DealBook: R.B.S. to Pay $612 Million Over Rate Rigging

LONDON – The Royal Bank of Scotland on Wednesday struck a combined $612 million settlement with American and British authorities over accusations that it manipulated interest rates, the latest case to emerge from a broad international investigation.

In an embarrassing blow to the bank, its Japanese subsidiary also pleaded guilty to criminal wrongdoing in its settlement with the Justice Department. The R.B.S. subsidiary, a hub of rate-rigging activity, agreed to a single count of felony wire fraud to resolve the case.

The settlement reflects the Justice Department’s renewed vigor for punishing banks ensnared in the rate manipulation case. In December, a Japanese subsidiary of UBS pleaded guilty to felony wire fraud as part of a larger settlement, representing the first unit of a big bank to agree to criminal charges in more than a decade.

As authorities built the R.B.S. case, they seized on a series of incriminating yet colorful e-mails that highlighted an effort to influence the rate-setting process, a plot that spanned multiple currencies and countries from 2006 to 2010. One senior trader expressed disbelief at reaping lucrative profits from the scheme, saying “it’s just amazing” how rate “fixing can make you that much money,” according to the government’s complaint. Another trader, after pressuring a colleague to submit a certain rate, offered a reward of sorts: “I would come over there and make love to you.”

In a statement on Wednesday, the American regulator leading the case slammed the bank for manipulating benchmarks like the London Interbank Offered Rate, or Libor. The regulator, the Commodity Futures Trading Commission, noted that R.B.S. employees “aided and abetted” UBS and other firms in the rate-rigging scheme and continued to run afoul of the law, though more covertly, even after learning of a federal investigation.

“The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank’s Libor submissions, trying to manufacture winning trades. That’s what happened at R.B.S.,” David Meister, the enforcement director of the commission, said in the statement.

Libor Explained

The settlement represents the latest setback for Royal Bank of Scotland, which has struggled to shake the legacy of the 2008 financial crisis. The British firm already has put aside $2.7 billion to compensate customers who were inappropriately sold loan insurance over recent years. On Jan. 31, British regulators also called on the bank and other local rivals to review the sale of interest-rate hedging products after more than 90 percent of a sample were found to have been sold improperly.

The broader rate-rigging case has centered on how much the Royal Bank of Scotland and a dozen other banks, including Citigroup and HSBC, charge each other for loans. Such benchmarks, including Libor, help determine the borrowing costs for trillions of dollars in financial products like corporate loans, mortgages and credit cards.

But the Royal Bank of Scotland, like many of its competitors, corrupted the process. Government complaints filed over the last year outlined a scheme in which banks reported false rates to lift trading profits and deflect concerns about their health during the crisis.

Authorities filed the first Libor case in June, extracting a $450 million settlement with the British bank Barclays. In December, UBS agreed to a record $1.5 billion settlement with European regulators, the Justice Department and the American regulator that opened the case, the Commodity Futures Trading Commission. The Justice Department’s criminal division, which secured the guilty plea from the bank’s Japanese unit, also filed criminal charges against two former UBS traders.

Some of the world’s largest financial institutions remain caught in the cross hairs of the case. Deutsche Bank has set aside an undisclosed amount to cover potential penalties.

While foreign banks have received the brunt of the scrutiny to date, an American institution could be among the next to settle. Citigroup and JPMorgan Chase are under investigation.

In the $612 million Royal Bank of Scotland case, authorities levied the second-largest fine in the multiyear investigation into rate manipulation.

The fine included a $325 million penalty from the trading commission and a £87.5 million ($137 million) sanction from the Financial Services Authority, the British regulator, marking one of the largest financial penalties ever from British authorities. The Justice Department, for its part, imposed a $150 million fine as part of a deferred-prosecution agreement with R.B.S. In addition to wire fraud, the Justice Department cited the bank for its role in a “price-fixing conspiracy” that violated anti-trust laws.

R.B.S., based in Edinburgh, had aimed to avert the guilty plea for its Japanese subsidiary. But the Justice Department’s criminal division declined to back down, and the bank had little leverage to push back. If it had balked at a plea deal, the Justice Department could have moved to indict the subsidiary.

“Like with Barclays and UBS, the settlement with R.B.S. is much more than a slap on the wrist,” said Bart Chilton, a member of the trading commission who is critical of soft fines on big banks.

In the wake of the settlement, Royal Bank of Scotland is shaking up its management team as it moves to repair its bruised image. John Hourican, the firm’s investment banking chief, resigned on Wednesday, and agreed to forgo some of his past and current compensation totaling around $14.1 million. While Mr. Hourican was not implicated in the scandal, senior executives said he was taking blame for wrongdoing in his division.

“John is the right senior person to take responsibility for this,” the bank’s chairman, Philip Hampton, told reporters on Wednesday.

Royal Bank of Scotland, in which the government holds an 82 percent stake after providing a $73 billion bailout in 2008, also plans to claw back bonuses and other long-term compensation totaling $471 million to help pay for the rate-rigging penalty. The bank will will primarily use the figure to pay the fines from U.S. authorities, while penalties from the British regulator will be recycled back to the British government.

At a press conference in central London on Wednesday, Stephen Hester, the bank’s chief executive, condemned the illegal behavior of some of the firm’s employees, but acknowledged that Royal Bank of Scotland did not monitor its Libor submissions closely enough to catch the wrongdoing.

Mr. Hester, who has led the bank through a series of scandals and has been dogged by politicians’ demands for reductions in bonuses, admitted that the rate-rigging episode had placed the bank under a lot of strain.

“It is one of the most difficult moments over the entire period,” he said.

Mr. Hester, a former chief executive of the property developer British Land, has focused on paring back the bank’s operations. The C.E.O. has cut more than 30,000 job cuts since 2008, attempted to spin-off of the mergers and acquisitions unit and cut the size of its balance sheet by £600 billion since 2009. Mr. Hester also waved his $1.5 million bonus for 2011 after coming under pressure from British politicians.

In the Libor case, the wrongdoing at R.B.S. occurred on smaller scale than at other banks. The breach, authorities say, was limited to Libor submitters and traders who sought to bolster their bottom line. By comparison, top executives at Barclays knew the bank was lowballing its Libor rates to assuage concerns about its high borrowing costs.

R.B.S., which admitted that 21 of its employees altered the firm’s Libor submissions for financial gain on hundreds of occasions, either disciplined or fired most of the employees. The rest left before they were implicated. In the UBS case, the trading commission cited more than 2,000 instances of illegal acts involving dozens of employees.

Still, the government complaints against R.B.S. portray a permissive culture that allowed rate-rigging to persist for some four years.

The bank’s own records captured the scheme in striking detail, revealing how traders pressured other employees to submit certain Libor figures. Submitters and traders sat in earshot of each other on a trading desk in London, forming what authorities termed a “cozy ring.”

