Wall St probe findings within weeks


  • Business
  • Saturday, 11 Jan 2003

NEW YORK: Disgruntled investors suing Wall Street firms over bad stock picks will soon get a windfall, as state regulators including New York Attorney-General Eliot Spitzer will likely release the findings of probes into Citigroup Inc and other banks by the end of the month. 

Officials for New York, Massachusetts and Washington are expected to present evidence on Citigroup’s Salomon Smith Barney unit, Morgan Stanley, Credit Suisse First Boston (CSFB) and US Bancorp unit Piper Jaffray before February, according to sources familiar with the matter.  

The states’ evidence – said to include documents, e-mails and interviews – comes from the broad probe into Wall Street business practices that resulted in last month’s landmark US$1.4bil settlement with 11 banks. 

A finalised court settlement is expected near the end of January, as well as US Securities and Exchange Commission (SEC) approval, informed sources have said. 

Investors have filed multi-million-dollar lawsuits accusing stock analysts of touting companies merely to win investment banking business. High-profile analysts like former Salomon Smith Barney telecoms guru Jack Grubman and former Merrill Lynch & Co dot-com analyst Henry Blodget have been named in many suits. 

States which investigated other firms, including Goldman Sachs Group Inc, Bear Stearns Cos and Lehman Brothers Holdings Inc, are also expected to reveal their findings at some point. Spitzer and state regulators have pledged to help investors recoup losses by arming them with whatever evidence they uncovere. 

Spitzer revealed findings of his initial probe into Merrill when he accused the firm of issuing conflicted research in April, and one source said more Merrill findings may be released. 

Ten firms, including Salomon, CSFB, Goldman Sachs and Morgan Stanley agreed to pay US$925mil in fines and restitution as part of the Dec 20 settlement. The list of firms – which eventually included Piper – neither denied nor admitted wrongdoing, which somewhat protects them against investor lawsuits. 

Yet, armed with evidence from the probes, investors have a unique advantage they did not have in past settlements. Investment banks and brokerages typically settle alleged misdoings with the SEC and the National Association of Securities Dealers (NASD), which were part of the settlement and seldom release evidence useful for subsequent civil action. – Reuters  

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