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Wall Street Fines May Top $1 Billion In Probe of Research Practices

Nov 22, 2002 | Wal Street Journal Regulators from the New York state attorney general's office, the Securities and Exchange Commission and others are discussing fines against Wall Street that could total more than $1 billion, as they head into the final stages of a broad investigation into whether securities firms misled small investors with faulty research during the stock-market boom of the 1990s, The Wall Street Journal reported Friday.

Currently under discussion are fines that could be more than $500 million from Citigroup Inc. and about $200 million from Credit Suisse Group's Credit Suisse First Boston securities unit, according to people close to the matter. Spokeswomen from Citigroup and CSFB had no comment.

At the same time, regulators are seeking fines of about $75 million each from several other major securities firms, including Goldman Sachs Group, Morgan Stanley, Lehman Brothers Holdings Inc., Deutsche Bank AG, UBS AG and Bear Stearns Cos., according to people familiar with the matter. Representatives of these companies declined to comment.

Regulators could also be seeking fines of less than $60 million each from the U.S. Bancorp Piper Jaffray, unit of U.S. Bancorp, and Thomas Weisel Partners LLC, these people say. A Piper Jaffrey spokeswoman said "based on everything we know the findings from the regulators would not be characterized as egregious." A Weisel spokeswoman said she would "be surprised if those were regulators' conclusions because they would be inconsistent with the facts and the firm's own review of the issue."

The penalties have yet to be finalized, and these terms could ultimately change if the firms adopt strong internal controls that reflect what the regulators have been seeking. And it isn't clear whether the firms would admit to any misconduct as part of the accords. In such securities-law pacts, firms often agree to pay fines without admitting or denying the allegations.

In any event, the upshot is that Wall Street's largest firms could end up paying penalties totaling more than $1.1 billion. This would surpass the largest case so far brought by regulators investigating the securities industry, the $1 billion civil settlement to resolve charges of price-fixing on dealers' price spreads for stocks traded on the Nasdaq Stock Market in 1996.

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