The tech bust landed in the Broward County court system Wednesday.
A lawsuit filed in Broward’s circuit court seeks $1 billion in damages from Merrill Lynch & Co. on behalf of investors who purchased shares of the Focus Twenty Fund, a mutual fund that tanked with the technology sector, said Darren C. Blum, the plaintiffs’ lawyer.
”It’s almost like enough is enough,” said Blum, who hopes to send Merrill a message. “They need to pay.”
Court papers filed Wednesday cite conflicts of interest stemming from links between the brokerage firm’s investment bankers and its research analysts, who allegedly touted stocks to help the firm secure lucrative banking deals.
”Those stocks were artificially inflated due to Merrill’s conflict of interest,” Blum said. “If they’re looking at a company and the analyst is playing hokeypokey with the report, the report’s no good.”
Merrill spokesman Mark Herr declined to comment on the lawsuit, other than to say the allegations were “baseless.”
”There was no conflict,” Herr said.
The suit also accuses Merrill of fraud, saying it downplayed the fund’s riskiness.
Sales materials pitched Focus Twenty as appropriate for retirement, Blum said. But with up to a 90 percent concentration in technology and telecommunications companies, such as Inktomi and Exodus, Ciena, Red Back Networks and Juniper Networks, the fund was inappropriate for all but the wealthiest investors, according to court papers.
”You can’t overconcentrate,” Blum said. “At least have a hedge. Have an exit strategy.”
Merrill disagrees that it misled investors.
”The prospectus disclosed the risk of investing in the Focus Twenty fund,” said Herr, who called the allegations “baseless and without merit.”
Court papers recall the bubble of the late 1990s and early 2000, when investors clamored to ride the Internet and tech bandwagons.
In March 2000,the Focus Twenty IPO raised $1.05 billion.
Focus Twenty soared briefly, ranking no. 6 of the top 20 best selling funds in March 2000. But its tech-heavy portfolio cratered with the market in 2001, losing roughly 70 percent of its value that year.