Complaint Expected to be Filed Against Credit Suisse First Boston
By Norm Alster, New York Times
BOSTON, Oct. 17 - Massachusetts securities regulators who have been investigating Credit Suisse First Boston and its research practices expect to file an administrative complaint against the firm, perhaps as early as Monday, according to a person close to the inquiry.
The complaint, which the person said concerns the influence of First Boston's investment bankers on its research analysts, and its practices in allocating new stock offerings, would be heard by an administrative law judge in the office of the Massachusetts secretary of the commonwealth, which has been conducting the inquiry.
Administrative law judges can levy fines and apply other civil penalties. Such judgments could be appealed to the general court system.
Cristina Von Bargen, a spokeswoman for Credit Suisse, said by telephone tonight that she would have no comment on such a complaint, but that "we continue to cooperate with all regulators and government officials on these matters."
The North American Securities Administrators Association, a group of securities regulators from 42 states, authorized Massachusetts to handle the First Boston inquiry, which is led by Secretary of the Commonwealth William F. Galvin. Mr. Galvin's office subpoenaed more than 250,000 e-mail messages and other internal documents and has already reviewed more than 160,000.
The documents, some of which have been described in newspaper reports, suggest that First Boston used the upbeat stock ratings of its research analysts to attract investment banking fees from companies that were hoping to raise money from investors.
Copies of e-mail messages obtained by The New York Times suggest that analysts were compensated at least partly according to the firm's investment banking revenue. Some analyst correspondence in the e-mail messages expressed concern about lowering the outlooks on stocks of companies that were investment banking clients of First Boston.
The filing of an administrative law complaint does not rule out the possibility of a criminal prosecution of Credit Suisse First Boston. Massachusetts has already forwarded some of the firm's e-mail messages to the New York attorney general, Eliot Spitzer, who has the power to bring criminal charges under a New York state securities law.
Last week, James B. Comey, the United States attorney for the Southern District of New York, requested some First Boston documents from Massachusetts regulators, according to the person close to the inquiry here. Calls to Mr. Comey were not immediately returned tonight.
A last-minute settlement with Massachusetts is not out of the question. One obstacle has been Mr. Galvin's insistence that Credit Suisse establish a separate research arm, independent of investment banking.
"Our objective is to make a permanent change in the way business is conducted by these houses," Mr. Galvin said in an interview last week. He also expressed concern that the investigations into Wall Street practices would result in weak penalties and no permanent change. "It can't be: `We'll pay a fine, all bygones are bygones.' " The filing of an administrative complaint may also reflect Mr. Galvin's reticence about participating in a so-called global settlement with state and federal regulators that would resolve all claims. Mr. Spitzer spoke with Mr. Galvin by telephone on Oct. 3 about the possibility of such a settlement, but no terms were outlined.