Settlement To Allege Securities Fraud
Language will aid suits against firms over stock researchApr 4, 2003 | Bloomberg News
The $1.4 billion settlement involving misleading stock research at Citigroup Inc., Credit Suisse First Boston, and nine other securities firms will say some of the biggest Wall Street houses committed fraud, said New York State Attorney General Eliot Spitzer.
Including allegations of fraud in the settlement, likely to be completed within weeks, will make it easier for investors and others to collect damages in private lawsuits against the firms, securities lawyers said.
''This is the largest fraud ever perpetrated on the investing public,'' Spitzer said at a meeting of the New York City Bar Association. Using the term fraud may invigorate shareholder lawsuits against the firms, securities lawyers said.
Each of the 11 firms in the settlement, which capped more than a year of investigation and negotiation, will sign separate deals. Joseph Borg, director of the Alabama Securities Commission, said in an interview that the banks most likely to be accused of fraud are the ones paying the biggest fines.
Citigroup Inc. and Credit Suisse First Boston paid the steepest penalties.
Including fraud in the settlement ''could reduce the burden of proof against the investment banks and either create more litigation or make the current litigation against them more successful,'' said Ron Geffner, a former enforcement attorney at the Securities and Exchange Commission who is now with Sadis & Goldberg LLC in New York.
Citigroup spokeswoman Leah Johnson didn't immediately return calls for comment. Credit Suisse spokeswoman Victoria Harmon, Goldman Sachs Group Inc. spokesman Lucas Van Praag, and Merrill Lynch & Co. spokesman Mark Herr declined to comment.
The firms, which have together set aside more than $3 billion to pay for the settlement and related lawsuits, have fought against attempts to include settlement language that may increase their legal liability and damage their reputation.