Goldman, CSFB Named by House in Analyst, IPO Probe (Update2)
By George Stein
New York, Sept. 4 (Bloomberg) -- Goldman Sachs Group Inc. and Credit Suisse First Boston Inc. are being investigated by the U.S. House Financial Services Committee, which is widening its probe of research conflicts of interest and allocations of initial share offerings at securities firms.
Goldman Sachs Chief Executive Officer Henry Paulson and Credit Suisse Chief Executive Officer John Mack were asked by the committee to turn over documents, e-mails, compensation formulas and all records related to their work with communications and technology firms.
The expanding probe adds to the woes of securities firms which have seen their shares plunge as business has eroded in the bear market. Congress is investigating whether Wall Street firms steered sought-after IPO shares to executives of companies to gain investment banking business.
``IPOs are placed by every firm and the question is how are they placed and what is influencing the determination of where those securities are placed,'' said Sandy Winer, a securities lawyer and former special counsel to the enforcement division of the Securities and Exchange Commission.
Congress last month opened an investigation of Citigroup Inc. into allegations of research conflicts and favoritism in IPO allocations. The committee is also probing whether analysts misled investors by recommending shares in companies with accounting and other financial woes.
``Investment banks were heavily involved in underwriting failed telecommunications companies during the dotcom boom and their analysts gave favorable ratings even as the stocks plummeted to pennies per share,'' Representative Michael Oxley, an Ohio Republican and the committee chairman, said in a statement.
Enron, Global Crossing
From Goldman, the committee seeks records from 14 companies. They are Backweb Technologies Ltd., Cosine Communications Inc., Engage Technologies Inc., Enron Corp., Evolving Systems Inc. Global Crossing Ltd., iAsiaWorks Inc., Insweb Corp., iVillage Inc. Portal Software Inc., PlanetRx.com Inc., Starmedia Network Inc., Tenfold Corp. and Valueclick Inc.
Credit Suisse was asked for records about 15 companies, including Enron and Global Crossing. The other companies are: Caliper Technologies Corp., Commerce One Inc., Digital Impact Inc., Digitalthink Inc., EarthShell Corp., Handspring Inc., Intraware Inc., Latitude Communications Inc., Razorfish Inc., Screaming Media Inc., TiVo Inc., Variagenics Inc. and Vitria Technology Inc.
``The investment banking department has never been involved in allocations of IPO shares, period,'' said Goldman Sachs spokesman Lucas Van Praag. ``We're more than happy to cooperate with any investigation.'' Credit Suisse spokeswoman Victoria Harmon said the firm is cooperating with the committee.
``Goldman Sachs had an awful lot of deals in which no stock was available for other underwriters. No one could get a share. They all went to friends and big clients,'' said Jon Burnham, chairman of Burnham Asset Management Corp., with $1.3 billion in assets. ``We knew it wasn't just Citigroup.''
Credit Suisse
Credit Suisse First Boston in January agreed to pay $100 million to settle regulatory charges that it allotted IPO shares in exchange for investor kickbacks in the form of higher commissions.
Credit Suisse dominated Internet and computer-related IPOs under the guidance of Palo Alto, California-based banker Frank Quattrone. The firm rose to No. 1 in the underwriting of technology shares in 2000 from 17th in 1997, before Quattrone joined the firm from Deutsche Bank AG. |
