Weisel Hits Impasse on Pact to End U.S. Probes

As 11 other investment banks close in on a deal with state and federal regulators, talks with Thomas Weisel Partners to settle government probes into its stock analysts have hit an impasse, sources close to the matter said Monday.

The hitch in negotiations probably means that the San Francisco-based investment firm will be the only one of 12 investment banks under investigation that won’t reach a final agreement with securities regulators in coming weeks, the sources said.

With the exception of occasional phone calls, discussions between Weisel and the regulators have all but broken down, according to one source.

“Nothing’s changed in terms of how far apart we are in the negotiating,” according to one regulator.

A Weisel spokeswoman declined to comment.

A final deal between Wall Street and the federal and state regulators, expected this month, would close a series of lengthy probes into whether equity analysts touted stocks to lure corporate-financing business to their firms.

Investigators turned up evidence against several firms indicating that analysts had issued glowing recommendations on stocks that they privately disparaged as “junk” and worse.

In December, the government and 10 firms reached a preliminary agreement for the companies to pay a collective $1.4 billion in fines and other payments, although the wording and other details of a final accord were left unresolved.

U.S. Bancorp Piper Jaffray, initially a holdout, later that month agreed to join the preliminary pact.

In February, Weisel became the 12th and final company to announce a monetary deal with regulators when it said it had agreed to pay $12.5 million as its part of the settlement.

But no such deal was struck, one source said Monday.

“We do not have a monetary agreement with them,” the source said. “We’ve been far apart” on that issue.

By contrast, talks toward a final agreement have progressed fairly well with the other firms, which include Citigroup Inc., Goldman Sachs Group and Morgan Stanley, sources have said. Merrill Lynch & Co. reached its own deal last year with New York Atty. Gen. Eliot Spitzer, and that has been incorporated into the so-called global settlement.

Weisel, a boutique firm that specializes in growth stocks, has argued from the start that it can’t afford a substantial fine.

Regulators initially had sought a fine of $60 million. But Weisel balked, and even some regulators felt the demand was far too high.

Sources said the deadlock with Weisel isn’t expected to derail a final settlement with the other firms.

It’s not clear what will happen to Weisel if it doesn’t reach an agreement, although regulators could sue the firm in state or federal courts.

In talks with the other Wall Street firms, negotiations have focused on such matters as what evidence regulators would release to the public and what specific charges they would lodge against the firms.

Those issues are important because of the potential effect on the barrage of legal claims that have been filed against the firms by aggrieved investors.

The firms want to minimize the legal fallout by limiting the scope and tone of what regulators release.