Morgan Stanley's Meeker named in lawsuits (your wish is coming true )
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By Brian Kelleher
NEW YORK, Aug 1 (Reuters) - Mary Meeker, the Morgan Stanley
<MWD.N> analyst once dubbed "Queen of the Internet" for her
bullish reports on the sector, was named as a defendant in a
pair of lawsuits on Wednesday alleging she provided biased
research on eBay Inc. and Amazon.com Inc.
The lawsuits come amid increasing scrutiny of Wall Street
analysts from investors, regulators and politicians. Analysts
at nine major unnamed brokerage firms used their positions to
profit from the companies they covered, acting Securities and
Exchange Commission Chairwoman Laura Unger told Congress on
Tuesday.
Meeker, whose firm was not immediately available for
comment, is not the first high-profile analyst to be named in a
complaint by disgruntled investors. Internet analyst Henry
Blodget of Merrill Lynch & Co. Inc. <MER.N> was named in a
$10.8 million arbitration case at the New York Stock Exchange.
Merrill paid $400,000 to settle the allegations.
Law firm Schiffrin & Barroway, LLP, based in Bala Cynwyd,
Pennsylvania, filed the lawsuits against Meeker and Morgan
Stanley on behalf of shareholders of Internet retailers Amazon
<AMZN.O> and eBay <EBAY.O>.
The suits, which seek class action status, claim she she
crossed over the "Chinese Wall," referring to the solid
separation that is supposed to exist between analysts and
investment bankers.
Some have questioned whether analysts are under pressure to
publish favorable research reports so their firms can get
lucrative investment banking businesses, like stock
underwriting and merger advisory, from the companies the
analysts cover.
Analysts have a "natural incentive" to put a lid on
negative research that might anger companies and impact future
banking business, Unger said in an April speech.
SEC investigations found 25 percent of analysts at nine
unnamed firms invested in companies before they went public
that they subsequently covered, Unger said. The agency also
found a few analysts sold stocks for profits as high as $3.5
million, all the while advising clients to buy the shares, she
said.
"It is possible that the analysts violated not only firm
policies but also securities laws," Unger said after her
testimony on Tuesday, leaving the door open for enforcement.
Wall Street, which has been trying to restore the
credibility of its research, was mum on the subject of Unger's
testimony. Morgan Stanley and Merrill, among other firms, on
Wednesday declined to comment on the proceedings.
MEEKER RESEARCH DRIVEN BY BANKING FEES, SUIT CLAIMS
Meeker put out recommendations and positive comments on
eBay and Amazon "not based on objective analyses, but rather on
her desire to attract and retain" the companies as Morgan
Stanley banking clients, the lawsuits alleged.
The lawsuits also claim Meeker's compensation was directly
tied to the amount of investment banking deals she brought in
for Morgan Stanley.
Wall Street firms have agreed to a set of analyst best
practices guidelines. The Securities Industry Association, an
industry trade group, in June issued new standards for analysts
that were approved by more than a dozen of Wall Street's
biggest companies.
Highlights of the guidelines included prohibiting firms
from tying analyst compensation directly to deals and
preventing analysts from reporting to investment banking
departments.
Merrill and Credit Suisse First Boston last month said they
were prohibiting their analysts from investing in stocks they
covered to prevent any appearance of impropriety.
Executives at Merrill, which said it settled the Blodget
allegations to avoid further legal costs, said all charges
against him were dismissed.
Wednesday's suits were filed on the behalf of people who
bought eBay <EBAY.O> or Amazon <AMZN.O> shares between Aug. 1,
1998, and Jan. 22, 2001.
((Financial News Desk (646) 223-6124))
REUTERS
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