Judge Dismisses Class-Action Suits Against Merrill, Others
It was a victory in court yesterday for Merrill Lynch and three
other large investment banks--Morgan Stanley, Credit Suisse First
Boston, and Goldman Sach--as judges dismissed claims in two class
action suits related to the firms' tainted stock research. The suits
charged that the firms intended to defraud investors by touting certain
Internet and telecommunications stocks.
In New York, Judge Milton Pollack dismissed a class-action claim
charging that Merrill Lynch intended to bilk investors through
misleading research from Internet analyst Henry Blodget. (Blodget
resigned from Merrill Lynch in 2001.) The cases were specifically
related to recommendations Blodget made on 24/7 Real Media and
Interliant. In his ruling, Judge Pollack said the investors involved
were largely "high-risk speculators," and that the research reports
contained significant disclosure suggesting that the stocks in question
were volatile.
Though research practices at many of the brokerage firms have been
exposed as illegal, individual suits against the firms are far from
slam-dunk affairs. Numerous cases against Morgan Stanley Internet
analyst Mary Meeker have been dismissed, as well as many cases against
Blodget. (One case, a $400,000 suit against Blodget, was successful a
couple of years ago.)
David Trone, a Prudential analyst who follows the brokerage industry,
says he expects yesterday's decision to have a chilling effect on
similar suits. "We fully expect the other stock claims against Merrill
to be withdrawn," Trone says. "While other areas of litigation have at
least some legitimacy, we believe research misrepresentation claims
were more conspiracy theory than intelligent fact-based claims."
In December, a probe into Wall Street's research practices culminated
in the levying on $1.4 billion in fines for the involved firms. Merrill
shouldered $100 million of that figure.
Acceptable Use Policy blog comments powered by Disqus
