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Technology Stocks : InfoSpace (INSP): Where GNET went! -- Ignore unavailable to you. Want to Upgrade?

To: sandintoes who wrote (26959)	4/27/2002 10:48:46 PM
From: Roger Sherman	Read Replies (1) \| Respond to of 28311

Merrill sure changed its tune, in just 18 days... Their first defensive reaction, reflected in the April 8th article below, proved to be just plain stupid. Perhaps it's because they've now hired ex NY mayor Rudy Guiliani as an "advisor," that they're now so damn apologetic to everyone. Or perhaps its because the SEC is getting involved, and said it intends to really crack down on firms that don't cooperate in the investigations. One article even said this could end up costing Merrill as much as $2 billion in settlement costs, as well as lost clients, and their stock's value. I especially got a real laugh out of these early Merrill comments, in the article below: In response, Merrill said the e-mails used were taken out of context and represent only "a piece of a continuous conversation." Merrill Lynch said it is "outraged" it wasn't given an opportunity to contest the accusation in court and believes Spitzer's conclusions are "just plain wrong." The firm said the e-mails in question show that there was normal give and take as well as vigorous debate among analysts as they assessed different companies. "As with oral conversation, emails may include ill-chosen words and offensive language, but this does not add-up to evidence of wrongdoing,"* Merrill stated.* Merrill maintains that "In claiming harm to investors, the action (by Spitzer) completely ignores the fact that virtually all internet stocks Merrill Lynch covered were assigned the highest risk rating - suitable only for investors with 'strong stomachs' who could tolerate the potential for extreme price volatility." ******************** story.news.yahoo.com Action By NY Attorney General** Mon Apr 8, 5:21 PM ET (This story was originally published by Dow Jones Newswires) NEW YORK -(Dow Jones)- Merrill Lynch & Co . Inc. (MER) said there is "no basis" for the allegations made Monday by New York Attorney General Eliot Spitzer, who claims investment banking had undue influence in determining stock ratings. In a press release Monday, Merrill Lynch said it is "outraged" it wasn't given an opportunity to contest the accusation in court and believes Spitzer's conclusions are "just plain wrong." As reported, Spitzer obtained a court order requiring Merrill Lynch to overhaul the way its analysts issue stock ratings on corporate clients, claiming that "public assessment of stocks was often false." Merrill Lynch said it is confident that a fair review will show it has conducted research with independence and integrity. "Our reputation for integrity, established over many years, is very important to us. We protect it aggressively. This includes defending ourselves when we are charged unfairly with wrongdoing. We believe these allegations are baseless, and we will defend ourselves vigorously," the firm said. Spitzer used Merrill Lynch e-mails as evidence demonstrating that stock ratings often contradicted the privately stated opinions of the firm's analysts. In response, Merrill said the e-mails used were taken out of context and represent only "a piece of a continuous conversation." The firm said the e-mails in question show that there was normal give and take as well as vigorous debate among analysts as they assessed different companies. Merrill said such discussion is "customary and appropriate" as analysts consider views from a number of different sources, including the companies they are covering and the investment bankers who work with those companies, before drawing independent conclusions. "As with oral conversation, emails may include ill-chosen words and offensive language, but this does not add-up to evidence of wrongdoing," Merrill stated. In the specific case of GoTo.com, Spitzer claimed that Merrill was publicly maintaining an "accumulate" rating on GoTo.com, despite evidence that an unidentified analyst reportedly wrote in a January 2001 e-mail that there was nothing interesting about the company "except banking fees." Merrill said it issued a June 6, 2001 downgrade of GoTo.com, representing an instance when the downgrade was "exactly the opposite of what the investment bankers would have preferred." Merrill said the downgrade was the right call. Merrill maintains that "In claiming harm to investors, the action (by Spitzer) completely ignores the fact that virtually all internet stocks Merrill Lynch covered were assigned the highest risk rating - suitable only for investors with 'strong stomachs' who could tolerate the potential for extreme price volatility." Merrill added that its "lead internet analyst repeatedly and publicly warned that a substantial majority of public internet companies would never make money and would disappear, and that investors should commit only a small amount of their total portfolio to a diversified basket of stocks which they were prepared to hold long-term." As part of his allegations against Merrill, Spitzer accused the firm's analysts of helping to recruit new investment banking clients in exchange for pay. Spitzer said the salaries analysts received were based on how much they had contributed to the firm's investment banking business. Merrill disputes these claims, saying research analyst compensation is based on "broad factors" and is not tied directly to the success of investment banking transactions. The firm said its research department doesn't report to investment banking or equity capital markets. Merrill also prohibits analysts from purchasing stocks that they cover, and has never allowed purchase of "pre-IPO" shares. "The final irony of this situation is that Merrill Lynch has been a recognized leader in establishing policies and procedures to protect the integrity and independence of its research function," Merrill Lynch said. Spitzer will reportedly consider "all possible sanctions" against Merrill, including criminal charges. -Carrie Kocik; Dow Jones Newswires; 201-938-5388