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Spitzer Set To Unveil Deals Today

CSFB Reportedly To Pay $150M; Other Firms Face Fines In Research Probe

Dec 20, 2002 | The Boston Globe New York Attorney General Eliot Spitzer will hold a news conference this morning to announce a settlement with most of the Wall Street firms who have been the subject of a yearlong regulatory probe, sources close to the investigation confirmed last night.

Credit Suisse First Boston Corp., which has been the focus for Massachusetts regulators, will agree to pay a $150 million fine and change its business practices, the sources said. But they said late yesterday afternoon that US Bancorp Piper Jaffray, which Massachusetts also agreed to help prosecute, was ''still miles apart'' from regulators on a possible settlement.

A CSFB spokeswoman said she could not confirm but would not deny the reports, and Piper Jaffray decline to comment. Massachusetts Secretary of State William F. Galvin also declined to comment on the talks last night.

The expected settlement announcement comes only days after Spitzer said during a panel discussion at Boston's John F. Kennedy Library that he was hopeful that ''either all or some subset of the firms'' would strike a deal soon. The announcement is expected to take place at either Spitzer's Lower Manhattan headquarters or the New York offices of the US Securities and Exchange Commission.

Spitzer, along with the SEC and a group of state regulators, has led an industrywide investigation of Wall Street research practices. Today's settlement is expected to include combined fines of more than $1 billion for the biggest investment banks, and another $1 billion over five years to create a fund to purchase and distribute independent stock research for brokerage clients. Firms in the probe include Salomon Smith Barney, Credit Suisse First Boston, Morgan Stanley, and Goldman Sachs Group Inc., and others. Merrill Lynch & Co. settled with Spitzer for $100 million earlier this year.

Late yesterday, The Washington Post reported on its Web site that Citigroup, parent of Salomon Smith Barney, will pay the largest fine, at $350 million. CSFB will pay the second biggest. Both firms will also publicly apologize, the article said.

Morgan Stanley, Goldman Sachs, Bear Stearns, Lehman Brothers, UBS Warburg, and Deutsche Bank are expected to pay about $50 million each. Piper Jaffray and Thomas Weisel Partners are expected to pay less, given their smaller size.

The practice of hyping buy and sell recommendations for stocks surged during the competitive bubble years, prosecutors and regulators have charged, as analysts publicly boosted stocks they privately called ''dogs.''

The idea, regulators said, was to provide positive research reports in exchange for lucrative investment banking business. In the most extreme cases, analysts had to seek permission from investment bankers to release negative reports - or were told to keep quiet about current or prospective clients.

Investigators in Massachusetts led the investigation into Credit Suisse, and agreed last week to aid Washington state regulators in the investigation of US Bancorp Piper Jaffray. To distribute the burden of the investigation, other state regulators agreed to take leading roles in investigating other firms.

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