Executive E-Mails At The Center Of A Case. E-mails sent by Merrill Lynch analysts were at the center of New York Attorney General Eliot Spitzer’s conflict-of-interest case against the firm which resulted in a $100-million settlement.
Spitzer’s office again is using e-mail as evidence in its investigation. In the complaint filed yesterday by Spitzer, Jack Grubman, Salomon Smith Barney’s top telecommunications analyst, sent an e-mail to two SSB investment bankers on Feb. 21, 2001. Grubman had learned that Focal Communications Corp., an investment banking client that Salomon had taken public in 1999, had complained about some aspects of a research note he had issued that day, in which he reiterated his “buy” rating on the stock. Focal, based in Chicago, was then selling at $15.50 per share.
The e-mail read:
“If I so much as hear one more peep out of them we will put the proper rating (i.e. 4, not even 3) on this stock which every single smart buysider feels is going to zero. We lost credibility on [two other stocks] because we support pigs like Focal.”
Grubman maintained his buy rating on Focal until Aug. 13, 2001, when the price had crashed from $15.50 to $1.24, according to the complaint. During the period prior to the downgrade, Salomon Smith Barney earned about $11.8 million in additional investment banking fees from Focal, the complaint said.
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