A POSITIVE FOR ASK JEEVES
LOOKS LIKE INVESTORS THAT WHERE DEFRAUDED IN THE CURRENT AND ON GOING CLASS ACTION SUIT MAY FIND THAT YOU CAN INDEED GET AWAY WITH IT ON WALL STREET;
Goldman, Morgan could avoid fraud charges --source
Wed April 2, 2003 05:23 PM ET
By Jake Keaveny
NEW YORK, April 2 (Reuters) - Morgan Stanley MWD.N and Goldman Sachs Group Inc. GS.N aren't expected to be cited for fraud in an industry securities settlement, providing an added defense against civil suits that some competitors face.
Both investment banks are expected to be cited for lesser violations in so-called "reports of finding" that will be released as part of a $1.5 billion industrywide settlement, a source familiar with the situation said on Wednesday.
That would put Goldman and Morgan Stanley in a better position to defend themselves against mounting private securities suits, according to legal experts.
By contrast, regulators have collected more evidence against Citigroup Inc's C.N Salomon Smith Barney unit and the Credit Suisse First Boston division of Switzerland's Credit Suisse Group CSGZn.VX , both of which are expected to be cited for securities fraud, according to the person.
"The use of certain words and charges is very important," said Thomas Ajamie, a securities attorney at Schirrmeister Ajamie LLP in Houston. "It will either help investors recover money or make it more difficult."
Negotiations with securities regulators of different states and the U.S. Securities and Exchange Commission have been held up by wrangling over the language of the reports. Talks are expected to be wrapped up within a few weeks, and the terms are still subject to change, said people familiar with the talks.
WORDS MATTER
Investment banks are expected to neither admit nor deny the allegations. But plaintiffs' lawyers representing individual investors will use the information to help bolster arguments before arbitration panels and courts, said Ajamie.
New York Attorney General Eliot Spitzer, who has led the investigation into Wall Street's research practices, has promised to make his office's findings publicly available.
Other states are expected to follow suit once a settlement is reached, said Maine securities regulation chief Christine Bruenn, who heads a group of state-level regulators.
"Our intent is for each lead state to make available whatever documents that are referenced" in our reports, Bruenn told Reuters.
Allegations are separated into three groups: securities fraud, the most severe and most difficult to prove; violations of New York Stock Exchange and National Association of Securities Dealers' rules; and admonitions for using unethical industry practices.
Last May, Spitzer's office released a so-called report of finding on Merrill Lynch & Co. MER.N after the investment bank settled allegations of securities fraud for $100 million.
While Merrill didn't deny or admit to allegations, the access to potentially incriminating e-mails and other documents spurred a wave of civil suits.
Spitzer's office is investigating Morgan Stanley and Citigroup Inc. C.N , while Goldman Sachs is being investigated by Utah's securities regulator and Credit Suisse by Massachusetts.
Goldman is expected to pay $110 million as part of the settlement, including $50 million in fines and restitution, while Morgan will pay $125 million, $50 million of it in fines and restitution.
The Wall Street Journal reported on Wednesday that Morgan Stanley would not be cited for fraud. |
