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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (65779)	5/11/2002 12:32:43 AM
From: LTK007	Respond to of 99280

WSJ run down on Merrill's attempt to avoid formal charges, as one reads it you can see they are offering an arm, to avoid having to give up an arm and leg, at least. <<Merrill Finishes Proposal for Spitzer Which It Hopes Will Avert Charges By CHARLES GASPARINO Staff Reporter of THE WALL STREET JOURNAL online.wsj.com (a pay site) Merrill Lynch & Co. has put the finishing touches on a formal proposal that it hopes will persuade New York Attorney General Eliot Spitzer to not bring formal charges as a result of his 10-month inquiry into the firm's research practices, according to people close to the investigation. The proposal, these people said, includes the creation of an ombudsman and a separate committee to monitor Merrill's research, payment of a fine totaling tens of millions of dollars and an expression of some contrition.(that's the arm they have offered-max) Restitution for aggrieved investors who lost money on stocks Merrill analysts recommended, however, would be left up to civil litigation on their behalf.( that is part of the leg they are trying to save--max) Another key element to the deal: Merrill will also attempt to get other Wall Street firms to go along with similar plans as a way of attempting to restore investor confidence in the research process, these people said. The move comes only two days after the two sides agreed on a "framework" for a possible settlement of allegations by Mr. Spitzer that the big Wall Street firm misled small investors with overly optimistic research on stocks of companies that were also investment-banking clients, paying big fees to Merrill. When the stocks plummeted, investors lost large sums in the process.( if Spitzer plays rough he has Merrill on the ropes over this matter as the pump and dump is felony, and Merrill and the other firms are in deep guilt on this issue. What we have here is Tokyo Joe on A MASSIVE SCALE--max) Merrill has denied the charges, but after Mr. Spitzer released e-mails from analysts showing that they privately harbored doubts about companies that received higher ratings from the firm, shares of Merrill dropped nearly 20% over the next few weeks. On Thursday, Merrill fell $1.04 to $42.91 as of 4 p.m. in New York Stock Exchange composite trading, The firm planned to present the proposal to Mr. Spitzer's office before the weekend. If Mr. Spitzer agrees to its terms, a final settlement could be reached in a matter of days. Spokesmen for both Merrill and Mr. Spitzer declined to comment Thursday. Under the proposal, Merrill would agree to appoint an "ombudsman" to monitor its research department, as well as create a separate committee that will keep tabs on the relationship between research and investment banking, these people said. Analysts no longer would be paid based on how many investment banking deals they help the firm generate; in fact, such deals would be specifically barred from being taken into account when the firm develops its end-of-year bonuses for researchers. Analysts would still be able to accompany the firm's bankers when they meet with potential investment-banking clients, these people added, as long as they are monitored by the new committee. Merrill also agreed to make more disclosures -- described as a "surgeon general's warning" on its research reports -- about investment-banking relationships, so that investors would know of motives for a broker to be pushing a certain stock. Merrill has also made it clear that it is willing to pay a significant fine as part of the process, particularly if Mr. Spitzer can convince other state regulators to accept the settlement and not bring charges against the firm, people familiar with the negotiations say. It's still unclear how much money Merrill would have to pay -- Mr. Spitzer has demanded about $100 million, and Merrill has offered around $50 million. However, people close to the inquiry say Merrill would be open to meeting Mr. Spitzer's demand for a $100 million payment if the attorney general can convince other agencies probing the company to go along with the settlement. In early April, Mr. Spitzer released evidence collected during his inquiry, including e-mails from research analysts such as Internet guru Henry Blodget, privately deriding stocks that Merrill was touting. Merrill denied the charges concerning its research, but talks on a settlement made progress this week after Mr. Spitzer threatened to hold public hearings on the matter, in which he would call past and present Merrill officials as a prelude to bringing formal charges. Mr. Spitzer has also broadened his investigation, subpoenaing other Wall Street firms for documents in recent days. Despite the proposal, it's still unclear if and when a deal will be reached. Mr. Spitzer has said that the two sides have made progress -- and have agreed on the broad outlines of an accord -- but now he and his deputies must carefully read over the Merrill proposal to determine if they think it goes it goes far enough. It's also unclear whether under the proposal, Mr. Spitzer can still bring charges against Mr. Blodget, who didn't return a call for comment. One possible sticking point could come over Merrill's proposal to allow analysts to continue to attend investment-banking pitches. Merrill executives say it's a necessary part of the capital-raising process for companies, which need input from analysts in order to sell stocks and bonds. But Mr. Spitzer has said such activities undermine the credibility of the research, and make it more likely that analysts will issue overly optimistic reports to help the firm win lucrative banking assignments. Write to Charles Gasparino at charles.gasparino@wsj.com