RIM named in Wall Street research probe
E-mails 'the smoking gun'
Robert Thompson
Financial Post
Tuesday, October 08, 2002
ADVERTISEMENT
Research In Motion Ltd. has become entangled in an investigation by the state of Massachusetts into the research and investment banking practices of Credit Suisse First Boston.
E-mails that allegedly came from Credit Suisse vice-president Chris Legg and were sent to Frank Quattrone, Research In Motion's chief of technology research and investment, appear to demonstrate the bank was prepared to give favourable stock coverage to its investment banking clients.
The e-mail says Waterloo, Ont.-based Research In Motion paid US$1.8-million to Credit Suisse and, in exchange, the investment bank should "return them to 'most favoured nation' status."
The e-mails, which were leaked to the media over the weekend, are expected to be a central part of an ongoing investigation of Credit Suisse by Massachusetts Secretary of State, William Galvin. He has called the documents "the smoking gun."
"The documents, discovered in the course of the investigation into Credit Suisse First Boston, present a very disturbing picture of stock recommendations made dependent on how much was paid in investment banking fees," Mr. Galvin said.
The documents also could play a central role in a criminal investigation by New York Attorney General, Elliot Spitzer.
Research In Motion, which is best known for its BlackBerry wireless e-mail pager, had included Credit Suisse First Boston in its October, 2000 share offering. The offering closed on Nov. 1, 2000 and raised US$585-million.
Research In Motion would neither comment on the investigation nor its involvement with Credit Suisse yesterday.
Brian McNiff, a spokesman for the Massachusetts Secretary of State, said Research In Motion has not become a target of the investigation, which started earlier this year.
"Research In Motion are just an example of how [Credit Suisse] worked and are not a part of our investigation," he said.
Shares in RIM closed down 4% yesterday at US$8.42.
The e-mail from Mr. Legg continues to say that, "I have represented to RIM that you will be resuming full coverage."
The e-mail was sent in March, 2001, just weeks after Ray Sharma, who had worked at Credit Suisse as an analyst covering RIM and wireless technology, left to join Bank of Montreal.
Following Mr. Sharma's departure, Marc Cabi promptly took over coverage of RIM, continuing a "buy" rating on shares of the wireless company.
Tim Long currently oversees coverage of Research In Motion for Credit Suisse. He initiated a "buy" rating when he started coverage in December, 2001, and kept the rating even as RIM's share price continued to fall. He cut his rating to "hold" in May, 2002.
Exchanging stock coverage for banking business has been common in institutional investment circles, especially during the technology boom of the late 1990s.
But the practice has come under scrutiny this year, with the state of New York launching a case against Merrill Lynch & Co.
The case demonstrated that several of Merrill Lynch's star analysts privately derided companies while promoting "buy" ratings on their shares. Merrill Lynch paid US$100-million to settle, but made no admission of wrongdoing.
When contacted yesterday, Credit Suisse did not answer any questions about the involvement of its investment bank on its research practices.
The bank issued a statement yesterday saying it "welcomed the participation by Mr. Galvin in the new coalition of state and federal regulators who are trying to move these issues forward towards constructive resolution to restore investor confidence."
The e-mails suggest research coverage was not the only perk RIM was offered in exchange for its cash. One e-mail to Mr. Quattrone shows he was urged to get RIM executives on a list to attend golf events like the British Open.
rthompson@nationalpost.com
© Copyright 2002 National Post
Product / Service
Company Name
Select a city ------- Victoria Vancouver Calgary Edmonton Regina Saskatoon Winnipeg Hamilton Toronto Ottawa Montreal Halifax ------- more...
TSE -10.400 5830.570
Dow +78.65 7501.49
S&P 500 +13.27 798.55
Nasdaq +9.81 1129.21
C$ (in U$) -0.0011 0.6264
updated 22:10 ET |
