Credit Suisse First Boston was accused of fraud in a lawsuit by creditors of Mortgage.com Inc., an Internet finance company that was out of business 14 months after Credit Suisse took it public.
It is the first lawsuit by company management against an underwriter since the IPO boom of 1999 and 2000 collapsed. The suit was filed in the Southern District of Florida on May 25 by a representative of Mortgage.com's creditors.
The shares debuted at $8 a share, more than doubled to a high of $22.75 within a month and then fell to below $1 within a year. The company closed in October because it was unable to raise enough cash to continue operating.
The suit alleges that Credit Suisse underpriced Mortgage.com's IPO so it could profit more and get "kickbacks" from investors who agreed to pay higher-than-normal commissions for the shares.
The suit also alleges that Credit Suisse used its Mortgage.com profit to "curry favor" with investors who could help it get additional IPO business. Credit Suisse, a unit of Credit Suisse Group, denied the accusations.