Merrill, Blodget Sued On CMGI Rating
Suit Seeks Class Status For Those Who Followed Recommendation To Buy Internet Stock In '99 And '00Aug 28, 2002 | CNN/Money Merrill Lynch & Co. and its former Internet analyst Henry Blodget have been hit by an investors lawsuit charging the firm misled investors with its positive recommendations on CMGI Inc. stock in 1999 and 2000.
The suit was filed by Finkelstein Thompson & Loughran, a Washington, D.C., law firm that has filed other investor suits against Merrill. The suit seeks certification as a class action on behalf of shareholders who bought shares of CMGI, a holding company that invested in Internet companies.
The lawyers' statement said Blodget and other Merrill analysts issued very favorable recommendations on CMGI when they allegedly knew that such comments were unwarranted and false, and that they made the recommendations to attract lucrative investment banking business for Merrill.
Similar charges were made by New York State Attorney General Eliot Spitzer, who won a $100 million settlement from Merrill Lynch, along with promises to reform its research practices, after he released e-mails from Blodget and other analysts that showed them critical of stocks on which they made positive recommendations.
Merrill also has agreed to settle at least one New York Stock Exchange arbitration case involving an investor who followed Blodget's recommendations on Infospace Inc. It paid $400,000 to Debases Kanjilal in the July 2001 case. Blodget accepted a buyout to leave the firm later that year.
latest suit covers a period between March 23,1999, and Oct. 6, 2000. During that time CMGI shares ranged from $18.31 to $163.36 when adjusted for splits. Shares of CMGI (CMGI: down $0.06 to $0.51, Research, Estimates) have fallen to a small fraction of those lofty prices since then.