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To: Jim Willie CB who wrote (51357)	5/13/2002 12:12:19 PM
From: stockman_scott	Respond to of 65232

Breaking the Banks Think Spitzer is tough? Wait till the angry throngs get through with Wall Street. FORTUNE Monday, May 27, 2002 By Shawn Tully fortune.com In early April, a square-jawed reformer named Eliot Spitzer shook with Poseidon-like force at Merrill Lynch's rickety reputation for research and left it in shambles. The New York State attorney general unearthed now-infamous e-mails in which Merrill analysts derided stocks they touted to small investors as "dogs" and "pieces of junk." Within days Merrill switched from outrage to surrender: At its annual meeting in late April, CEO David Komansky abjectly apologized to his clients. With one thrust, Spitzer is accomplishing what the SEC and the U.S. Attorney's office have failed to do: force radical reform on Wall Street research. "The markets depend on integrity and honesty of information," says Saul Cohen, a lawyer at Proskauer Rose in New York. "The SEC failed to ensure that honesty. Spitzer stepped into the vacuum." But the Spitzer investigation will do far more than, say, separate analysts' pay from investment banking deals; it could also vastly increase the financial damages Wall Street faces. That has investors worried: Since Spitzer released the damning e-mails on April 8, Merrill Lynch stock has tumbled 23%. The six leading U.S. banks have since shed $48 billion, one-tenth of their market capitalization. The threats against Wall Street lurk in two corners. First, the settlements with New York and other states over corrupt research will be costly, especially for Merrill. Spitzer is demanding around $100 million in fines. But dozens of other states and their chagrined Merrill clients will likely win lesser amounts. David Trone of Prudential Securities reckons that Merrill will have to pay between $500 million and $1 billion. Spitzer is now examining Salomon Smith Barney, Goldman Sachs, and other firms. If e-mails show that their analysts purposely misled investors, they may face Merrill-sized payments too. Perhaps more damaging, however, is that Spitzer's investigation could add momentum to civil suits over Wall Street's handling of IPOs. A Who's Who of class-action attorneys, from Fred Isquith to Mel Weiss, have filed 310 lawsuits against 45 underwriters and the flimsy startups they brought public, demanding $50 billion to $60 billion in damages. Investors are mostly ignoring these suits, given the precedent (Credit Suisse First Boston settled a similar case last year with the SEC for a modest $100 million). "The market underestimated the financial threat to the other firms when the SEC and the Justice Department failed to file more serious charges against CSFB for market manipulation," says John Coffee, a securities-law professor at Columbia University. An aggressive SEC investigation could immensely strengthen the civil lawsuits. And the SEC, clearly embarrassed by Spitzer's crusade, is anxious to show renewed zeal in punishing wrongdoing on Wall Street. The agency is now pursuing a charge far more serious than inflated commissions, a practice known as "laddering." Under laddering, an underwriter agrees to give fund managers IPO shares only if they agree to buy even more shares at higher prices after the stock goes public. Laddering inflates the prices that small investors then pay and is "blatantly illegal market manipulation," says Coffee. FORTUNE has learned that the SEC may have found a smoking gun. On April 29, the SEC's New York office summoned Nicholas Maier, the former syndicate manager for hedge fund Cramer & Co. and author of the recent Trading With the Enemy, to testify. Maier confirmed that firms he dealt with regularly engaged in the practice. The SEC lawyers then showed Maier a document, known in the trade as an IPO "book," from a leading Wall Street firm for a 2000 offering. The lawyers made it clear that they believe the sheet demonstrates laddering by showing the amounts and share prices at which the funds promised to buy a stock before it opened for trading. Typically, the banks dumped the shares shortly thereafter. If the SEC can prove laddering, it could collect several hundred million from each of the guilty firms, according to legal experts. Then the chance that investors will win their civil suits improves dramatically, as plaintiffs could use the same evidence the SEC did. Those settlements might reach well over $1 billion, says litigation consultant James Newman. That's 10% of what U.S. banks earned last year. Should that happen, Poseidon's initial blast may look like a small tremor.

To: Jim Willie CB who wrote (51357)	5/13/2002 12:22:36 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Arab Oil Producers Assure Customers of Reliable Supplies By Alex Lawler and Sean Evers Cairo, May 12 (Bloomberg) -- Saudi Arabia and other Arab oil- producing countries dismissed traders' speculation that oil supplies from the Middle East would be disrupted to punish Israel and its allies in the West. Saudi Arabia's minister, Ali al-Naimi, told the Organization of Arab Petroleum Exporting Countries that the nation will maintain spare capacity to guarantee supplies should output be disrupted elsewhere. Egyptian President Hosni Mubarak said Arab nations shouldn't use oil as a weapon in the Israeli conflict. ``OPEC always does its best to defend and ensure security of supply,'' said Abdullah bin Hamad al-Attiyah, Qatar's oil minister, in an interview. ``History shows that OPEC countries have been reliable suppliers, even in the most difficult of circumstances,'' such as during the 1991 Gulf War. Crude oil rose to an eight-month high of $27.99 a barrel in New York Friday as Israeli preparations for a retaliatory strike against the Palestinians for a suicide bombing on Tuesday renewed concern that flows from the region might be disrupted. Iraq last month halted exports in support of the Palestinians. Arab producers, with the exception of Iraq, haven't restricted supplies for political reasons since the oil crisis of 1973, when Saudi Arabia and other states cut off exports to the U.S. because of its support of Israel. Saudi Arabia no longer favors such tactics. ``We have an interest in a stable oil market both in the short and the long term, at a level that guarantees a fair price for producers and consumers,'' Saudi minister al-Naimi said. The Organization of Petroleum Exporting Countries holds almost 80 percent of known oil reserves yet pumps only about a third of world supply, restraining output to inflate prices. No `Battles' ``We respect the consumer,'' said Mubarak in a statement read to the OAPEC conference by Prime Minister Atef Ebeid. ``We are not concocting any battles.'' While other oil producers haven't followed Iraq's call to restrict supplies, the events of Sept. 11, fighting between Israelis and Palestinians and Iraq's action have heightened consumers' concern about supplies. Ministers at a meeting of the Group of Eight countries in Detroit on May 3 said oil importers can prepare for disruptions by diversifying into energy sources such as coal and nuclear power. ``Energy security and flexible emergency response are critically important in today's world,'' a statement from the G8 said. ``Countries can improve their ability to respond to changing energy supply conditions through increased energy efficiency and a mix of energy sources.'' The U.S. and other nations hold emergency inventories in a bid to prevent shortages in the event of an embargo. Consuming countries have also used oil as a weapon, such as through U.S. sanctions on investment in Iran and Libya, said Robert Mabro, a professor at the Oxford Institute of Energy Studies. Oil ministers echoed the point. ``Insecurity of supply may be self-generated by the West and the U.S. by political embargoes preventing companies investing in countries such as Iran, Iraq and Libya,'' said Chakib Khelil, Algeria's oil minister, in an interview. Other nations at the meeting of the Organization of Arab Petroleum Exporting Countries in Cairo include OPEC members Kuwait and Libya and non-OPEC states Bahrain, Egypt, Syria and Tunisia. The group gathers to discuss topics ranging from trends in oil markets to financing the next generation of oil fields.