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To: TFF who wrote (10031)	4/24/2002 8:38:37 AM
From: TFF	Respond to of 12617

Criminal charges could be filed if conflicts found By Rex Nutting, CBS.MarketWatch.com Last Update: 6:36 PM ET April 23, 2002 WASHINGTON (CBS.MW) -- The Justice Department is looking at Wall Street's stock analysts for possible conflicts of interest in their ratings and recommendations. Michael Chertoff, head of the criminal division, told Bloomberg News that criminal charges are possible if investigators find that research analysts tilted their "buy" and "hold" recommendations to help their firms win investment-banking business. "We're going to be doing a lot of cases involving financial reporting," Chertoff told Bloomberg. "The way they disseminate and handle the information of publicly traded companies seems to me to be one of the front-burner white-collar enforcement issues for the next several years.'' Bryan Sierra, a spokesman for the Justice Department, said "Financial reporting, including the work of financial analysts, is on the radar screen." He added, however, that "We're not investigating anything yet." "The department needs to look at it to see if further investigation is needed," Sierra said. He said the preliminary probe was sparked by its investigation into Enron (ENRNQ: news, chart, profile) as well as press reports and other allegations that have surfaced. State securities regulators said Tuesday they would form a multi-state task force to look into the analysts' recommendations, following the lead of New York Attorney General Eliot Spitzer, who charged Merrill Lynch (MER: news, chart, profile) with giving self-serving and misleading advice. Spitzer has reportedly subpoenaed records from other top Wall Street firms, including Credit Suisse First Boston, Morgan Stanley, Goldman Sachs, Salomon, UBS PaineWebber, and Lehman Brothers Merrill has agreed to greater disclosure of its possible conflicts as it tries to settle the New York charges, hoping to avoid a $100 million fine. See full story. Spitzer released damaging internal e-mails from superstar Internet analyst Henry Blodget and others in which the analysts trashed the same stocks they were recommending as bargains. Following the collapse of the dot-coms and Enron's bankruptcy, regulators and shareholders have been demanding that Wall Street firms separate their research from their other businesses to avoid conflicts of interest. Merrill and other firms have been hit with shareholder suits, alleging that the brokers knew recommended stocks were really junk. The stock exchanges, the Securities and Exchange Commission and the Securities Industry Association have all called for strengthening the "Chinese Wall" between research analysts and investment bankers. Additionally, there have also been calls in Congress to tighten securities laws to eliminate the temptation analysts feel to recommend companies that do business with their firm. Spitzer is scheduled Wednesday to ask the House Financial Services Committee to back just such a regulatory measure requiring brokerages to accompany analysts' ratings with disclosure about investment bank services that the rated company has paid for. Rex Nutting is Washington bureau chief of CBS.MarketWatch.com.