At the bottom of this page is a list of companies, including Ask Jeeves, whose IPOs are under investigation. If you purchased shares in any of these companies and suffered a financial loss, please click here to contact our firm for further information on your legal rights and remedies.
Press Coverage of Fraud in the High Tech IPO Market
In December 2000, The Wall Street Journal began to publish articles regarding a joint investigation by the SEC and United States Attorney's Office into the payment by certain investors of additional, undisclosed compensation for allocations in "hot IPOs." In an article published on December 7, 2000, the newspaper reported:
The authorities are scrutinizing ways in which Wall Street dealers may have sought and obtained larger-than-typical trading commissions in return for giving coveted allocations of IPOs to certain investors. Some of the arrangements could have included specific formulas tied to investors' profits on offerings, the people familiar with the probe say. Many of the offerings doubled or more in their first day of trading during an IPO mania that began in late 1998.
The probe focuses on whether some investors and dealers took that arrangement a step further by linking IPO profits to commission levels in ways that came to resemble kickbacks to the dealers from the investors, the people say...
For example, at times dealers asked investors to pay commissions equaling 25% to 40% or more of the investors' IPO profits on those particular dealers' IPOs, according to traders and people with knowledge of the probe. In other instances, investors paid big commissions to a dealer the day after receiving a lucrative IPO allocation, according to one person with knowledge of the probe.
Sometimes, traders say, the commissions were routed to dealers through a series of trades, sometimes with offsetting purchases and sales of equal amounts of the same stock conducted solely to generate commissions.
On May 11, 2001, The New York Times reported that Anthony F. Bruan, a long-time manager of a New York hedge fund that had been a customer of CSFB, testified before a federal grand jury in cooperation with the SEC and U.S. Attorney's Office investigation:
Mr. Bruan has told the grand jury that in exchange for allocations of I.P.O.'s, several of the biggest investment banks demanded kickbacks of trading profits and commitments to buy more shares of the new stocks after the offerings, the people said. They said the firms that Mr. Bruan has named include Credit Suisse First Boston....
Mr. Bruan has contended that investment banks manipulated the trading of I.P.O.'s by lining up commitments from investors to buy more shares at specific prices above the offering prices. That practice, known as laddering, would help to ensure that the price of a new stock would rise on its first day of trading, fueling demand from other investors who wanted a piece of a hot stock, Mr. Bruan has said.
On December 11, 2001, The Wall Street Journal reported that CSFB had reached a settlement with the government:
Credit Suisse First Boston has agreed to pay $100 million to resolve a federal investigation into alleged abuses in its distribution of shares of initial public offerings of stock, according to people familiar with the matter. The proposed settlement marks the biggest regulatory crackdown on the excesses of the dot-com stock boom of the 1990s. And it foreshadows the issuance of new rules that could help level the playing field for small investors.
The pact grows out of an 18-month probe of whether CSFB gave favored investors larger shares of IPO stocks. In exchange, these clients allegedly kicked back part of their quick profits on IPOs to CSFB, in the form of inflated commissions on other stock trades.
On January 22, 2002, the SEC announced the $100 million settlement with Credit Suisse First Boston (“CSFB”) arising out of its allocation of IPO stock offerings. CSFB, which neither admitted nor denied guilt in the settlement, was accused of charging large customers extraordinarily high trading commissions in exchange for selling them shares in IPOs that were virtually guaranteed to skyrocket amid the frenzy of the dot-com bubble. The SEC alleged that the firm would take as much as 65 percent of a customer's IPO trading profits in the form of excessive commissions on other trades the customers placed.
Investor Lawsuits
Private class action lawsuits have been filed against the high tech securities underwriters claiming that they violated federal securities laws by omitting and/or misrepresenting material facts in the prospectuses, the disclosure statements filed with the SEC and relied upon by investors purchasing shares in the company. Investigations are also occurring concerning the activities of top executives of the companies whose shares were brought to the market in the IPOs.
Lawsuit Claims
The lawsuits against underwriters allege that contrary to the representations in each prospectus, the underwriters solicited and received additional, excessive and undisclosed commissions.
In addition, and unknown to other investors, the lawsuits allege that the underwriters entered into illegal "tie-in" agreements with customers. In exchange for agreeing to allocate subscriptions in the IPOs (at the IPO price), the underwriters allegedly sought guarantees from their customers that they would purchase additional shares in the companies brought to distort and artificially inflate the price for the shares in the companies after the IPO was completed. Individual investors who bought shares following the IPOs at the inflated price and later sold their shares for a loss when the stock prices in these companies fell were harmed by the alleged manipulations that the underwriters and others engaged in.
IPOs Under Investigation
Please click here to contact Lieff Cabraser if you purchased stock in any of the following companies either at the IPO, or in the aftermarket before March 31, 2001:
Company Name Stock Symbol
ASK JEEVES, INC. ASKJ
AVANEX CORPORATION AVNX
BLUE MARTINI SOFTWARE, INC BLUE
CACHEFLOW, INC. CFLO
CALIPER TECHNOLOGIES CORP. CALP
EXTENSITY, INC. EXTN
FINISAR FNSR
GADZOOX NETWORKS, INC. ZOOX
INTERSIL CORP/DE ISIL
KANA SOFWARE KANAD
NIKU CORPORATON NIKU
NUMERICAL TECHNOLOGIES NMTC
ONI SYSTEMS CORP. ONIS
OPENWAVE SYSTEMS, INC. OPWV
OPLINK COMMUNICATIONS, INC. OPLK
QUEST SOFTWARE QSFT
SELECTA, INC SLTC
SILICON IMAGE, INC. SIMG
TURNSTONE SYSTEMS TSTN
TUT SYSTEMS, INC. TUTS
VA SOFTWARE CORPORATION LNUX
WIRELESS FACILITIES WFII
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