Merrill Settles With Spitzer
By Ben White Washington Post Staff Writer Tuesday, May 21, 2002; 9:23 AM NEW YORK, May 21--Merrill Lynch & Co. has reached an agreement with New York Attorney General Eliot Spitzer that requires the securities firm to pay a $100 million fine and express contrition for the behavior of its research analysts and more formally separate the firm's investment bankers and analysts. After weeks of sometimes slow and painful negotiations, the two sides struck the deal at 2:15 this morning that allows Merrill to avoid civil or criminal charges. Details of the agreement will be announced at a news conference in lower Manhattan today. A Spitzer spokesman said the deal includes "everything that the attorney general wanted" even though Merrill Lynch will not formally admit wrongdoing. The brokerage giant had said throughout the negotiations that to do so would open the firm to shareholder lawsuits. Spitzer had been investigating Merrill Lynch for a year, but the two sides began negotiating a settlement in earnest several weeks ago when the attorney general released subpoenaed e-mails in which former Merrill Internet analyst Henry Blodget and others privately derided as "crap" and "junk" stocks the firm was publicly recommending. Spitzer alleged that Merrill analysts committed fraud against investors by recommending stocks they knew to be of questionable value in order to generate or maintain lucrative investment banking fees for their firm. He has broadened his investigation and sent subpoenas to a handful of other Wall Street firms. The spokesman for Spitzer said the other firms were now "on deck" and that the attorney general would press forward unless the Securities and Exchange Commission proposed tougher rules governing securities analysts than the ones the agency approved earlier this month.
