stamford, Conn., and he was part of a team of tech-stock traders that posted outsize returns during the dot-com boom and bust. Later, he helped start Sigma Capital, an SAC unit in Midtown Manhattan.

While years apart, the two share the same hometown — Great Neck, N.Y., on Long Island, where both attended Great Neck North High School. They also share a love of art; Mr. Steinberg introduced Mr. Cohen to his childhood friend Sandy Heller, who became Mr. Cohen’s longtime art adviser.

In the past, SAC has distanced itself from former employees charged with insider trading, but on Friday, it issued a statement in support of Mr. Steinberg: “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity.”

Federal investigators have tried to press lower-level SAC employees for information in helping them build a case against Mr. Cohen. In one instance, F.B.I. agents showed a former trader a sheet of paper with headshots of his former colleagues, with Mr. Cohen at the center. The agents compared the SAC founder to an organized-crime boss who sat atop a corrupt organization.

The pressure on Mr. Cohen, 56, escalated in November, when prosecutors charged Mathew Martoma, a former SAC portfolio manager, with trading in the drug stocks Elan and Wyeth based on confidential drug trial data that a doctor had leaked to him. Mr. Cohen was involved in drug stock trades, but the government has not claimed that he possessed any secret information. Those trades were the subject of the S.E.C. civil action that SAC settled for $602 million. Mr. Martoma has pleaded not guilty and has refused to cooperate with investigators.

Mr. Cohen has not been accused of any wrongdoing and has told his investors that he believes he has acted appropriately at all times.

Amid his legal woes, Mr. Cohen, whose net worth is estimated at about $10 billion, has gone on a shopping binge in recent days, paying $155 million for the Picasso painting “Le Rêve” and $60 million for an oceanfront estate in East Hampton on Long Island.

Mr. Steinberg’s name surfaced last fall, when a former SAC analyst pleaded guilty to being part of an insider-trading ring that illegally traded the technology stocks Dell and Nvidia. As part of his guilty plea, the analyst, Jon Horvath, implicated Mr. Steinberg, saying that he gave the confidential information to Mr. Steinberg and that they traded based on that data. On Friday, federal prosecutors charged Mr. Steinberg with conspiracy and securities fraud, accusing him of participating in the illegal Dell and Nvidia trades. The Securities and Exchange Commission filed a parallel civil lawsuit against Mr. Steinberg.

Last year, a jury convicted two hedge fund managers at other firms related to the Dell and Nvidia trades. E-mails from Mr. Steinberg that emerged in that trial were included in the indictment on Friday.

In one e-mail from August 2008, sent a few days before Dell’s quarterly earnings announcement, Mr. Horvath disclosed secret details about Dell’s financial data to Mr. Steinberg.

Mr. Horvath wrote that he had “a 2nd hand read from someone at the company.” He added, “Please keep to yourself as obviously not well known.”

Mr. Steinberg replied: “Yes normally we would never divulge data like this, so please be discreet.”

In another e-mail from the trial, Mr. Steinberg told Mr. Horvath and another portfolio manager, Gabe Plotkin, about a conversation he had with Mr. Cohen about conflicting views of Dell inside SAC. Mr. Plotkin owned a large Dell position, while Mr. Steinberg was short, meaning that he thought shares of Dell would drop in value.

“Guys, I was talking to Steve about Dell earlier today and he asked me to get the two of you to compare notes before the print” — meaning ahead of the company’s earnings release — “as we are on opposite sides of this one,” Mr. Steinberg wrote.

Since his name surfaced in the investigation, Mr. Steinberg has occasionally spent evenings in New York hotels to avoid being handcuffed at home in front of his two children. Federal agents refused to let Mr. Steinberg surrender of his own volition at F.B.I. headquarters downtown, expressing the view that white-collar defendants should not be given special treatment.

John Marshall Mantel for The New York TimesMichael Steinberg entered a plea of not guilty in Federal District Court in Manhattan on Friday and was freed on $3 million bail.

This post has been revised to reflect the following correction:

Correction: March 29, 2013

Because of incorrect information supplied by prosecutors, an earlier version of this article gave the wrong age for Michael Steinberg, the SAC Capital Advisors portfolio manager who was arrested on Friday. He is 40, not 41.

DealBook: JPMorgan Chase Inquiry Reveals Status Quo After Financial Crisis

Daniel Rosenbaum for The New York TimesSenator Carl Levin, Democrat of Michigan.

People have learned their lesson.

We’ve been told that so many times since the near-death experiences of the financial crisis. Bankers and regulators have flipped roles: now it’s the bankers who are cautious and their overseers who are aggressive.

Details of JPMorgan Chase’s multibillion-dollar trading loss — brought to light by a riveting and devastating report from the Senate Permanent Subcommittee on Investigations — demonstrate what a sham that is. Bankers aren’t acting cautious and chastened. Risk managers aren’t in the ascendance on Wall Street. Regulators remain their duped and docile selves.

