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Goldman Sachs Faces $75 Million Fine

Nov 27, 2002 | Washington Post

Regulators have asked Goldman Sachs Group Inc. to pay about $75 million to settle conflict-of-interest allegations, sources said. The request came as meetings continued between regulators and a dozen of Wall Street's largest firms regarding a "global settlement" of multiple investigations.

Merrill Lynch Co., which this year agreed to pay $100 million to settle charges that its analysts issued intentionally misleading stock research, was told it would not have to pay another fine as part of any global settlement with state, federal and industry regulators, two sources said.

Meanwhile, J.P. Morgan Chase Co. may join a handful of other firms in arguing against paying a large fine, the sources said. Lawyers for the bank, who were to meet with regulators on Tuesday, may argue that because the firm does not serve many individual investors and did not have a high-profile analyst during the stock boom of the late 1990s, it should not have to pay a sizable fine as part of the settlement. All three companies declined comment on the settlement talks.

New York state's attorney general, Eliot Spitzer; the Securities and Exchange Commission; NASD, the securities industry's principal self-regulatory body, and regulators in numerous other states are probing allegations that Wall Street misled investors during the recent stock boom with inflated research reports intended to generate lucrative banking fees. The regulators also are examining whether hard-to-get and often highly valuable shares in initial public offerings were allocated to executives at firms that were also investment banking clients.

These investigations have been deeply embarrassing to Wall Street, which is trying to negotiate a settlement that would bring all the probes to an end.

But if J.P. Morgan does put up significant resistance to paying a large fine, the firm would join a number of others that have indicated in recent days they are not yet ready to sign off on the settlement under terms being suggested by regulators.

Executives at Credit Suisse First Boston Corp. on Friday said they were "stunned" when regulators suggested the firm pay a $250 million fine, in addition to the $100 million it has already paid to settle an earlier probe. In addition to Credit Suisse, executives at Thomas Weisel Partners and U.S. Bancorp Piper Jaffray Inc. have said they do not believe their firms committed sufficient wrongdoing to merit large fines.

Regulators say they always viewed the current round of meetings as the start of negotiations on fines and other parts of the settlement. Executives at some of the firms also concede they are striking an opening bargaining position.

CSFB denies it gave clients perks

Credit Suisse First Boston has denied accusations of securities fraud in a complaint filed by the state of Massachusetts, calling the charges "fundamentally flawed," The New York Times reported from New York.

CSFB, the investment banking arm of Credit Suisse Group, denied Monday that it had used its investment advice and new shares issued by its clients to reward companies and their executives for hiring the firm. The denials came in an answer to an administrative complaint that was filed Oct. 21 by William Galvin, the secretary of the commonwealth of Massachusetts.

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