The bank eventually separated the employees, forcing them to communicate over e-mail and phone. A flurry of instant messages ensued, some more vulgar than others.

A trader noted in September 2009 that his requests for rates moved up and down, “like a whores drawers.” Another employee acknowledged that the Libor rate-setting process is “a cartel now.”

To get their way with employees who submitted Libor rates, traders promised “love” and affection. Others merely offered steak and sushi. One trader resorted to begging, invoking a plea of “pretty please.”

The collusion was not limited to inside Royal Bank of Scotland.

Between 2007 and 2010, the bank’s traders cooperated with other banks, including the Swiss financial giant UBS, and brokerage firms to manipulate Libor, according to regulatory filings. To ensure rate submissions at other banks benefited their own trading positions, some of Royal Bank of Scotland’s staff paid brokers more than a combined $300,000 in kickbacks over the time period to influence traders at other firms on their behalf.

When authorities started investigating, the traders adapted their tactics. One employee noted that federal authorities “are all over us.”

The concerns prompted a more covert approach. In September 2010, after the trading commission ordered an internal investigation at R.B.S., a derivatives trader urged a colleague who requested a higher Libor rate to send “no emails anymore.”

Two months later, a Libor submitter rebuffed an instant message request to manipulate rates. But then, the submitter spoke with the trader via telephone, explaining “we’re not allowed to have those conversations” over instant message.

Their call was recorded. The employees laughed, according to a transcript, and the submitter reassured the trader that he would fulfill the request: “Leave it with me, and uh, it won’t be a problem.”

The lobbying paid off. When employees submitted bogus rates, government authorities said, Libor was altered.

Lanny Breuer, the head of the Justice Department’s criminal division, called the actions a “stunning abuse of trust.”

He also warned of coming actions against other big banks. “Our message is clear: no financial institution is above the law.”

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Dell to go private in landmark $24.4 billion deal

SAN FRANCISCO/NEW YORK (Reuters) - Michael Dell struck a deal to take Dell Inc private for $24.4 billion in the biggest leveraged buyout since the financial crisis, partnering with the Silver Lake private equity firm and Microsoft Corp to try to turn around the struggling computer company without Wall Street scrutiny.

The deal, which requires approval from a majority of shareholders excluding Dell himself, would end a 24-year run on public markets for a company that was conceived in a college dorm room and quickly rose to the top of the global personal computer business - only to be rendered an also-ran over the past decade as PC prices crumbled and customers moved to tablets and smartphones.

Dell executives said on Tuesday that the company will stick to a strategy of expanding its software and services offerings for large companies, with the goal of becoming a full-service provider of corporate computing services in the mold of the highly profitable IBM. They played down speculation that Dell might spin off the low-margin PC business on which it made its name.

Dell did not give specifics on what it would do differently as a private entity, angering some shareholders who said they needed more information to determine whether the $13.65-a-share deal price - a 25 percent premium over Dell's stock price before buyout talks leaked in January - was adequate.

"This feels like the ultimate insider trade. Why weren't the plans and projections that Michael Dell has going forward been shared with me and other shareholders?" said Frederick "Shad" Rowe, general partner of Greenbrier Partners and a trustee of the $22 billion Texas Employees Retirement System. Rowe said he dumped about 400,000 shares of Dell on Tuesday, adding, "I was so irritated I didn't want to think about it anymore.

Dell spokesman David Frink said the board had conducted an extensive review of strategic options before agreeing to the buyout to ensure that the best interests of all stockholders were served.

Although Dell shares were trading at more than $18 a year ago, many analysts said they believed the majority of shareholders will accept the buyout because of pessimism over the growth prospects of the PC business.

"A private Dell is likely to more aggressively cut costs, in our view. But we think merely restructuring only postpones the inevitable, creating a value trap," said Discern Inc analyst Cindy Shaw. "Dell needs to do more than reduce its cost structure. It needs to innovate."

Dell was regarded as a model of innovation as recently as the early 2000s, pioneering online ordering of custom-configured PCs and working closely with Asian component suppliers and manufacturers to assure rock-bottom production costs. But it missed the big industry shift to tablet computers, smartphones and high-powered consumer electronics such as music players and gaming consoles.

As of 2012's fourth quarter, Dell's share of the global PC market had slipped to just above 10 percent from 12.5 percent a year earlier as its shipments dived 20 percent, according to research house IDC.

Some of Dell's rivals took pot shots at the deal, in unusually pointed comments that reflect how bitter the struggle is in a commoditized PC industry that has wrestled to reverse a decline in sales globally.

Hewlett-Packard Co, which itself has suffered years of turmoil in the face of challenges in the PC business, said in a statement that Dell's deal would "leave existing customers and innovation at the curb," and vowed to exploit the opportunity.

Lenovo, which consists largely of the former IBM PC unit, referred to the "distracting financial maneuvers and major strategic shifts" of its rival while emphasizing its own stability and strong financial position.

The deal will be financed with cash and equity from Michael Dell, $1 billion cash from private equity firm Silver Lake, a $2 billion loan from Microsoft Corp, and between $11 billion and $12 billion in debt financing from Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.

The company said Michael Dell will contribute his 16 percent stake in the company but did not say how much cash he would inject. The company will now conduct a 45-day "go-shop" process in which others might make higher offers.

"Though we were hoping for a higher price, we trust that the Dell board has properly done its job by conducting a process open to any third-party offers and reviewing all strategic options," said Bill Nygren, who manages the $7.3 billion Oakmark Fund and $3.2 billion Oakmark Select Fund, which have a $250 million position in Dell.

"Should we hear evidence to the contrary, we'll raise a ruckus."

Sources with knowledge of the matter said Dell's board, advised by the Boston Consulting Group, had considered everything from a leveraged recapitalization to a breakup of the company before agreeing to the LBO.

Although the deal will load Dell with more debt, some Wall Street analysts said that was relatively low compared to the cash the company generates.

Bernstein Research analyst Toni Sacconaghi said that if Dell were to use 40 percent of its annual cash flow of about $2.5 billion to $3 billion to pay down debt, a sale of the company in about five years could net Silver Lake, Mike Dell and other investors close to $10 billion, or 5 times free cash flow at the time.

Helped by acquisitions, Dell has been building a business selling servers, IT services and other products for corporate clients that - while still dwarfed by IBM's and HP's - is growing at a near-10 percent clip. Critics say it will not be easy for Dell to beat IBM and HP in this area, no matter what its corporate structure.

Sales of PCs still make up the majority of Dell's revenues. Dell said in a regulatory filing that no new job cuts were expected but it indicated more acquisitions down the road. The company has spent $13 billion since fiscal 2008 to acquire more than 20 companies including several large software and services companies as it seeks to reconfigure itself as a broad-based supplier of technology for big companies.

"We recognize this process will take more time," Chief Financial Officer Brian Gladden told Reuters. "We will have to make investments, and we will have to be patient to implement the strategy. And under a new private company structure, we will have time and flexibility to really pursue and realize the end-to-end solutions strategy."