What we now know about the incident is that, as the cliché has it, the cover-up was worse than the crime. The losses out of the London office weren’t enough to take down the bank. But as they were building, JPMorgan traders fiddled with risk measures and valuations. The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.

As JPMorgan got into trouble, traders and the responsible executives treated the valuation of trading positions, made up of derivatives, as a puppet made to do what they wanted. The traders pulled on this calculation or that to change the way they were valuing the position to reduce the losses.

Ina Drew, the head of the bank’s chief investment office, referring to how the positions were calculated, asked an underling if he could “start getting a little bit of that mark back.” She then asked if he could “tweak at whatever it is I’m trying to show.” She might believe it is exculpatory that she prefaced the comment by saying to do it “if appropriate” and that the tweak should come with “demonstrable data,” but any idiot working for her would know exactly what she meant: create some rationale to manipulate the valuations to make things look better than they really are.

This discussion did not make it into the bank’s internal report on the incident from January. Imagine that.

Yes, Ms. Drew was ousted. But her actions show that what financial executives do postcrisis when faced with trouble is no different than what they did precrisis. In testimony on Friday, in a quiet voice, she deflected blame up to Mr. Dimon and down to her traders, claiming she was kept in the dark.

The Senate report makes it clear that JPMorgan misled shareholders and the public, particularly on its April 13, 2012, conference call.

That call, which makes up a particularly damning portion of the Senate report, featured a haughty Jamie Dimon famously dismissing the problem as a “tempest in a teapot.”

Of course, it was no such squall. In the call, the chief financial officer at the time, Douglas L. Braunstein, made a number of what appear to be misleading statements about the trades. Mr. Braunstein said the trading decisions were made on a very long-term basis, when in fact the traders were shuffling positions almost daily to make profits and then to disastrously “defend” their positions from further losses. Mr. Braunstein reassured investors and analysts in the call that the trades were vetted by the firm’s top risk managers, when they were not (though top officials, including Mr. Dimon, knew about repeated risk-measure breaches).

This means “there was risk oversight” for the office that made the trades, and the trading “positions needed to comply with limits,” a JPMorgan spokesman, Joseph Evangelisti, said. “We were not aware at the time of all the deficiencies in the risk organization” of the trading group.

In the conference call, Mr. Braunstein also said that the trades were “fully transparent to the regulators,” but, in fact, watchdogs didn’t receive any regular reporting of the positions and received specific information only days before the call.

“What Doug said was accurate,” Mr. Evangelisti said. “No one in senior management at that time believed there was a larger problem in the context of the firm’s size and scale.”

In JPMorgan’s internal report, the call receives scant attention. In testimony before Senator Carl Levin, the Michigan Democrat who heads the Senate subcommittee, Mr. Braunstein fell back on the explanation that he was saying what he believed at the time.

Mr. Braunstein wasn’t available for comment, according to the bank.

Maybe regulators will think it notable that the chief financial officer of JPMorgan misled shareholders in his first extensive comments about the trading losses. Don’t hold your breath.

I don’t even expect much to come out of the evidence that the bank misled regulators. The bank stopped giving its regulator, the Office of the Comptroller of the Currency, important information. At one point, the bank told the agency that it was reducing the size of its positions when it was actually increasing those positions, according to the Senate report.

Despite JPMorgan’s smoke screens, the regulators deserve the public humiliation they have received. They were alerted to risk-measure breaches that should have warned them of problems. By April 30, 2012, just weeks after the trading debacle came to light and before any serious investigation, the Office of the Comptroller of the Currency declared the matter closed, according to internal minutes from a meeting. (At Friday’s hearing, officials from the agency disputed that it was, in fact, closed.)

So, yes, people have learned their lessons, the real lessons of the financial crisis. JPMorgan repeated the same misdeeds that other banks successfully pulled off at the height of the financial crisis: mismarking portfolios of assets and misleading the public. This was condoned by regulators. Regulators and prosecutors have been averting their eyes for years from rotted bank assets and rotted bank morals; why would JPMorgan expect any different reaction in this case?

Mr. Dimon and JPMorgan executives have all publicly donned hair shirts to demonstrate their contrition. Mr. Dimon and Mr. Braunstein even took pay cuts, going from earning many millions to some fewer millions.

JPMorgan argues that Mr. Dimon and Mr. Braunstein told regulators and the public only what they believed at the time. Mr. Dimon and Mr. Braunstein made mistakes, but they quickly worked to clean them up, fire those responsible and change their ways. The losses were small relative to the size of the bank and, if anything, demonstrate the strength of JPMorgan’s diversified business. After all, the bank made record earnings last year.

But I suspect that if you dosed JPMorgan executives with Pentothal, they would reveal they believed all of this attention was a media creation and political showboating — still a “tempest in a teapot.”

