Blodget's words used against Merrill
AG's case cites 'bad smell' e-mail, other comments
By Allen Wan, CBS.MarketWatch.com
Last Update: 7:24 PM ET April 8, 2002
NEW YORK (CBS.MW) - Former high-flying Internet analyst Henry Blodget may be gone from Merrill Lynch, but he'll live on in a series of revealing e-mails cited in the legal case against his former firm.
The New York attorney general's case against Merill Lynch (MER: news, chart, profile) is based on a sworn affidavit that cites e-mail exchanges in which Blodget disparages some Internet stocks in private while he was recommending them to investors in public.
Merrill said there was "no basis" for the attorney general's case and said the e-mails were taken out of context and were just "one piece of a continuous conversation, isolated at a single point in time - not the end conclusion." See full story.
The attorney general's affidavit cited the case of InfoSpace. Merrill kept the stock on its "Favored 15" list from at least August 2000 until Dec. 5, 2000, although Blodget acknowledged as early as July 2000 that the stock was a "powder keg" and that "many institutions" had raised "bad smell comments" about it, the affadavit said. By October of 2000, he had referred to it as a "piece of junk," it said.
In another reference, after initiating coverage of Internet company GoTo.com and being asked by an institutional investor "What's so interesting about GOTO except banking fees????," Blodget replied: "nothin.(sic)"
Despite harsh criticism of Merrill's former Internet research chief, the attorney general's report noted moments when the analyst clearly seemed to have trouble with his conscience.
"The absence of clear guidance from Merrill Lynch management on how to resolve conflicts created by these pressures led respondent Henry Blodget, the head of the Internet group, in a moment of candor, to threaten to 'start calling the stocks... like we see them, no matter what the ancillary business consequences are,'" Eric Dinallo, counsel to Attorney General Eliot Spitzer, said in his sworn affidavit.
Blodget left Merrill Lynch late last year after accepting a buyout package. |
