Analysts Accused of Touting 'Junk' to Boost Profits
Merrill Lynch E-Mail Shows Firm Pushed Bad Investments on Clients, Chief N.Y. Prosecutor Says
By Robert O'Harrow Jr. Tuesday, April 9, 2002; Page E01
NEW YORK, April 8 -- A trove of internal e-mail from one of Wall Street's biggest investment banks shows that analysts promoted struggling technology companies they didn't believe in while the bank earned fees selling the firms' stock, the state's attorney general alleged today.
At the height of the technology bubble, Henry Blodget and other Internet analysts at Merrill Lynch & Co. issued glowing reports about companies that would later crash, while privately deriding the stocks to one another in salty, dismissive language.
One company given a top rating by analysts was described in-house as "a piece of junk." Another was called "such a piece of crap," even though analysts in Merrill's Internet group told investors to buy more of it for their portfolios. One analyst worried that regular investors "are losing their retirement" because of the misleading advice.
The documents, filed in court after a 10-month investigation, provides ammunition to critics who question whether the so-called "Chinese Wall" separating analysts, who are supposed to provide independent advice, and investment bankers, who generate fees by bringing stocks to the market, actually exists, as Wall Street claims.
"As dramatic and damning as this evidence is against Merrill Lynch, it may be the tip of the iceberg," Attorney General Eliot Spitzer said at a news conference.
[http://www.washingtonpost.com/wp-dyn/articles/A16742-2002Apr8.html]
Carl
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