Regulators are set to reach into the pockets of the Wall Street stars who rode the 1990s bull market to riches.
When the global settlement to reform corrupt stock research practices winds down this month, a handful of investment bankers and analysts could face civil and even criminal charges that seek, among other things, a big chunk of their fat bonuses, sources familiar with the probes told The Post.
“Individuals are off the table for the global settlement,” a source close to the talks said, “but the states’ investigations continue, and individuals could be subject to criminal or civil actions,” as well as further actions by federal regulators.
Among those coming under further scrutiny from federal and state regulators are Credit Suisse First Boston’s leading tech banker, Frank Quattrone; former Salomon Smith Barney telecom analyst Jack Grubman; former Merrill Lynch tech analyst Henry Blodget; Goldman Sachs’ co-head of global telecom research Frank Governali; and Morgan Stanley technology analyst Mary Meeker.
Execs from U.S. Bancorp Piper Jaffray and Thomas Weisel Partners – whose behavior during the tech boom was labeled “atrocious” by regulators – may be added to the list later.
These tech stars, regulators said, were major players at the hub of some of the worst conflicts of interest being probed.
Blodget, Grubman and Meeker, dubbed “Queen of the ‘Net,” were very public supporters of stocks that failed soon afterward.
Goldman and Morgan Stanley have denied any wrongdoing by their analysts. CSFB officials declined comment. Other parties could not be reached or did not return calls for comment.
Some these high-flyers took home millions in bonuses during the tech bubble.
Grubman reportedly got a $20 million bonus for a single year during the tech heyday. Quattrone negotiated a huge piece of the pie reportedly as big as 50 percent of the revenues he generated for himself and his team when he joined CS First Boston in mid-1998.
By the next year, Quattrone’s tech team had boosted CS First Boston from 17th in the underwriting league tables for tech IPOs to the top slot, and it reportedly generated between 12 and 15 percent of the big Swiss-owned investment bank’s revenues. Revenues topped $3.5 billion in 2000 at CS First Boston.
For Blodget, the regulators may even go after proceeds from a seven-figure advance for a book about the tech boom he’s writing.
Although SEC sources said going after Wall Streeters’ cash gains is “novel territory,” that won’t stop them.
“The SEC is committed to stripping offenders of their ill-gotten gains,” sniffed an agency insider. “If there’s a way [to get at them, they’ll] get them.”
Robert Heim, a former SEC official who’s now a partner at at Meyers & Heim, said the individual pros “will be facing some significant monetary fines if the SEC chooses to go after them.”
Twelve of the top brokerages are in talks with the Securities and Exchange Commission, National Association of Securities Dealers and states’ regulators to end multiple probes into analysts’ conflicts of interest.
Probes have uncovered evidence that allegedly shows analysts inflated their ratings on stocks in order to get lucrative investment banking fees that would pad their bonuses.
The next meeting between regulators and Wall Street is slated for Dec. 11, with hopes to have a global settlement in place by year-end, sources said.