U.S. House panel widens probe of IPOs, conflicts
Wednesday September 4, 5:51 pm ET
WASHINGTON, Sept 4 (Reuters) - The U.S. House Financial Services Committee widened its probe into Wall Street on Wednesday, seeking information on possible special access to hot initial public offerings and analyst conflicts of interest from Goldman Sachs (NYSE:GS - News) and Credit Suisse First Boston.
ADVERTISEMENT
The panel also requested information about possible conflicts of interest by the two firms' analysts as it tries to determine whether new laws or regulations are needed for the industry.
The request comes after Salomon Smith Barney admitted that it allocated huge numbers of shares to top WorldCom Inc. (Other OTC:WCOEQ.PK - News) executives, including former Chief Executive Bernard Ebbers who made $11.1 million over four years off the stock offerings.
"Insider allocation of initial public offering shares unfairly dilutes the value of the stock for the small investor," Rep. Michael Oxley, chairman of the panel and an Ohio Republican, said in a statement.
Salomon's former telecommunications analyst Jack Grubman is under investigation by securities regulators for possible conflicts of interest in his positive ratings on telecommunications companies that were nosediving.
An e-mail released by the committee on Tuesday showed that Grubman warned WorldCom's then chief financial officer, Scott Sullivan, that a strategist at Salomon was taking WorldCom off its recommended list.
"Be advised that failure to provide this information in a satisfactory form may result in the issuance of a subpoena," Oxley said in the letters to Goldman and Credit Suisse, a unit of Credit Suisse Group Inc. (CSGZn.VX)
The panel ended up issuing two subpoenas to Salomon, a unit of Citigroup Inc. (NYSE:C - News), because the firm said it could not violate the privacy of its clients without a subpoena.
Victoria Harmon, a CSFB spokeswoman, said "we continue to cooperate with all authorities." A Goldman Sachs spokesman was not immediately available for comment. |