Gladden said the company's strategy would "generally remain the same" after the deal closed, but "we won't have the scrutiny and limitations associated with operating as a public company."

Shares of Dell closed 1.1 percent higher at $13.42.

FALL FROM GRACE

Michael Dell returned to the company as CEO in 2007 after a brief hiatus but has been unable to engineer a turnaround thus far. Analysts said Dell could be more nimble as a private company, but it will still have to deal with the same difficult market conditions.

There is little history to suggest whether going private makes such a transition easier. IBM's famously successful transition from hardware vendor to corporate IT partner took place while it was trading on public markets.

Freescale, formerly the semiconductor division of Motorola, was taken private in 2006 for $17.6 billion by a group of private equity firms including Blackstone Group LP, Carlyle Group and TPG Capital LP. Analysts say the resulting debt load hurt its ability to compete in the capital-intensive chip business. Freescale cut just under 5 percent of its work force last year as it continued to restructure.

Microsoft's involvement in the Dell deal piqued much speculation about a renewed strategic partnership, but the software company is providing only debt financing and Dell said there were no specific business terms attached to the transaction. Dell has long been loyal to Microsoft's Windows operating system, which has been at the heart of its PC business since its inception.

Microsoft's loan will take the form of a 10-year subordinated note with roughly 7 percent to 8 percent interest, a source close to the matter told Reuters.

The Dell deal would be the biggest private equity-backed leveraged buyout since Blackstone Group LP's takeout of the Hilton Hotels Group in July 2007 for more than $20 billion and is the 11th-largest on record.

The parties expect the transaction to close before the end of Dell's 2014 second quarter, which ends in July. News of the talks first emerged on January 14, although they reportedly started in the latter part of 2012. Michael Dell had previously acknowledged thinking about going private as far back as 2010.

J.P. Morgan and Evercore Partners were financial advisers, and Debevoise & Plimpton LLP was the legal adviser to the special committee of Dell's board. Goldman Sachs was financial adviser, and Hogan Lovells was legal adviser to Dell.

Wachtell, Lipton, Rosen & Katz was legal adviser to Michael Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets were financial advisers to Silver Lake, and Simpson Thacher & Bartlett LLP was its legal adviser. Lazard Ltd advised Microsoft.

(Additional reporting by Aaron Pressman in Boston; Writing by Ben Berkowitz and Edwin Chan; Editing by Tiffany Wu, Leslie Gevirtz and Cynthia Osterman)

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Monopoly fans vote to add cat, toss iron tokens

PAWTUCKET, R.I. (AP) — The Scottie dog has a new nemesis in Monopoly after fans voted in an online contest to add a cat token to the property trading game, replacing the iron, toy maker Hasbro Inc. announced Wednesday.

The results were announced after the shoe, wheelbarrow and iron were neck and neck for elimination in the final hours of voting that sparked passionate efforts by fans to save their favorite tokens, and by businesses eager to capitalize on publicity surrounding pieces that represent their products.

The vote on Facebook closed just before midnight on Tuesday, marking the first time that fans have had a say on which of the eight tokens to add and which one to toss. The pieces identify the players and have changed quite a lot since Parker Brothers bought the game from its original designer in 1935.

Rhode Island-based Hasbro announced the new piece Wednesday morning.

Other pieces that contested for a spot on Monopoly included a robot, diamond ring, helicopter and guitar.

"I think there were a lot of cat lovers in the world that reached out and voted," said Jonathan Berkowitz, vice president for Hasbro gaming marketing.

The Scottie Dog was the most popular of the classic tokens, and received 29 percent of the vote, the company said. The iron got the fewest votes and was kicked to the curb.

The cat received 31 percent of votes for new tokens.

The results were not entirely surprising to animal lovers.

The Humane Society of the United States says on its website that there were more than 86 million cats living in U.S. homes, with 33 percent of households owning at least one feline in August 2011. Worldwide, there were an estimated 272 million cats in 194 countries in June 2008, according to London-based World Society for the Protection of Animals.

The online contest to change the tokens was sparked by chatter on Facebook, where Monopoly has more than 10 million fans. The initiative was intended to ensure that a game created nearly eight decades ago remains relevant and engaging to fans today.

"Tokens are always a key part of the Monopoly game ... and our fans are very passionate about their tokens," Berkowitz said.

Monopoly's iconic tokens originated when the niece of game creator Charles Darrow suggested using charms from her charm bracelet for tokens. The game is based on the streets of Atlantic City, N.J., and has sold more than 275 million units worldwide.

The other tokens currently in use are a racecar, a shoe, thimble, top hat, wheelbarrow and battleship. Most of the pieces were introduced with the first Parker Brothers iteration of the game in 1935, and the Scottie dog and wheelbarrow were added in the early 1950s.

The original version also included a lantern, purse, cannon and a rocking horse. A horse and rider token was used in the 1950s. During World War II, metal tokens were replaced by wooden ones, because metal was needed for the war effort.

"I'm sad to see the iron go," Berkowitz said. "Personally, I'm a big fan of the racecar so I'm very relieved it was saved but it is sad to see the iron go."

The social-media buzz created by the Save Your Token Campaign attracted numerous companies that pushed to protect specific tokens that reflect their products.

That includes garden tool maker Ames True Temper Inc. of Camp Hill, Penn., that spoke out in favor of the wheelbarrow and created a series of online videos that support the tool and online shoe retailer Zappos which pushed to save the shoe, Berkowitz said.

Versions of Monopoly with the new token will come out later this year.

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Monopoly: https://www.hasbro.com/monopoly

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Rodrique Ngowi can be reached at www.twitter.com/ngowi

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Well: Gluten-Free for the Gluten Sensitive

Eat no wheat.

That is the core, draconian commandment of a gluten-free diet, a prohibition that excises wide swaths of American cuisine — cupcakes, pizza, bread and macaroni and cheese, to name a few things.

For the approximately one-in-a-hundred Americans who have a serious condition called celiac disease, that is an indisputably wise medical directive.

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One woman’s story of going gluten-free.

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Now medical experts largely agree that there is a condition related to gluten other than celiac. In 2011 a panel of celiac experts convened in Oslo and settled on a medical term for this malady: non-celiac gluten sensitivity.

What they still do not know: how many people have gluten sensitivity, what its long-term effects are, or even how to reliably identify it. Indeed, they do not really know what the illness is.

The definition is less a diagnosis than a description — someone who does not have celiac, but whose health improves on a gluten-free diet and worsens again if gluten is eaten. It could even be more than one illness.

“We have absolutely no clue at this point,” said Dr. Stefano Guandalini, medical director of the University of Chicago’s Celiac Disease Center.

