A federal judge Monday tossed out charges that Citigroup Inc., Merrill Lynch & Co. and eight other investment banks violated antitrust laws when they underwrote initial public offerings of stock.
The lawsuit, filed in 2001 on behalf of investors, stemmed from the Internet-stock boom of the late 1990s. Plaintiffs contended that in exchange for access to hot IPOs, the banks required investors to pay kickbacks and later buy more shares to artificially inflate prices. They also accused the banks of collusion and "commercial bribery."
In dismissing the antitrust claims with prejudice, meaning they cannot be brought again, Judge William Pauley of the U.S. District Court in Manhattan wrote that the Securities and Exchange Commission had jurisdiction over securities underwriting.
The ruling is a victory for the SEC, but it doesn't rule out other investor claims over IPO practices.
"You've cut out, at least on an antitrust theory, one possible source of remedy for [New York Atty. Gen.] Eliot Spitzer or other regulators," said Charles Murdock, a law professor at Loyola University of Chicago. "Private lawsuits could still go forward, though this could make it tougher."
A lawyer for the plaintiffs said he had not reviewed Pauley's opinion.
The 10 bank defendants included Citigroup's Salomon Smith Barney unit, Merrill Lynch, Bear Stearns & Co., Credit Suisse First Boston, Deutsche Bank, Goldman Sachs & Co., J.P. Morgan Chase & Co., Lehman Bros. Inc., Morgan Stanley and the now-defunct Robertson Stephens Inc.