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RIM Stays Mum On Alleged CSFB Fee Squeeze

Oct 9, 2002 | The Globe And Mail

Canada's Research In Motion Ltd. was silent about an alleged Wall Street fee squeeze for a second day yesterday, leaving questions about why it agreed if it did agree to pay New York broker Credit Suisse First Boston to ensure analyst coverage.

RIM, based in Waterloo, Ont., was a superstar of the 1990s tech-stock boom, coining a tech-talk expression through the success of its BlackBerry wireless e-mail device.

Its share price hit $227 on the Toronto Stock Exchange in 2000 but was headed back to earth early last year when the company became the subject of a series of internal e-mails at CSFB. The stock rose $1.05 to $14.50 yesterday after falling 52 cents on Monday.

The messages, leaked by securities investigators to U.S. news organizations, include one purportedly written on March 8, 2001, by Chris Legg, then a CSFB investment banker, to Frank Quattrone, head of the firm's California-based technology finance group, and Marc Cabi, then a research analyst in the firm's San Francisco office.

It could be read as meaning the firm withheld analyst coverage on RIM until it paid $1.8-million (U.S.) in fees that CSFB felt it was owed for work on a stock offering.

"RIM paid us the extra $1.8M we asked for," a copy obtained by The Wall Street Journal said. "That brings our total received from them to $6.5M, which is exactly the 25 per cent we requested as a percentage of the total fee in their most recent financing. . . .

"Now that the fee issue is behind us, I would ask that we return them to 'most favored nation' status.

"Marc, as per our conversation, I have represented to RIM that you will be resuming full coverage."

If coverage was withheld, the gap was brief, however. Mr. Cabi issued a report on RIM on April 30, 2001, calling the stock a buy. His predecessor, Ray Sharma, had made the same recommendation on Jan. 23.

In the meantime, Mr. Sharma had left to join Toronto-based BMO Nesbitt Burns Inc., which announced his hiring on March 6. He declined this week to discuss his experience at CSFB, saying his current employer forbids analysts to talk to reporters. "In any event, I was not at CSFB at the time of these e-mails so I'm not sure if I could be of any help," he told The Globe and Mail by e-mail.

Mr. Quattrone, who remains at CSFB, and Mr. Cabi, who has left, did not return phone messages. CSFB itself has been silent since it issued a statement on Monday saying it is confident that the controversy will not lead to criminal charges.

Another CSFB alumnus is Ontario Premier Ernie Eves, who served as vice-chairman of Credit Suisse First Boston Canada in his months out of politics last year after he stepped down as finance minister in February.

The firm announced his appointment in April.

Yesterday, Mr. Eves said he knows nothing about a $1.8-million payment by RIM. "No. It's news to me. I never did any work on RIM. . . . I've never talked to anybody at RIM about anything to do with Credit Suisse First Boston, so it's news to me."

CSFB now is just the latest Wall Street giant to be accused of abusing its research side in search of fees.

U.S. newspapers said the leaked documents include an investment-banking pitch in which it boasted that it "stands by its clients" by continuing to recommend their stocks even after the companies suffer financial setbacks.

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