Kristen Golden Testa could be one of the gluten-sensitive. Although she does not have celiac, she adopted a gluten-free diet last year. She says she has lost weight and her allergies have gone away. “It’s just so marked,” said Ms. Golden Testa, who is health program director in California for the Children’s Partnership, a national nonprofit advocacy group.

She did not consult a doctor before making the change, and she also does not know whether avoiding gluten has helped at all. “This is my speculation,” she said. She also gave up sugar at the same time and made an effort to eat more vegetables and nuts.

Many advocates of gluten-free diets warn that non-celiac gluten sensitivity is a wide, unseen epidemic undermining the health of millions of people. They believe that avoiding gluten — a composite of starch and proteins found in certain grassy grains like wheat, barley and rye — gives them added energy and alleviates chronic ills. Oats, while gluten-free, are also avoided, because they are often contaminated with gluten-containing grains.

Others see the popularity of gluten-free foods as just the latest fad, destined to fade like the Atkins diet and avoidance of carbohydrates a decade ago.

Indeed, Americans are buying billions of dollars of food labeled gluten-free each year. And celebrities like Miley Cyrus, the actress and singer, have urged fans to give up gluten. “The change in your skin, physical and mental health is amazing!” she posted on Twitter in April.

For celiac experts, the anti-gluten zeal is a dramatic turnaround; not many years ago, they were struggling to raise awareness among doctors that bread and pasta can make some people very sick. Now they are voicing caution, tamping down the wilder claims about gluten-free diets.

“It is not a healthier diet for those who don’t need it,” Dr. Guandalini said. These people “are following a fad, essentially.” He added, “And that’s my biased opinion.”

Nonetheless, Dr. Guandalini agrees that some people who do not have celiac receive a genuine health boost from a gluten-free diet. He just cannot say how many.

As with most nutrition controversies, most everyone agrees on the underlying facts. Wheat entered the human diet only about 10,000 years ago, with the advent of agriculture.

“For the previous 250,000 years, man had evolved without having this very strange protein in his gut,” Dr. Guandalini said. “And as a result, this is a really strange, different protein which the human intestine cannot fully digest. Many people did not adapt to these great environmental changes, so some adverse effects related to gluten ingestion developed around that time.”

The primary proteins in wheat gluten are glutenin and gliadin, and gliadin contains repeating patterns of amino acids that the human digestive system cannot break down. (Gluten is the only substance that contains these proteins.) People with celiac have one or two genetic mutations that somehow, when pieces of gliadin course through the gut, cause the immune system to attack the walls of the intestine in a case of mistaken identity. That, in turn, causes fingerlike structures called villi that absorb nutrients on the inside of the intestines to atrophy, and the intestines can become leaky, wreaking havoc. Symptoms, which vary widely among people with the disease, can include vomiting, chronic diarrhea or constipation and diminished growth rates in children.

The vast majority of people who have celiac do not know it. And not everyone who has the genetic mutations develops celiac.

What worries doctors is that the problem seems to be growing. After testing blood samples from a century ago, researchers discovered that the rate of celiac appears to be increasing. Why is another mystery. Some blame the wheat, as some varieties now grown contain higher levels of gluten, because gluten helps provide the springy inside and crusty outside desirable in bread. (Blame the artisanal bakers.)

There are also people who are allergic to wheat (not necessarily gluten), but until recently, most experts had thought that celiac and wheat allergy were the only problems caused by eating the grain.

For 99 out of 100 people who don’t have celiac — and those who don’t have a wheat allergy — the undigested gliadin fragments usually pass harmlessly through the gut, and the possible benefits of a gluten-free diet are nebulous, perhaps nonexistent for most. But not all.

Anecdotally, people like Ms. Golden Testa say that gluten-free diets have improved their health. Some people with diseases like irritable bowel syndrome and arthritis also report alleviation of their symptoms, and others are grasping at gluten as a source of a host of other conditions, though there is no scientific evidence to back most of the claims. Experts have been skeptical. It does not make obvious sense, for example, that someone would lose weight on a gluten-free diet. In fact, the opposite often happens for celiac patients as their malfunctioning intestines recover.

They also worried that people could end up eating less healthfully. A gluten-free muffin generally contains less fiber than a wheat-based one and still offers the same nutritional dangers — fat and sugar. Gluten-free foods are also less likely to be fortified with vitamins.

But those views have changed. Crucial in the evolving understanding of gluten were the findings, published in 2011, in The American Journal of Gastroenterology, of an experiment in Australia. In the double-blind study, people who suffered from irritable bowel syndrome, did not have celiac and were on a gluten-free diet were given bread and muffins to eat for up to six weeks. Some of them were given gluten-free baked goods; the others got muffins and bread with gluten. Thirty-four patients completed the study. Those who ate gluten reported they felt significantly worse.

That influenced many experts to acknowledge that the disease was not just in the heads of patients. “It’s not just a placebo effect,” said Dr. Marios Hadjivassiliou, a neurologist and celiac expert at the University of Sheffield in England.

Even though there was now convincing evidence that gluten sensitivity exists, that has not helped to establish what causes gluten sensitivity. The researchers of the Australian experiment noted, “No clues to the mechanism were elucidated.”

What is known is that gluten sensitivity does not correlate with the genetic mutations of celiac, so it appears to be something distinct from celiac.

How widespread gluten sensitivity may be is another point of controversy.

Dr. Thomas O’Bryan, a chiropractor turned anti-gluten crusader, said that when he tested his patients, 30 percent of them had antibodies targeting gliadin fragments in their blood. “If a person has a choice between eating wheat or not eating wheat,” he said, “then for most people, avoiding wheat would be ideal.”

Dr. O’Bryan has given himself a diagnosis of gluten sensitivity. “I had these blood sugar abnormalities and didn’t have a handle where they were coming from,” he said. He said a blood test showed gliadin antibodies, and he started avoiding gluten. “It took me a number of years to get completely gluten-free,” he said. “I’d still have a piece of pie once in a while. And I’d notice afterwards that I didn’t feel as good the next day or for two days. Subtle, nothing major, but I’d notice that.”

But Suzy Badaracco, president of Culinary Tides, Inc., a consulting firm, said fewer people these days were citing the benefits of gluten-free diets. She said a recent survey of people who bought gluten-free foods found that 35 percent said they thought gluten-free products were generally healthier, down from 46 percent in 2010. She predicted that the use of gluten-free products would decline.

Dr. Guandalini said finding out whether you are gluten sensitive is not as simple as Dr. O’Bryan’s antibody tests, because the tests only indicate the presence of the fragments in the blood, which can occur for a variety of reasons and do not necessarily indicate a chronic illness. For diagnosing gluten sensitivity, “There is no testing of the blood that can be helpful,” he said.

He also doubts that the occurrence of gluten sensitivity is nearly as high as Dr. O’Bryan asserts. “No more than 1 percent,” Dr. Guandalini said, although he agreed that at present all numbers were speculative.

