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Credit Suisse Tactics Revealed

Documents Show Firm Demanded Fees For Analysis

Oct 7, 2002 | The Boston Globe Executives of Wall Street's Credit Suisse First Boston promised to provide high-tech companies positive stock ratings even in the event of bad news and withheld stock analysis from at least one company until it paid certain investment banking fees, according to documents from the Massachusetts Securities Division obtained by the Globe.

A Credit Suisse proposal for new clients, dated July 1999, near the top of the Internet bubble, said the company ''stands by its clients.'' The document indicated with stock charts and data points that it would offer better stock ratings than rival bankers, including Goldman, Sachs & Co. and Morgan Stanley Dean Witter.

Separately, in a series of e-mails sent in March 2001, Credit Suisse employees discussed the resumption of analyst coverage for Research in Motion, a Canadian company that makes the BlackBerry, a wireless e-mail device. In one e-mail, employee Chris Legg informs the firm's tech research department and technology investment banking chief, Frank Quattrone, that RIM had paid $1.8 million, as requested. As a result, he suggests that ''we return them to `most favored nation' status.''

The e-mail goes on to say: ''I have represented to RIM that you will be resuming full coverage.''

Massachusetts Secretary of State William F. Galvin called the documents ''a smoking gun'' that shows clients of embattled Credit Suisse had to buy investment banking services in order to receive stock coverage - and that fees were rewarded with misleadingly positive coverage.

''These documents have the firm boasting that they would not give bad ratings, even if others did,'' Galvin said. ''In addition, they withheld analysis for a period of time. When they were suddenly able to get more business, they resumed coverage.''

Credit Suisse officials could not be reached last night. The company recently has declined to comment on specific e-mail correspondence but has said that it is cooperating with the Massachusetts investigation.

The e-mails appear to be the latest damning evidence in the ongoing investigation by Massachusetts officials, New York Attorney General Elliot Spitzer, and the Securities and Exchange Commission into the previously common Wall Street practice of offering stock coverage in exchange for investment banking business. During the stock boom of the late 1990s, in particular, when firms were vying to take hot tech companies public, there was heated competition for such business.

In the Credit Suisse e-mails, not only was RIM to be rewarded with stock coverage for paying investment banking fees, but the company's executives were to receive other perks as well. One e-mail urges Quattrone, the investment banker, and research executives to get RIM's senior executives on the list to attend the British Open or a golf tournament at Pebble Beach in California.

''We intend to continue to purse this,'' Galvin said. ''This is part of our ongoing investigation.''

Merrill Lynch & Co. in May made a $100 million settlement with Spitzer to end an investigation of its positive recommendations on tech stocks that analysts privately acknowledged were overpriced. Citigroup has been working to settle its own conflict-of-interest problems, following charges by regulators, and could set a new standard by separating its stock research unit from its investment banking group.

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