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CEOs Spared In Wall Street Settlement

No Criminal Prosecutions In Spitzer Investigation

Jan 1, 2002 |

Executives of top securities firms will not be criminally prosecuted as part of pending settlement of probes into Wall Street research, New York state Attorney General Eliot Spitzer said.

Spitzer, in an interview with talk-show host Charlie Rose Wednesday, said that his office will probably not prosecute some individuals who could have been targeted.

"In order to get the systemic structural reforms that I think is so critical to the investor and to the marketplace, we have probably forgone the opportunity to send a few people to jail," he said.

Spitzer added that he thinks a settlement of the probes into Wall Street research is very near. "We're pretty darn close, I think, to a resolution," he said.

The New York AG's comments indicate that top executives, including Citigroup's Sanford Weill, will not face jail terms. Weill, and former Salomon Smith Barney analyst Jack Grubman, have been at the center of an investigation into whether analyst research is compromised by investment banking relationships.

However, other regulators could bring actions against some individuals after a settlement is reached, a Spitzer spokeswoman said Thursday.

Talks between top securities firms and regulators including Spitzer, the Securities and Exchange Commission, the National Association of Securities Dealers and the North American Securities Administrators Association Inc. have been ongoing for months. Discussions will continue this week.

Firms involved in the negotiations include Goldman Sachs, Merrill Lynch, Morgan Stanley, CSFB, Citigroup, Bear Stearns, U.S. Bancorp, Deutsche bank, Lehman Brothers, J.P. Morgan Chase, UBS Paine Webber and Thomas Weisel.

Officials for Spitzer's office believe that a pact could be reached before the end of the year. Such a resolution would call for the separation of investment banking from research and a ban on IPO "spinning." With this practice, many of the investment banks gave IPO shares to executives at companies they were doing business with.

The Wall Street pact would also call for each of 12 securities firms under investigation to assign an independent monitor who would distribute company research and at least two independent research reports.

However, firms and regulators continue to haggle over fines. Citigroup had been expected to pay more than $500 million and Credit Suisse First Boston as much as $250 million. However, Citi may pay only $350 million and CSFB may face fines of $150 million, according to press reports.

Shares of Deutsche Bank lost $1.31, or 2.7 percent, to $47.25 Thursday, Goldman fell by 89 cents to $72.81 and Merrill lost 27 cents to $40.27.

Morgan shed 15 cents to $40.95, Citigroup lost a penny to $37.14, UBS fell by 11 cents to $49.45 and J.P. Morgan decreased by 32 cents to $23.68.

Lehman added a nickel to $56.01 while U.S. Bancorp gained 2 cents to $21.05.

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