He said his research group was working to identify biological tests that could determine gluten sensitivity. Some of the results are promising, he said, but they are too preliminary to discuss. Celiac experts urge people to not do what Ms. Golden Testa did — self-diagnose. Should they actually have celiac, tests to diagnose it become unreliable if one is not eating gluten. They also recommend visiting a doctor before starting on a gluten-free diet.

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This post has been revised to reflect the following correction:

Correction: February 4, 2013

An earlier version of this article misspelled the surname of Thomas O'Bryan. It is O'Bryan, not O'Brien.

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DealBook: R.B.S. to Pay $612 Million Over Rate Rigging

LONDON – The Royal Bank of Scotland on Wednesday struck a combined $612 million settlement with American and British authorities over accusations that it manipulated interest rates, the latest case to emerge from a broad international investigation.

In an embarrassing blow to the bank, its Japanese subsidiary also pleaded guilty to criminal wrongdoing in its settlement with the Justice Department. The R.B.S. subsidiary, a hub of rate-rigging activity, agreed to a single count of felony wire fraud to resolve the case.

The settlement reflects the Justice Department’s renewed vigor for punishing banks ensnared in the rate manipulation case. In December, a Japanese subsidiary of UBS pleaded guilty to felony wire fraud as part of a larger settlement, representing the first unit of a big bank to agree to criminal charges in more than a decade.

As authorities built the R.B.S. case, they seized on a series of incriminating yet colorful e-mails that highlighted an effort to influence the rate-setting process, a plot that spanned multiple currencies and countries from 2006 to 2010. One senior trader expressed disbelief at reaping lucrative profits from the scheme, saying “it’s just amazing” how rate “fixing can make you that much money,” according to the government’s complaint. Another trader, after pressuring a colleague to submit a certain rate, offered a reward of sorts: “I would come over there and make love to you.”

In a statement on Wednesday, the American regulator leading the case slammed the bank for manipulating benchmarks like the London Interbank Offered Rate, or Libor. The regulator, the Commodity Futures Trading Commission, noted that R.B.S. employees “aided and abetted” UBS and other firms in the rate-rigging scheme and continued to run afoul of the law, though more covertly, even after learning of a federal investigation.

“The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank’s Libor submissions, trying to manufacture winning trades. That’s what happened at R.B.S.,” David Meister, the enforcement director of the commission, said in the statement.

Libor Explained

The settlement represents the latest setback for Royal Bank of Scotland, which has struggled to shake the legacy of the 2008 financial crisis. The British firm already has put aside $2.7 billion to compensate customers who were inappropriately sold loan insurance over recent years. On Jan. 31, British regulators also called on the bank and other local rivals to review the sale of interest-rate hedging products after more than 90 percent of a sample were found to have been sold improperly.

The broader rate-rigging case has centered on how much the Royal Bank of Scotland and a dozen other banks, including Citigroup and HSBC, charge each other for loans. Such benchmarks, including Libor, help determine the borrowing costs for trillions of dollars in financial products like corporate loans, mortgages and credit cards.

But the Royal Bank of Scotland, like many of its competitors, corrupted the process. Government complaints filed over the last year outlined a scheme in which banks reported false rates to lift trading profits and deflect concerns about their health during the crisis.

Authorities filed the first Libor case in June, extracting a $450 million settlement with the British bank Barclays. In December, UBS agreed to a record $1.5 billion settlement with European regulators, the Justice Department and the American regulator that opened the case, the Commodity Futures Trading Commission. The Justice Department’s criminal division, which secured the guilty plea from the bank’s Japanese unit, also filed criminal charges against two former UBS traders.

Some of the world’s largest financial institutions remain caught in the cross hairs of the case. Deutsche Bank has set aside an undisclosed amount to cover potential penalties.

While foreign banks have received the brunt of the scrutiny to date, an American institution could be among the next to settle. Citigroup and JPMorgan Chase are under investigation.

In the $612 million Royal Bank of Scotland case, authorities levied the second-largest fine in the multiyear investigation into rate manipulation.

The fine included a $325 million penalty from the trading commission and a £87.5 million ($137 million) sanction from the Financial Services Authority, the British regulator, marking one of the largest financial penalties ever from British authorities. The Justice Department, for its part, imposed a $150 million fine as part of a deferred-prosecution agreement with R.B.S. In addition to wire fraud, the Justice Department cited the bank for its role in a “price-fixing conspiracy” that violated anti-trust laws.

R.B.S., based in Edinburgh, had aimed to avert the guilty plea for its Japanese subsidiary. But the Justice Department’s criminal division declined to back down, and the bank had little leverage to push back. If it had balked at a plea deal, the Justice Department could have moved to indict the subsidiary.

“Like with Barclays and UBS, the settlement with R.B.S. is much more than a slap on the wrist,” said Bart Chilton, a member of the trading commission who is critical of soft fines on big banks.

In the wake of the settlement, Royal Bank of Scotland is shaking up its management team as it moves to repair its bruised image. John Hourican, the firm’s investment banking chief, resigned on Wednesday, and agreed to forgo some of his past and current compensation totaling around $14.1 million. While Mr. Hourican was not implicated in the scandal, senior executives said he was taking blame for wrongdoing in his division.

“John is the right senior person to take responsibility for this,” the bank’s chairman, Philip Hampton, told reporters on Wednesday.

Royal Bank of Scotland, in which the government holds an 82 percent stake after providing a $73 billion bailout in 2008, also plans to claw back bonuses and other long-term compensation totaling $471 million to help pay for the rate-rigging penalty. The bank will will primarily use the figure to pay the fines from U.S. authorities, while penalties from the British regulator will be recycled back to the British government.

At a press conference in central London on Wednesday, Stephen Hester, the bank’s chief executive, condemned the illegal behavior of some of the firm’s employees, but acknowledged that Royal Bank of Scotland did not monitor its Libor submissions closely enough to catch the wrongdoing.

Mr. Hester, who has led the bank through a series of scandals and has been dogged by politicians’ demands for reductions in bonuses, admitted that the rate-rigging episode had placed the bank under a lot of strain.

“It is one of the most difficult moments over the entire period,” he said.

Mr. Hester, a former chief executive of the property developer British Land, has focused on paring back the bank’s operations. The C.E.O. has cut more than 30,000 job cuts since 2008, attempted to spin-off of the mergers and acquisitions unit and cut the size of its balance sheet by £600 billion since 2009. Mr. Hester also waved his $1.5 million bonus for 2011 after coming under pressure from British politicians.

In the Libor case, the wrongdoing at R.B.S. occurred on smaller scale than at other banks. The breach, authorities say, was limited to Libor submitters and traders who sought to bolster their bottom line. By comparison, top executives at Barclays knew the bank was lowballing its Libor rates to assuage concerns about its high borrowing costs.

R.B.S., which admitted that 21 of its employees altered the firm’s Libor submissions for financial gain on hundreds of occasions, either disciplined or fired most of the employees. The rest left before they were implicated. In the UBS case, the trading commission cited more than 2,000 instances of illegal acts involving dozens of employees.

