Judge Approves $1.4 Billion Settlement to Restore Investors' Trust in Wall Street

TBO ^ | 10/31/03 | Larry Neumeister

[Tumbleweed_Connection]

NEW YORK (AP) - A federal judge Friday approved a settlement by which the nation's biggest brokerage firms will pay $1.4 billion to resolve charges they gave biased stock ratings. Calling the deal fair, adequate and in the public interest, Judge William H. Pauley said it will bring "sweeping institutional reform of equity research in the investment banking industry in the United States."

The settlement, first announced nearly a year ago, settles charges by regulators that the firms misled investors by inflating stock ratings to help their firms win investment banking business.

The deal resulted after investigators unearthed e-mails in which analysts privately criticized stocks even as they urged the public to buy them, causing small investors to doubt they were on a level playing field with larger market players.

The deal was negotiated by Attorney General Eliott Spitzer's office, the Securities and Exchange Commission and other regulators.

Besides the money, it also calls for 10 firms, including Citigroup, Goldman Sachs and Credit Suisse First Boston, to sever the links between research and investment banking and to fund independent stock research for investors that would complement their own analysts' work.

In agreeing to the fines, the firms neither admit nor deny charges that they had misled investors.

In an order approving the settlement, Pauley wrote that consent decrees signed by each company provide an architecture to distribute $399 million to aggrieved investors who bought securities tainted by conflicted research.

He said the judgments do not block investors from pursuing other avenues of recovery against the defendants.

"Finally, at a time when increasing numbers of American households are investing in the equity markets, the investor education initiatives launched under these consent decrees will benefit the entire nation," Pauley said.

A message left with Spitzer's office as well as Citigroup and Goldman Sachs were not immediately returned.

Victoria Harmon, a spokeswoman for Credit Suisse First Boston, said the firm declined to comment.

[ken5050]

Pure crap...the government doesn't want to Arthur Anderson the brokerage firms..so it allows them to plead, pay a fine, yet not admit guilt...this has to stop, otherwise, it's the price of poker...

[razorback-bert]

Only one question, how much do I get?

I figure my trust is worth $250,000.

[Richard Kimball]

I won't trust them for less than a half-million. For $200,000, I'll talk to them.

[John Doe #1]

You are very perceptive! What makes one think the corporations involved in biased stock ratings wouldn't be a partner to this fraud & equally charged.. such as what was reported in Citigroup's chairman asking the chairman at AT&T (who sits on each other's boards) in currying favors from the broker Jack Grubman(that artifically upgraded AT&T's stock) so the chairman Sandy Weill at Citigroup could get a board member removed ...with the help of Michael Armstrong, Chairman of AT&T. Why should only the broker be chastised? In my opinion, the broker was only doing what he was pressured into doing by the corporations & only a partner in this crime. Of course, he did get his daughters enrolled in an exclusive school. Yet to the best of my knowledge, the broker was the only one brought to task...to date.
Of course, I understand Sandy Weill has stepped down at
Citigroup and Michael Armstrong has been shuffled off to
Comcast . In my view, it looks like they think if they can run, they can hide.