Wall St crusader warns of 'flood of investor claims'
From Abigail Rayner in New York
WALL STREET firms can expect a flood of legal claims, despite agreeing to a settlement with Eliot Spitzer, the New York attorney-general, over allegations that they published biased stock research.
In an exclusive interview with The Times, Mr Spitzer, who investigated 12 US banks, said they can now expect “a ton of litigation” from thousands of investors who have lost millions of dollars in investments that were made on analysts’ recommendations.
Although the banks investigated agreed to pay $1.4 billion (£900 million) in a deal with Mr Spitzer four months ago, they have been wrangling over the final wording of settlement. Yesterday Mr Spitzer said that there were no longer any disagreements over the wording of the settlement. Ten of the 12 banks are expected to sign the agreement by today.
Mr Spitzer said: “We are really near at this point. If things go as planned, the announcement could be in a matter of days or early next week at the outside.” The settlement has to be signed off by the US Securities and Exchange Commission (SEC), which is expected later this week.
Mr Spitzer predicted that investors would now try to claim money off the banks, which have set up a restitution fund as a part of the $1.4 billion settlement. He said: “Can you imagine if I put an ad in the paper and said, I have $1 billion. If you want some, let me know and explain to me why you deserve it. I’d get a million e-mails the next morning with claims totaling $100 billion.”
He added: “With respect to each of the settling banks there will then be a separate document that lays out the allegations with respect to their misconduct. It is in that document that the word ‘fraud’ is used as an allegation by the regulators.”
He declined to say which banks’ documents contained the word fraud, but indicated that Citigroup’s Salomon Smith Barney, Credit Suisse First Boston and Merrill Lynch were among them.
Mr Spitzer said: “Clearly, those three, based on what has been disclosed in public record already, have problematic factors to deal with.” The banks have agreed to tough new performance overviews for stock analysts, after Mr Spitzer found that even top analysts had patchy track records. |