Still, the government complaints against R.B.S. portray a permissive culture that allowed rate-rigging to persist for some four years.

The bank’s own records captured the scheme in striking detail, revealing how traders pressured other employees to submit certain Libor figures. Submitters and traders sat in earshot of each other on a trading desk in London, forming what authorities termed a “cozy ring.”

The bank eventually separated the employees, forcing them to communicate over e-mail and phone. A flurry of instant messages ensued, some more vulgar than others.

A trader noted in September 2009 that his requests for rates moved up and down, “like a whores drawers.” Another employee acknowledged that the Libor rate-setting process is “a cartel now.”

To get their way with employees who submitted Libor rates, traders promised “love” and affection. Others merely offered steak and sushi. One trader resorted to begging, invoking a plea of “pretty please.”

The collusion was not limited to inside Royal Bank of Scotland.

Between 2007 and 2010, the bank’s traders cooperated with other banks, including the Swiss financial giant UBS, and brokerage firms to manipulate Libor, according to regulatory filings. To ensure rate submissions at other banks benefited their own trading positions, some of Royal Bank of Scotland’s staff paid brokers more than a combined $300,000 in kickbacks over the time period to influence traders at other firms on their behalf.

When authorities started investigating, the traders adapted their tactics. One employee noted that federal authorities “are all over us.”

The concerns prompted a more covert approach. In September 2010, after the trading commission ordered an internal investigation at R.B.S., a derivatives trader urged a colleague who requested a higher Libor rate to send “no emails anymore.”

Two months later, a Libor submitter rebuffed an instant message request to manipulate rates. But then, the submitter spoke with the trader via telephone, explaining “we’re not allowed to have those conversations” over instant message.

Their call was recorded. The employees laughed, according to a transcript, and the submitter reassured the trader that he would fulfill the request: “Leave it with me, and uh, it won’t be a problem.”

The lobbying paid off. When employees submitted bogus rates, government authorities said, Libor was altered.

Lanny Breuer, the head of the Justice Department’s criminal division, called the actions a “stunning abuse of trust.”

He also warned of coming actions against other big banks. “Our message is clear: no financial institution is above the law.”

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Lindsey Vonn Hospitalized After Crash in Super-G

Luca Bruno/Associated Press

Lindsey Vonn was airlifted by helicopter in Schladming, Austria.

SCHLADMING, Austria — The Olympic champion Lindsey Vonn, whose record-breaking ski racing career has frequently mixed stirring triumph with frightening spills, injured two knee ligaments in a tumbling crash Tuesday and may need reconstructive knee surgery. Vonn fell in the super-G of the world Alpine championship, a race contested one year and two days before the scheduled start of the Sochi Winter Olympics in Russia.

Vonn, who has won the World Cup overall title four times and has more World Cup victories than any American, is the defending Olympic downhill gold medalist.

Vonn’s right knee bent awkward as she landed a jump just before she somersaulted down the mountain. Her ski technician, Heinz Hammerle, said he believed Vonn sustained an injury to her right knee. At a meeting of team and race officials Tuesday evening, Peter Schroksnadel, the president of the Austrian ski federation, said that Vonn had injured her anterior cruciate ligament and a lateral knee ligament. Her sister, Laura Kildow, told NBC Sports that Vonn was going to need surgery.

Recovery times for reconstructive knee surgeries vary greatly, but numerous ski racers with multiple ligament tears have returned to the slopes in less than a year — with unpredictable results.

Tuesday’s race, the first of the world championships, was delayed nearly four hours because of fog. There were more than 10 separate delays as officials struggled to get the race in with daylight fading. Vonn led through the first timed stage of the race, but by the second stage she was trailing the eventual winner Tina Maze of Slovenia by .12 of a second.

In the middle of the course, as Vonn made a right-footed turn and arced to her left, she navigated a jump at the same time. Vonn soared above the snow a little off balance with her hands behind her torso rather than in front of her chest, which normally ensures a more stable landing.

Returning to the snow, her right leg splayed briefly to the right and her knee hyperextended inward and toward the left. She pitched forward at the same time as she flipped. With her right ski cartwheeling down the slope after her, Vonn came to a stop a few hundred feet down the slope without contacting the protective fencing. She was attended to by medical personnel for 12 minutes on the side of the trail and airlifted off the mountain to a hospital.

Vonn has missed several weeks of World Cup racing this winter after an intestinal illness hospitalized her in November. After some subpar performances, she took an extended absence from the circuit in mid-December. But Vonn returned about a month later, winning a downhill race Jan. 19 and a giant slalom race the following week.

“I’m really sorry for Lindsey, who took a too direct line,” said Maze, who watched Vonn’s fall. “I regret her dreadful crash.”

Lara Gut of Switzerland finished second, 0.38 seconds behind Maze. Julia Mancuso of the United States was third, 0.52 back. Mancuso called it “by far the most difficult race in my career.”

Other top contenders, like Maria Hoefl-Riesch of Germany and Anna Fenninger of Austria, also failed to complete the course.

Vonn sustained a concussion that sidelined her during the world championships two years ago. She also had a spectacular, harrowing crash days before the 2006 Winter Olympics in Italy. With a severely bruised back, she competed days later but failed to win an Olympic medal. Vonn injured her thumb in a crash in the 2010 Vancouver Olympics when she also won a bronze medal in the combined. Those Olympics began with the prospect of Vonn not competing at all because of a shin injury she revealed just days before the start of the Olympics.

Kelley McMillan reported from Schladming, Austria. Bill Pennington reported from New York.

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Dell to go private in landmark $24.4 billion deal

(Reuters) - Michael Dell will take Dell Inc private for $24.4 billion in the biggest leveraged buyout since the financial crisis, a deal that allows the billionaire chief executive officer to revive the fortunes of his computer company without Wall Street scrutiny.

The deal - announced on Tuesday and financed with cash and equity from Michael Dell, cash from private equity firm Silver Lake, and a $2 billion loan from Microsoft Corp - will end a rocky 24-year run on public markets for a company conceived in a college dorm room.

To many investors, Dell's decline in market share since its peak in the early 2000s symbolizes the rapidly dwindling prospects of the personal computer industry.

The world's No. 3 PC maker, which Michael Dell began in 1984 as a computer-sales outfit while he was still a 19-year-old pre-med student at the University of Texas, is now going through a painful transition from a pure PC maker to a one-stop provider of enterprise computing services. Sales of PCs still make up the majority of its revenue.

Analysts say the restructuring may entail job cuts and more costly acquisitions, as the company arms itself to do battle with larger and more established rivals like Hewlett-Packard Co and IBM Corp.

"We recognize this process will take more time," Chief Financial Officer Brian Gladden told Reuters. "We will have to make investments, and we will have to be patient to implement the strategy.