“Not true,” Mr. Evangelisti, the JPMorgan spokesman, said. “We acknowledged from the outset that we made significant mistakes, and we have repeatedly apologized for them. We do not blame the media or regulators for these issues. This was our fault totally. All we can do now is fix the problems and learn from them.”

As has happened so often in the wake of the financial crisis, we are left with the spectacle of bankers — here the well-compensated Mr. Dimon and Mr. Braunstein — insisting that they were clueless and incompetent, which would shield them from any allegations of intent to defraud.

As for many longtime officials at the Office of the Comptroller of the Currency, they may well think that this was merely a nuanced mistake that calls for nothing more than careful suggestions of remedies that don’t harm the bank too much. The new head of the agency, Thomas J. Curry, has begun to clean house and re-energize the place, but the overhaul that is needed looks too big for one person.

So let’s take a moment to celebrate a handful of American heroes, Mr. Levin and the staff members at the Senate Permanent Subcommittee on Investigations. Because of them, this corruption has come to light. Friday’s hearing served to emphasize how lonely Mr. Levin’s efforts are. Senator John McCain, Republican of Arizona and the new ranking minority member on the committee, did a yeoman’s job of asking a few questions. Senator Ron Johnson, Republican of Wisconsin, made a few incoherent statements using the au courant phrase “too big to fail,” then scuttled out of the hearing. None of the other senators, Democrats and Republicans alike, bothered to show up.

The 78-year-old Mr. Levin, peering over those glasses that seem surgically attached to the tip of his nose, soldiered on.

But let’s imagine what would happen if this report does what the senator hopes and puts pressure on the regulators to finish a simplified and loophole-free Volcker Rule, which would prohibit banks from making bets for their own profit using taxpayer-backed money. Why should we have the slightest confidence that big banks could be persuaded to follow it? And why should we feel reassured that, if they didn’t, regulators could or would enforce it?

We shouldn’t. And we don’t.

Drilling Company Chief Resigns Over Inquiry

LONDON — The chief executive of Saipem, the largest European drilling and engineering contractor for the oil industry, resigned Wednesday evening after an Italian prosecutor’s office said it was investigating possible corruption.

The executive, Pietro Franco Tali, also served as deputy chairman of the company, in which the big Italian oil company ENI has a controlling stake.

A Saipem spokesman,  Andrea Pagano Mariano, said  the investigation related  to contracts on oil and gas projects in Algeria involving the state oil company Sonatrach. He declined to elaborate.  

Although Mr. Tali “is in no manner a subject of the prosecutor’s investigation,  he felt that his resignation would better enable the company to respond to the prosector’s inquiry,” Saipem said in a statement. The activities were said to have occurred through 2009.

ENI,  which has roughly 43 percent of Saipem’s shares, held an emergency board meeting Wednesday night, according to a press release. In recent days, it said, the board had urged  the drilling company’s chairman, Alberto Meomartini, “to take immediate remedial actions in managing the situation.”

ENI’s chief financial officer,  Alessandro Bernini, who held the same position at Saipem until 2008, also resigned Wednesday, although he “considers that his actions were right and proper,” according to an ENI release.

An ENI spokeswoman, Erika Mandraffino, said the allegations about Saipem came to ENI’s attention a few days ago. She declined to indicate what the inquiry involves in Algeria, where Saipem has billions of dollars’ worth of oil and gas operations and drilling contracts,  and about 2,600 employees.

Saipem’s board, meanwhile, named the chief operating officer of ENI’s  gas and power division, Umberto Vergine, to replace Mr. Tali as Saipem’s chief.   

The company also suspended Pietro Varone, chief operating officer of Saipem’s engineering and construction unit, following a notice of inquiry from the prosecutor related to the same investigation. Saipem’s board also ordered an internal audit using  external consultants.

“Saipem believes that its business activities have been conducted in compliance with applicable, internal procedures” and its code of ethics, the company said, and has offered its full cooperation to the prosecutor’s office.  

The investigation is a blow to ENI,  which under its chief executive, Paolo Scaroni, is working to establish itself as a premier exploration and production company. Earlier on Wednesday, ENI had announced a new natural gas discovery off the coast of Mozambique, where the company has become an early leader in staking a position in that country’s promising gas reserves.

Although ENI stresses that Saipem is independently managed,  the two companies are closely intertwined. 

In an interview on Nov. 19, Mr. Scaroni  said that while the company was divesting other non-core assets, he considered Saipem “a major asset.”

He said that Saipem was “managed at arm’s length” because ENI was only “one of the customers” of the engineering company. He said Saipem was the top candidate to build the portion of the proposed South Stream natural gas pipeline from Russia to Eastern and Western Europe,  under the Black Sea. 

ENI, along with Gazprom, is a key backer of the project.