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To: 10K a day who wrote (26355)	7/21/2001 11:33:00 PM
From: Roger Sherman	Respond to of 28311

Okay, another article today re: ML settlement... seattletimes.nwsource.com Saturday, July 21, 2001 - 12:00 a.m. Pacific BROKERAGE SETTLES 'WATERSHED' CASE By Walter Hamilton Los Angeles Times In a case that could unleash a legal tidal wave against Wall Street, Merrill Lynch said yesterday it has settled a high-profile arbitration case in which an investor claimed he was duped by the company's Internet-stock analyst. The New York-based brokerage agreed to pay $400,000 to settle the case brought by a New York pediatrician who lost money by following the allegedly tainted recommendations of Merrill analyst Henry Blodget. In an arbitration case filed in March with the New York Stock Exchange, Debasis Kanjilal claimed that he lost about $518,000 in the stock of Bellevue-based Infospace because Blodget had kept a "buy" recommendation on the stock as Merrill Lynch brokered a $4 billion deal to get Go2Net, a Seattle-based Web company, bought by Infospace. Kanjilal said he would have dumped his holdings had he known about it. The settlement surprised many legal observers, in part because it is likely to trigger scores of similar cases from aggrieved investors who have lost millions of dollars on failed Internet stocks in the market plunge of the past 16 months. It's also likely to intensify the furor over the integrity of Wall Street stock analysts. Critics say analysts' recommendations are sometimes compromised by hidden financial conflicts that prevent them from giving unbiased advice to investors. "On a scale of 1 to 10, (the settlement) is about a 10," said Mark Maddox, a securities attorney in Indianapolis. "It's one of the most watershed things to happen in a securities-arbitration case in a long time." Merrill settled the case to "avoid further distraction and the expense of protracted litigation," the company said in a statement. "We stand behind our research. Henry Blodget is the top-rated analyst in his sector," said Joseph Cohen, a Merrill spokesman, who declined further comment. Analysts have come under a firestorm of criticism for their role in pumping up speculative tech stocks in the late 1990s. The central issue is whether analysts issue objective recommendations or whether their motives are compromised by undisclosed financial incentives. In recent years, analyst compensation increasingly has been tied to the amount of investment-banking business they generate for their companies. Congress held a hearing on the subject and National Association of Securities Dealers has proposed rules to force analysts to divulge conflicts of interest. Kanjilal's case garnered considerable interest because it was one of the first to target a stock analyst. Most arbitration cases are directed at brokerage companies and individual stock brokers. However, the settlement doesn't set a formal legal precedent that could affect the outcome of similar cases heard by arbitration panels. Investors generally are required by their brokerage agreements to take disputes to arbitration rather than to court. Kanjilal had originally asked for $800,000 to recover his investment losses and $10 million in punitive damages to "punish and deter respondents and other firms from engaging in similar conduct in the future." Analysts expressed surprise at the size and timing of the settlement. "Merrill Lynch knew this was the flagship case. They knew that by settling this case they would invite copycat cases," said Henry Hu, a securities-law professor at the University of Texas Information from The Associated Press is included in this report. Copyright © 2001 The Seattle Times Company