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CSFB E-Mail About Agile Examined

Regulators Investigate Giving Recommendations On Stock To Gain Clients

Nov 28, 2002

In a newly released e-mail, Credit Suisse First Boston star banker Frank Quattrone posed a blunt question to a colleague about a software company on which CSFB had begun offering research.
"What have we extracted from them on banking side to get this coverage?" Quattrone wrote.

The e-mail of Nov. 6, 2000, about Agile Software Corp. was obtained by Massachusetts securities regulators investigating whether CSFB tried to attract investment banking business by issuing rosy research about prospective clients.

The regulators believe that, while professional investors may have been in on a wink-and-nod culture in which stock ratings were artificially boosted, individual investors were hung out to dry. In a civil complaint, Massachusetts is seeking a $1.9 million fine and to break apart the company's research and banking operations.

A separate set of e-mails shows an exchange in which CSFB employees try to dissuade a colleague from downgrading stock of Yahoo! Inc. from "hold" to "sell" despite an earnings pre-announcement that was "a complete disaster."

In response to the e-mail from the analyst, Jamie Kiggen, CSFB banker Bill Brady wrote: "Would appreciate it if you could keep it at a hold still highlighting all of the negatives," adding that the company remains a "premier Web asset."

The e-mails suggest bankers and researchers discussed the matter by phone. Later in the day, Kiggen wrote: "You've all weighed in with various risks to the potential revenue here (all of which I've anticipated, and a few of which I believe, although the wait for revenue from these guys has been awfully long)."

In a subsequent e-mail, Kiggen said that if CSFB kept its hold rating and Yahoo! still took its investment banking business to another firm, CFSB "will have missed an opportunity to raise the firm's research profile and credibility; but I'm sure that won't happen." The note ended with the online shorthand for a wink, a semicolon followed by a closed parenthesis.

The company issued a statement saying, "CSFB continues to work closely with the broad coalition of state and federal regulators to achieve significant national reforms. We are strongly committed to this ongoing process, which we believe is the best way to achieve effective, industry-wide reform and help restore investor confidence in the markets."

Spokeswoman Victoria Harmon said that the company had not, in the end, taken on any investment banking business from Yahoo! or Agile.

On Monday, CSFB filed its response to the civil complaint filed last month by Massachusetts regulators, calling the allegations "fundamentally flawed" and an attempt to find a scapegoat for the technology bust.

The response claims Secretary of the Commonwealth William Galvin's office "seeks to place blame on CSFB for the dashed expectations created by the 1990s technology boom" and that the civil complaint is "riddled with factual mistakes and flatly incorrect descriptions of documentary evidence."

Investigators "failed to interview or take testimony from a single current CSFB employee or to review media coverage that widely disclosed to the public facts, such as CSFB's reporting structure, that the Division alleges were kept secret," the response states.

In addition to the Massachusetts investigation, CSFB and other financial companies are negotiating with regulators over possible fines, reportedly totaling more than $1 billion, for misleading investors with poor research.

CSFB faces an assessment of $200 million to $250 million, according to recent published reports. It has paid $100 million this year to end investigations into allegations of kickbacks received from big investors.


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