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Probe Moves Up Corporate Ladder

Jan 7, 2003 | New York Daily News

Moving up the ladder at Wall Street firms, regulators are preparing to question several research bosses to unravel the role some of them may have played in the last bull market.

The National Association of Securities Dealers plans to bring in Andrew Melnick, Merrill Lynch's former global head of research, who, indirectly, oversaw former Internet analyst Henry Blodget, people familiar with the situation said.

The NASD has already told Blodget, who publicly supported stocks he privately trashed, he could face charges for his picks.

Regulators intend to examine whether managers including Melnick, who is now the co-head of research at Goldman Sachs, were doing their jobs in overseeing these analysts.

The probes are "going to widen out," said Timothy Ghriskey, founder of Ghriskey Capital Partners. "We'll see both government cases and civil cases. I don't think at all that we've seen the end of this."

Officials from the NASD, Merrill Lynch, and Goldman Sachs declined to comment.

Regulators from the NASD, the Securities and Exchange Commission and the New York Stock Exchange recently announced a $1.5 billion settlement with 11 of the biggest securities firms for hyping stocks of investment banking clients and for giving hot stocks to corporate honchos.

The regulators and the firms are still working out some of the details of that settlement. Regulators yesterday continued to discuss how to divide up that money among the states. New York will receive $40 million.

Former Salomon Smith Barney telecom analyst Jack Grubman, at the center of many of these disclosures, is expected to pay a $15 million fine as a part of the settlement and has agreed to a lifetime ban from the securities industry. Blodget may also face such a ban and a multimillion dollar fine.

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