Keeping Tabs on the Investigations

Stock Analyst Honesty

* The allegations: Analysts routinely tout stocks to curry favor with companies they cover, in the hope of winning investment banking business for their firms. New York Atty. Gen. Eliot Spitzer has leveled the harshest charges, accusing Merrill Lynch & Co. analysts of privately disparaging certain stocks while pushing them to investors. The firm has denied wrongdoing, but is in settlement talks with Spitzer.

* Who’s investigating: State and federal regulators, including Spitzer, the National Assn. of Securities Dealers and the New York Stock Exchange. The Securities and Exchange Commission launched a probe of at least 10 major brokerages in late April.

* Reform proposals: The SEC will vote Wednesday on a package proposed by the NASD and NYSE. It includes a ban on analysts reporting to investment bankers and a requirement that analysts give investors extensive detail about their stock-rating systems. Some experts have praised the plan, but Spitzer and others say it falls short of what is needed. Some firms have instituted reforms on their own, such as barring analysts from owning stocks they follow.

* Private lawsuits: Investors filed several suits last year against Morgan Stanley analyst Mary Meeker, but the suits were quickly thrown out by a federal judge. Merrill Lynch, however, agreed to pay a New York investor $400,000 to settle his arbitration claim against the brokerage firm and former analyst Henry Blodget. After Spitzer’s release of the Merrill e-mails, attorneys alleging IPO violations against major brokerages amended many of their claims to include new charges against analysts.

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IPOs

* The allegations: Major brokerages committed abuses in their handling of initial public stock offerings in the late 1990s. Investigators are studying whether some investment banks charged excessive commissions that amounted to illegal kickbacks. They’re also studying whether firms required some IPO investors to buy more shares once trading began, which may have manipulated the market.

* Who’s investigating: The SEC and NASD. However, the U.S. attorney’s office in Manhattan decided last year against pursuing a criminal case against Credit Suisse First Boston.

* Reform proposals: CSFB agreed to pay $100 million to settle a probe of the firm by the SEC and NASD. The firm was alleged to have committed bookkeeping violations and to have improperly shared in the profits of its customers.

* Private lawsuits: Small investors have filed 310 consolidated class-action suits in federal court in New York against about 45 investment banks.

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Wall St. and Enron

* The allegations: Investment banks helped Enron Corp. dupe investors by concocting the murky partnerships that plunged the energy company into bankruptcy.

* Who’s investigating: The House Energy and Commerce Committee is conducting an intensive probe. The SEC is looking into aspects of Enron’s relationship with Wall Street.

* Reform proposals: Among a battery of Enron-related legislation, the House passed a bill last month that would mandate moderate accounting and corporate financial reporting reforms. It would require the SEC to set up a disciplinary board to oversee auditors. A Senate committee is working on a tougher bill. A separate Senate committee approved a bill that would make it easier to prosecute securities fraud.

* Private lawsuits: Enron shareholders have sued nine major investment banks, saying they helped Enron conceal its poor finances. Some Enron creditors also have attacked Citigroup and J.P. Morgan Chase & Co. over their Enron involvement. The banks have denied wrongdoing. J.P. Morgan also is involved in an almost $1-billion dispute with 11 insurance companies over Enron claims.

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Walter Hamilton