"And under a new private company structure, we will have time and flexibility to really pursue and realize the end-to-end solutions strategy."

Gladden said the company's strategy would "generally remain the same" after the deal closed, but "we won't have the scrutiny and limitations associated with operating as a public company."

Michael Dell and private equity firm Silver Lake are paying $13.65 per share in cash for the world's No. 3 computer maker. Michael Dell's MSD Capital investment firm will also provide cash financing for the deal. Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets will offer debt financing.

Shares of Dell were up 0.8 percent at $13.38 in morning trading.

Dell, whose fairy-tale rise throughout the 1990s and the early part of the next decade once made it a Wall Street darling, has ceded market share in recent years to nimbler rivals such as Lenovo Group. That is in spite of Michael Dell's efforts in the five years since he retook the helm of the company following a brief hiatus during which its fortunes waned.

As of 2012's fourth quarter, Dell's share of the global PC market had slid to just above 10 percent from 12.5 percent a year earlier as its shipments dived 20 percent - the fastest quarterly pace of decline in years, according to research house IDC.

While analysts said Dell could be more nimble as a private company, it will still have to deal with the same difficult market conditions. International Business Machines Corp last decade underwent what is considered one of the most successful transformations of a hardware company, all while trading on public markets.

"This is an opportunity for Michael Dell to be a little more flexible managing the company," said FBN Securities analyst Shebly Seyrafi. "That doesn't take away from the fact they will have challenges in the PC market like they did before."

RECORD BUYOUT

The deal would be the biggest private equity-backed leverage buyout since Blackstone Group LP's takeout of the Hilton Hotels Group in July 2007 for more than $20 billion, and is the 11th-largest on record.

The parties expect the transaction to close before the end of Dell's 2014 second quarter, which ends in July.

News of the buyout talks first emerged on January 14, although they reportedly started in the latter part of 2012. Michael Dell had previously acknowledged thinking about going private as far back as 2010.

The $13.65-per-share price is a premium of about 24 percent to the average $11 price of Dell stock before news of the deal talks broke and is far below the $17.61 that the shares were trading for a year ago.

"The key question here is will shareholders approve this deal, because there is practically no premium where the stock is trading," Sterne Agee analyst Shaw Wu said.

J.P. Morgan and Evercore Partners were financial advisers, and Debevoise & Plimpton LLP was the legal adviser to the special committee of Dell's board. Goldman Sachs was financial adviser, and Hogan Lovells was legal adviser to Dell.

Wachtell, Lipton, Rosen & Katz was legal adviser to Michael Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets were financial advisers to Silver Lake, and Simpson Thacher & Bartlett LLP was its legal adviser.

(Writing by Ben Berkowitz and Edwin Chan; Editing by Gerald E. McCormick and Lisa Von Ahn)

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Queen Latifah production co. strikes Netflix deal

NEW YORK (AP) — Queen Latifah's production company, Flavor Unit Entertainment, has signed a deal with Netflix.

The entertainer announced Tuesday that the multiyear deal gives the streaming service first look at titles from her production company. It starts this spring.

Latifah launched Flavor Unit in New Jersey with Shakim Compere. It's now based in Miami. The company has produced films such as "Bringing Down the House" and "Just Wright," both starring Latifah. It also produced the HBO film "Life Support," which earned a Golden Globe Award for Latifah.

Latifah said in a statement that Netflix is a "strong brand and the perfect place to showcase our projects."

Flavor Unit is also producing the upcoming Terrence Howard thriller "House of Bodies" and "Percentage," starring Ving Rhames and Macy Gray.

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Personal Health: Effective Addiction Treatment

Countless people addicted to drugs, alcohol or both have managed to get clean and stay clean with the help of organizations like Alcoholics Anonymous or the thousands of residential and outpatient clinics devoted to treating addiction.

But if you have failed one or more times to achieve lasting sobriety after rehab, perhaps after spending tens of thousands of dollars, you’re not alone. And chances are, it’s not your fault.

Of the 23.5 million teenagers and adults addicted to alcohol or drugs, only about 1 in 10 gets treatment, which too often fails to keep them drug-free. Many of these programs fail to use proven methods to deal with the factors that underlie addiction and set off relapse.

According to recent examinations of treatment programs, most are rooted in outdated methods rather than newer approaches shown in scientific studies to be more effective in helping people achieve and maintain addiction-free lives. People typically do more research when shopping for a new car than when seeking treatment for addiction.

A groundbreaking report published last year by the National Center on Addiction and Substance Abuse at Columbia University concluded that “the vast majority of people in need of addiction treatment do not receive anything that approximates evidence-based care.” The report added, “Only a small fraction of individuals receive interventions or treatment consistent with scientific knowledge about what works.”

The Columbia report found that most addiction treatment providers are not medical professionals and are not equipped with the knowledge, skills or credentials needed to provide the full range of evidence-based services, including medication and psychosocial therapy. The authors suggested that such insufficient care could be considered “a form of medical malpractice.”

The failings of many treatment programs — and the comprehensive therapies that have been scientifically validated but remain vastly underused — are described in an eye-opening new book, “Inside Rehab,” by Anne M. Fletcher, a science writer whose previous books include the highly acclaimed “Sober for Good.”

“There are exceptions, but of the many thousands of treatment programs out there, most use exactly the same kind of treatment you would have received in 1950, not modern scientific approaches,” A. Thomas McLellan, co-founder of the Treatment Research Institute in Philadelphia, told Ms. Fletcher.

Ms. Fletcher’s book, replete with the experiences of treated addicts, offers myriad suggestions to help patients find addiction treatments with the highest probability of success.

Often, Ms. Fletcher found, low-cost, publicly funded clinics have better-qualified therapists and better outcomes than the high-end residential centers typically used by celebrities like Britney Spears and Lindsay Lohan. Indeed, their revolving-door experiences with treatment helped prompt Ms. Fletcher’s exhaustive exploration in the first place.

In an interview, Ms. Fletcher said she wanted to inform consumers “about science-based practices that should form the basis of addiction treatment” and explode some of the myths surrounding it.

One such myth is the belief that most addicts need to go to a rehab center.

“The truth is that most people recover (1) completely on their own, (2) by attending self-help groups, and/or (3) by seeing a counselor or therapist individually,” she wrote.

Contrary to the 30-day stint typical of inpatient rehab, “people with serious substance abuse disorders commonly require care for months or even years,” she wrote. “The short-term fix mentality partially explains why so many people go back to their old habits.”

Dr. Mark Willenbring, a former director of treatment and recovery research at the National Institute for Alcohol Abuse and Alcoholism, said in an interview, “You don’t treat a chronic illness for four weeks and then send the patient to a support group. People with a chronic form of addiction need multimodal treatment that is individualized and offered continuously or intermittently for as long as they need it.”

Dr. Willenbring now practices in St. Paul, where he is creating a clinic called Alltyr “to serve as a model to demonstrate what comprehensive 21st century treatment should look like.”

