Subject:  Billion dollar Wall Street pact imminent |
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richyrich
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Date Posted: 18:18:29 12/19/02 Thu
Billion dollar Wall Street pact imminent
Executives likely to escape prosecution in settlement
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 7:48 PM ET Dec. 19, 2002
NEW YORK (CBS.MW) - A landmark billion dollar settlement of Wall Street's research scandals could be announced as soon as Friday, persons familiar with the situation told CBS.MarketWatch.com Thursday.
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While top executives would likely be spared prosecution, firms involved in the talks are expected to pay fines of more than $1 billion. Part of the money paid by the firms will go to a restitution fund for investors, a source said.
An announcement would end months of discussions between regulators, headed by New York Attorney General Eliot Spitzer, and top securities firms. The investigation centers on whether analyst research is compromised by investment banking relationships.
"It's a done deal," one source said.
However, a different person cautioned that while talks "have picked up" not all firms have signed off on the pact so a pact could be delayed.
Spitzer, in an interview with talk-show host Charlie Rose Wednesday, said he thinks a settlement of the probes into Wall Street research is very near. "We're pretty darn close, I think, to a resolution," he said.
Spitzer's office declined comment late Thursday.
Firms involved in the negotiations include Goldman Sachs (GS: news, chart, profile), Merrill Lynch (MER: news, chart, profile), Morgan Stanley (MWD: news, chart, profile), CSFB, Citigroup (C: news, chart, profile), Bear Stearns, U.S. Bancorp (USB: news, chart, profile), Deutsche Bank (DB: news, chart, profile), Lehman Brothers (LEH: news, chart, profile), J.P. Morgan Chase (JPM: news, chart, profile), UBS Paine Webber (UBS: news, chart, profile) and Thomas Weisel.
A resolution would call for the separation of investment banking from research and a ban on IPO "spinning." With this practice, many of the investment banks gave shares in hot IPOs to executives at companies they were doing business with.
The Wall Street pact would also call for each of the securities firms under investigation to assign an independent monitor who would distribute company research and at least two independent research reports.
Spitzer said Wednesday that executives of top securities firms will not be criminally prosecuted as part of the pending settlement of probes into Wall Street research.
"In order to get the systemic structural reforms that I think is so critical to the investor and to the marketplace, we have probably forgone the opportunity to send a few people to jail," he said.
Spitzer's comments suggested that top executives, including Citigroup's Sanford Weill, will not face jail terms. Weill, and former Salomon Smith Barney analyst Jack Grubman, have been at the center of an investigation into whether analyst research is compromised by investment banking relationships.
However, other regulators could bring actions against some individuals after a settlement is reached, a Spitzer spokeswoman said Thursday. And the proposed settlement would not protect analyst Grubman or CSFB uber-banker Frank Quattrone, a source said.
Throughout the negotiations, firms and regulators have haggled over the fines. Citigroup had been expected to pay more than $500 million and Credit Suisse First Boston as much as $250 million. However, Citi may pay only $350 million and CSFB may face fines of $150 million, according to press reports.
Shares of Deutsche Bank lost $1.67, or 3.44 percent, to $46.89 Thursday, Goldman fell by 3.40, or 4.61 percent cents to $70.30 and Merrill lost 69 cents to $39.85.
Morgan shed 80 cents to $40.30, Citigroup lost 15 cents to $37, UBS fell by 13 cents to $49.43 and J.P. Morgan decreased by 67 cents to $23.33.
Lehman lost 88 cents to $55.08 while U.S. Bancorp dropped a nickel to $20.98.
Luisa Beltran is a reporter for CBS.MarketWatch.com
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