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Documents Suggest CSFB Used Favorable Stock Coverage To Solicit Investment Banking Business

Oct 7, 2002 | AP

Making a pitch for new business, Credit Suisse First Boston told a prospective client it would conduct more forgiving research than competitors, according to documents being gathered to support a possible criminal case against the Wall Street firm.

The documents, gathered by Massachusetts securities regulators, appear to show the company deciding to resume research coverage of a technology company once it had paid investment banking fees.

In an e-mail from March 2001, Frank Quattrone, a high-profile CSFB investment banker, was told by a colleague that Research in Motion, the company that makes the BlackBerry wireless e-mail device, should return to "most favored nation status" now that the company "paid us the extra $1.8 (million) we asked for."

The documents, obtained by The Associated Press, are part of an investigation by Massachusetts Secretary of State William Galvin, the state's top securities regulator.

They offer the latest look into the once-common Wall Street practice in which financial firms offered research coverage of a company's stock in exchange for its investment banking business.

Last month, Galvin's office gave evidence involving CSFB to New York Attorney General Eliot Spitzer, saying the company may have broken the law. Spitzer's office has not decided whether to pursue criminal charges.

Galvin did not immediately return a phone message Monday. In published reports, he called the documents "a smoking gun" and said they indicate possible criminal activity.

CSFB spokeswoman Victoria Harmon declined to comment directly on the e-mails but said: "We welcome the participation of Mr. Galvin in a new coalition of state and federal regulators who are trying to move these issues forward towards constructive resolution to restore investor confidence. We are very confident that after learning the facts the New York attorney general will determine that a criminal proceeding is not warranted against the firm nor any of its employees."

Harmon said the company has made systematic changes in its practices in recent years.

In the e-mail about RIM, CSFB investment banker Chris Legg wrote to Quattrone and others that "Now that the fee issue is behind us, I would ask that we return them to 'most favored nation' status."

Legg, no longer with the company, wrote, "I do believe if there were a significant M&A trade, they would use us" and said he had told the company CSFB would resume coverage.

The documents also include a July 1999 CSFB presentation for new clients that indicated with charts that the company was more forgiving than competitors in the research ratings it assigned to clients' stocks.

Also on Monday, CNBC, citing unidentified sources close to the firm, said CSFB was expecting to announce job cuts totaling 20 percent of its work force. Quattrone's technology investment banking division could face 40 percent cuts, the network said. Harmon, the CSFB spokeswoman, declined to comment.

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