Citigroup Inc., the world's largest financial services company, must defend allegations of biased analyst research in nine separate investor lawsuits instead of just one, a federal judge in New York ruled on Tuesday.
Shareholders of WorldCom Inc., Global Crossing Ltd., AT&T; Corp. and six other companies sued the bank's Salomon Smith Barney unit, alleging analysts had artificially boosted the value of nine technology stocks to gain investment-banking business.
Some investors asked U.S. District Judge Barbara S. Jones to consolidate 77 suits involving those companies. She ruled that claims should be packaged into nine suits organized by the technology companies rated by Salomon analysts.
The ruling makes it more difficult for Citigroup to settle investor claims or manage trials, analysts and lawyers said. In each of the nine suits, Jones plans to appoint a lead shareholder to manage claims, she said.
"It'll make it more expensive, and it will make it longer," said Richard X. Bove, a banking analyst at Hoefer & Arnett Inc. in Pinellas Park, Fla. "With nine suits, you're presumably going to have a wider array of decisions."
Citigroup spokeswomen Leah Johnson and Susan Thomson did not return calls for comment.
Citigroup and 10 other banks agreed to separate research and investment-banking activities as part of a $1.4-billion settlement last month of conflict of interest investigations by state and federal securities regulators. A report detailing bank conflicts is due in "a matter of weeks," New York Atty. Gen. Eliot Spitzer said Tuesday. His office was part of the regulator coalition.
Jones told investors to indicate any interest in being lead shareholder by Jan. 31.
Securities laws require that lead lawyers, who earn the largest fees in such litigation, will be chosen after a shareholder leader is picked.
"It's more difficult to talk to 10 lawyers than to talk to one," said John Halebian, a New York securities lawyer suing on behalf of Global Crossing shareholders.
Jones consolidated 17 suits filed by shareholders of WorldCom stock, 11 for Metromedia Fiber Network Inc., 10 for Williams Communications Group Inc., nine for AT&T;, eight for Global Crossing, seven each for Winstar Communications Inc., Level 3 Communications Inc. and XO Communications Inc., and one for Rhythms Netconnections Inc.