Credit Suisse First Boston may have tied research coverage of an investment banking client to a big check, according to information released by Massachusetts’ top securities regulator.
In E-mails to technology chief Frank Quattrone in March 2001, a banker described a “return to most favored nation status,” for Research In Motion Limited, after the company paid $1.8 million in banking fees.
The documents show that Quattrone used analyst recommendations to win banking business, said William Galvin, Massachusetts’ secretary of state. Galvin sent the information to state Attorney General Eliot Spitzer, who has been investigating Wall Street research at several firms.
Spitzer, who is currently probing such conflicts at Salomon Smith Barney, recently joined forces with Securities and Exchange Commission chairman Harvey Pitt and others, including the New York Stock Exchange, to form a global framework for dealing with these problems.
The CSFB E-mails “clearly indicated there was a quid quo pro between banking and analysis,” Galvin told Bloomberg News. “It clearly violates their fiduciary duty – they were not giving good faith advice; it was corrupted by their effort to garner investment banking business.”
Galvin has asked Spitzer to pursue criminal charges.
A Spitzer spokeswoman declined to comment.
“We are very confident that after examining the facts, the New York attorney general will determine that a criminal proceeding is not warranted against the firm nor any of its employees,” CSFB said in a statement.
CSFB analyst Timothy Long initiated coverage of Research In Motion with a “buy” recommendation in December. He switched his recommendation to “hold” on May 21 when the shares had fallen 55% from a month earlier.
Separately, CSFB, Merrill Lynch, J.P. Morgan Chase, and Goldman Sachs are all preparing for job cuts as investment banking business slows.
CSFB’s investment banking chief, Adebayo Ogunlesi, is asking bankers to cancel their employment contracts, as the bank cuts costs to stem widening losses, Bloomberg News said, citing people familiar with the matter.
Ogunlesi, speaking last week to managing directors in the basement auditorium of the 11 Madison Ave. headquarters, said he planned to ask everyone in the division who had contracts to “rip them up,” Bloomberg said, citing unnamed sources.
A CSFB spokeswoman declined to comment.
After losses from bad telecom loans, J.P. Morgan may cut as many as 4,000 of its 20,000 investment bankers, and will likely fire about 25% of its staff in other support areas, people familiar with the bank said.
The bank is likely to announce some of those cuts when it reports earnings next week, analysts said.
Goldman Sachs plans to cut 250 investment bankers, Bloomberg said, citing unnamed sources.