FEDS TO FINGER BLODGET & CO. By JESSICA SOMMAR
Criminal charges are expected to fly soon against former analysts at Merrill Lynch.
Federal prosecutors are expected to level criminal charges against some of Wall Street's former high-flying Internet analysts as soon as next week, sources told The Post.
While it is unclear who might be charged, those under the gun include former Merrill Lynch analyst Henry Blodget as well as others who were the targets of a lawsuit brought recently by New York Attorney General Eliot Spitzer, sources familiar with the federal probe said.
The suit filed by Spitzer named as defendants Blodget, Justin Baldauf, Kirsten Campbell, Virginia Syer Genereux, Sofia Ghachem, Thomas Mazzucco, Edward McCabe and Deepak Raj, according to the New York AG's complaint filed April 8.
Merrill Lynch, the nation's largest brokerage firm, was also named as a defendant in the complaint but is not expected to be charged by the feds, sources said.
It was not clear yesterday whether the charges will stem from a grand jury or from a "criminal information," in which prosecutors set forth the essential facts of the case.
"If a defendant waives his right to a grand jury, it's likely he or she has been negotiating a settlement - that is, a plea bargain," said John Coffee, a securities law professor at Columbia University.
The Securities and Exchange Commission - also investigating analyst conflicts of interests - often brings its own enforcement proceeding at the same time as the U.S. Attorney.
Spitzer continues to investigate conflicts of interest among analysts.
The federal investigation, conducted by the U.S. Attorney for the Southern District of New York, James Comey, is expected to include charges of securities fraud. It could also include charges of mail or wire fraud, legal eagles said.
The U.S. Attorney's office did not return calls for comment. The SEC and the New York AG's office declined to comment. Henry Blodget and Merrill Lynch officials did not return calls.
Spitzer, who led the successful charge against Merrill Lynch - winning $100 million in fines and structural changes at the firm - has been sharing information with both the U.S. Attorney's office and the Manhattan District Attorney since Merrill Lynch settled the case in May.
The evidence includes damning e-mail communications displaying analysts' private disdain for stocks to which the firm publicly gave its highest ratings, so as to keep lucrative investment banking deals with those companies.
Blodget and Merrill Lynch are already the subject of numerous lawsuits by investors claiming they were misled by coverage of Internet stocks.
Last year, Merrill Lynch settled an arbitration brought by a disgruntled investor against Blodget for $400,000.
Blodget - who had no training as an analyst before skyrocketing to the top of the Internet stock boom - rightly predicted that Amazon.com would hit $400.
But at the end of the dot-com boom, less than 1 percent of securities analysts made "sell" recommendations, even as many tech companies failed.