Merrill Analyst Says Firing Unethical

Merrill Lynch & Co. analyst Peter Caruso, fired Tuesday for allegedly disclosing to some investors that he planned to lower his profit estimates on Home Depot Inc., said he did nothing wrong and is being used as a “scapegoat” by the brokerage giant.

Shares of Home Depot fell 7.4% on July 12, when Caruso’s report was published. Caruso said he told clients at a July 11 lunch meeting that he expected the retailer to report sluggish sales. But the 20-year Merrill veteran said he never indicated he would lower his rating or profit estimates the next day.

“It was unethical of Merrill Lynch to terminate me,” said Caruso, 44.

He said a Merrill salesperson at the lunch interpreted his comments as a sign he would cut his forecasts and alerted institutional investors. He declined to identify the salesperson.

“They’re using me as a scapegoat to cover up what’s going on here,” Caruso said.

Tim Cobb, a spokesman for Merrill in New York, said Caruso broke the firm’s rules. “We completed a thorough investigation and stand behind our conclusions,” Cobb said.

Merrill’s decision to fire Caruso, ranked No. 1 among retail industry analysts in Institutional Investor magazine’s annual polls for the last five years, is an effort to avoid another potential legal mess, some experts say.

In May, Merrill agreed to pay $100 million and change its research practices to settle charges brought by New York Atty. Gen. Eliot Spitzer. He alleged that the firm’s Internet analysts misled investors by touting stocks primarily to help garner investment banking business from the companies.