Credit Suisse First Boston Corp., the focus of a complaint by Massachusetts Secretary of State William Galvin charging the firm with analyst misconduct, is now the target of a civil class-action suit in Boston.
The lawsuit alleges that analysts with Credit Suisse First Boston known as CSFB issued reports publicly touting shares of Agilent Technologies Inc. of Palo Alto, Calif., while privately warning prized clients away from the company’s securities.
Filed the same day as Galvin’s complaint, the lawsuit could be the first of a tidal wave of litigation against the investment bank based on investigative work by the secretary of state’s office.
A CSFB spokeswoman with the Swiss bank’s New York office declined to comment on the case.
The suit was filed in U.S. District Court in Boston on behalf of a single shareholder, Patricia Maillet, who owned “a couple of hundred shares,” according to her attorney, Thomas G. Shapiro, with Boston-based Shapiro Haber & Urmy LLP. The stock was made attractive to investors by misleading analyst research that eventually was exposed as bogus, according to Shapiro.
Court documents refer to e-mails, uncovered by Galvin’s office, bad-mouthing Agilent stock. One in particular describes what came to be known as the “Agilent two-step,” whereby an analyst hangs a “buy” rating on a stock that he privately dislikes. “The average investor was not privy to any (contradictory) verbal information from CSFB,” according to the Galvin report. CSFB has denied the allegations made in Galvin’s report.
Measurement- and test-equipment maker Agilent underwent a public offering in November 1999, with stock going for about $30 per share. Analysts in 2000 set a target price of $87 per share, the class-action complaint said. Agilent stock in recent days has hovered around $10.
Shapiro said he could not calculate the potential damages, saying the number of people harmed by CSFB’s false rating is unknown. But he hinted at the possible size in the complaint, noting that more than 72 million shares of Agilent stock were sold on its opening day.
Galvin’s complaint also alleges CSFB misled investors by allowing its investment-banking division to exert undue influence on the firm’s research department. Shapiro said that Galvin’s legwork, much of which was made public prior to the Oct. 21 unveiling of the complaint, provided the basis on which his client sued.
The secretary of state’s labors could spark an explosion of class-action suits against CSFB, experts said. “Usually it’s not just one,” said a plaintiff’s lawyer, who asked not to be identified. “You’ll usually see many.”
In fact, this is the third such case Shapiro has filed against CSFB in recent weeks. And he proudly claims to have filed the first class-action against an analyst, last summer, Merrill Lynch & Co.’s Henry Blodgett, who is accused of misrepresenting a stock’s value.
And there’s more to come from Shapiro. “I anticipate we’ll be filing more” against other brokerages, Shapiro said. “We’ve been contacted.”