This validates the lack of morals on Wall Street, and also backs up my last post>
EToys Creditors Sue Goldman Sachs,
Alleging Illegal Profit Off of Its IPO
By KATE KELLY
Staff Reporter of THE WALL STREET JOURNAL
Online retailer eToys Inc., which went public during the "dot-com" bubble, became one of the few companies to turn against Wall Street and join the flood of lawsuits charging that securities firms profited illegally from hot initial public offerings in the boom.
Los Angeles-based eToys , which sought bankruptcy-law protection from creditors in March 2001, charged in a suit filed May 15 in New York State Supreme Court, that Goldman Sachs Group Inc., which led its IPO in 1999, set a lowball price on the eToys IPO in order to gain illegal kickbacks from favored investors who received shares of the hot IPO.
The relatively low price set for the IPO, the suit alleges, robbed eToys of hundreds of millions of dollars of cash that could have helped the company to stave off bankruptcy. The shares nearly quadrupled in price on their first day of trading. The suit charged that Goldman induced some investors to agree to give the firm a portion of the profits they later made on eToys shares in exchange for getting IPO stock allocations.
Citing company policy, a spokeswoman for Goldman said the firm doesn't comment on legal matters.
The suit, brought by a committee of the company's unsecured creditors, carries symbolic value because eToys was one of the better-known dot-coms to have crashed and burned. It parallels a lawsuit brought a year ago by creditors of a company formerly known as Mortgage.com Inc. against that company's IPO underwriter, the Credit Suisse First Boston unit of Credit Suisse Group.
In January, CSFB settled charges by the Securities and Exchange Commission and the regulatory unit of the National Association of Securities Dealers that it violated securities rules by sharing IPO profits with about 100 hedge funds that paid outsize commissions in exchange for hot IPOs. In settling the case without admitting or denying wrongdoing, CSFB paid $100 million in penalties to the two agencies.
In spring of 2001, eToys closed its doors for business and sold its trademark, logos, software and other assets to closely held KB Toys for $14 million. |