“While some people are helped by one intensive round of treatment, the majority of addicts continue to need services,” Dr. Willenbring said. He cited the case of a 43-year-old woman “who has been in and out of rehab 42 times” because she never got the full range of medical and support services she needed.

Dr. Willenbring is especially distressed about patients who are treated for opioid addiction, then relapse in part because they are not given maintenance therapy with the drug Suboxone.

“We have some pretty good drugs to help people with addiction problems, but doctors don’t know how to use them,” he said. “The 12-step community doesn’t want to use relapse-prevention medication because they view it as a crutch.”

Before committing to a treatment program, Ms. Fletcher urges prospective clients or their families to do their homework. The first step, she said, is to get an independent assessment of the need for treatment, as well as the kind of treatment needed, by an expert who is not affiliated with the program you are considering.

Check on the credentials of the program’s personnel, who should have “at least a master’s degree,” Ms. Fletcher said. If the therapist is a physician, he or she should be certified by the American Board of Addiction Medicine.

Does the facility’s approach to treatment fit with your beliefs and values? If a 12-step program like A.A. is not right for you, don’t choose it just because it’s the best known approach.

Meet with the therapist who will treat you and ask what your treatment plan will be. “It should be more than movies, lectures or three-hour classes three times a week,” Ms. Fletcher said. “You should be treated by a licensed addiction counselor who will see you one-on-one. Treatment should be individualized. One size does not fit all.”

Find out if you will receive therapy for any underlying condition, like depression, or a social problem that could sabotage recovery. The National Institute on Drug Abuse states in its Principles of Drug Addiction Treatment, “To be effective, treatment must address the individual’s drug abuse and any associated medical, psychological, social, vocational, and legal problems.”

Look for programs using research-validated techniques, like cognitive behavioral therapy, which helps addicts recognize what prompts them to use drugs or alcohol, and learn to redirect their thoughts and reactions away from the abused substance.

Other validated treatment methods include Community Reinforcement and Family Training, or Craft, an approach developed by Robert J. Meyers and described in his book, “Get Your Loved One Sober,” with co-author Brenda L. Wolfe. It helps addicts adopt a lifestyle more rewarding than one filled with drugs and alcohol.

This is the first of two articles on addiction treatment.

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DealBook: $24 Billion Buyout for Dell, Biggest Since 2007

9:32 a.m. | Updated

Dell announced on Tuesday that it had agreed to go private in a $24.4 billion deal led by its founder and the investment firm Silver Lake, in the biggest leveraged buyout since the financial crisis.

Under the terms of the deal, the buyers’ consortium, which also includes Microsoft, will pay $13.65 a share in cash. That is roughly 25 percent above where Dell’s stock traded before word emerged of the negotiations of its sale.

Michael S. Dell will contribute his stake of roughly 14 percent toward the transaction, and will contribute additional cash through his private investment firm, MSD Capital. Silver Lake is expected to contribute about $1 billion in cash, while Microsoft will loan an additional $2 billion.

Dell’s board is said to have met on Monday night to vote on the deal. In its statement, the company said Mr. Dell recused himself from any discussions about a transaction and did not vote.

As a newly private company – now more firmly under the control of Mr. Dell – the computer maker will seek to revive itself after years of decline. The takeover represents Mr. Dell’s most drastic effort yet to turn around the company he founded in a college dormitory room in 1984 and expanded into one of the world’s biggest sellers of personal computers.

But the advent of new competition, first from other PC manufacturers and then smartphones and the iPad, severely eroded Dell’s business. Such is the concern about the company’s future that Microsoft agreed to lend some of its considerable financial muscle to shore up one of its most important business partners.

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,” Mr. Dell said in a statement. “Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision.”

Still, analysts have expressed concern that even a move away from the unyielding scrutiny of the public markets will not let Mr. Dell accomplish what years of previous turnaround efforts have failed to achieve.

Nevertheless, the transaction represents a watershed moment for the private equity industry, reaching heights unseen over the past five years. It is the biggest leveraged buyout since the Blackstone Group‘s $26 billion takeover of Hilton Hotels in the summer of 2007, and it is supported by more than $15 billion of debt financing raised by no fewer than four banks.

“Michael Dell is a true visionary and one of the pre-eminent leaders of the global technology industry,” Egon Durban, a managing partner at Silver Lake, said in a statement. “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global I.T. solutions provider.”

Mr. Dell first approached the board about taking the company private in August. That prompted the board to form a special committee, with JPMorgan Chase and the law firm Debevoise & Plimpton as advisers. It was charged with considering alternatives to a management buyout, including other deals or borrowing money to pay out a special dividend.

To help ward off accusations of self-dealing by Mr. Dell, the special committee has hired an independent investment bank, Evercore Partners, specifically to oversee a 45-day “go shop” period in which the company will solicit other potential buyers.

“The special committee and its advisers conducted a disciplined and independent process intended to ensure the best outcome for shareholders,” Alex J. Mandl, the head of the Dell independent committee, said in a statement. “Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”

Dell itself was advised by Goldman Sachs and the law firm Hogan Lovells, while Mr. Dell retained Wachtell, Lipton, Rosen & Katz as legal counsel. Silver Lake was advised by Bank of America Merrill Lynch, Barclays, Credit Suisse, RBC Capital Markets and the law firm Simpson Thacher & Bartlett.

On Tuesday, Mr. Dell sent a memo to company employees about the deal. Here is a copy of the memo:

Today, we announced a definitive agreement for me and global technology investment firm Silver Lake to acquire Dell and take it private.

This transaction is an exciting new chapter for Dell, our team and our customers. We can immediately deliver value to stockholders, while continuing to execute our long-term growth strategy and focus on helping customers achieve their goals.

Together, we have built an incredible business that generates nearly $60 billion in annual revenue. We deliver enormous customer value through end-to-end solutions that are scalable, secure and easy to manage, and Enterprise Solutions and Services now account for 50 percent of our gross margins.

Dell’s transformation is well underway, but we recognize it will still take more time, investment and patience. I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy. We’ll have the flexibility to continue organic and inorganic investment, and grow our business for the long term.

I am particularly pleased to be in partnership with Silver Lake, a world-class investment firm with an outstanding reputation and significant experience in the technology sector. They know all the technology business models, understand the value chain and have an extremely strong global network of contacts. I am also glad that Microsoft is part of the transaction, further building on a nearly 30-year relationship.

I am honored to continue serving as chairman and CEO, and I look forward to working with all of you, including our current senior leadership team, to accelerate our efforts. There is much more we can accomplish together. I am committed to this journey and I am grateful for your dedication and support. Please, stay focused on delivering results for our customers and our company.

There is still considerable work to be done, and undoubtedly both challenges and triumphs lie ahead, but as always, we are making the right decisions to position Dell, our team and our customers for long-term success.

Michael

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