Posted on 09/05/2002 5:18:59 AM PDT by Libloather
US expands probe to Goldman Sachs and CSFB
Wednesday September 4, 9:30 pm ET
FT.com
By Joshua Chaffin in New York and Peter Spiegel in Washington
Goldman Sachs and Credit Suisse First Boston are being forced to turn over documents to a US congressional committee as it broadens its investigation into conflicts of interest on Wall Street. The committee is examining the conduct of the investment banks' stock research analysts and the way they doled out shares of sought-after initial public offerings.
The request was signed by Michael Oxley, the chairman of the House Financial Services committee, and Richard Baker, chairman of the Capital Markets subcommittee.
It refocuses scrutiny on the underwriting of IPOs, an activity that was one of the most lucrative on Wall Street in the late 1990s, but also one of the most controversial.
Committee staff would not say whether they had uncovered specific evidence of wrongdoing on behalf of Goldman and CSFB, but indicated the requests were based on information investigators have uncovered as part of their inquiry into Citigroup's Salomon Smith Barney investment banking unit.
"We don't go on fishing expeditions here," said Peggy Peterson, a spokesperson for chairman Oxley. "When we make a document request, it's for a reason."
The committee noted in a statement that both banks were "heavily involved" in underwriting telecommunications companies during the internet bubble.
"Their analysts gave favourable ratings even as the stocks plummeted to pennies per share," it added.
Mr Oxley's committee has been investigating Salomon and its former telecommunications analyst Jack Grubman for their close ties to WorldCom and Global Crossing, two former high-flying telecommunications companies that collapsed into bankruptcy earlier this year.
The committee is trying to determine whether Mr Grubman and Salomon did favours for the companies - such as awarding them shares of sought-after IPOs - to win their investment banking business.
The far-reaching letters asked for information about who received shares of Goldman-underwritten IPOs for companies such as iVillage, PlanetRX.com and Starmedia, and Earthshell, Razorfish and Screaming Media, which were underwritten by CSFB. Both banks were questioned about their dealings with Enron and Global Crossing.
The committee also demanded records of any board meetings that the banks' stock analysts attended and whether their compensation was tied to their contributions to investment banking.
Mr Oxley and Mr Baker have even asked the banks to provide a list of companies on which their officers serve as directors.
CSFB has previously admitted some of its analysts' contracts were tied to banking revenues, but said they have since been amended.
The bank agreed this year to a $100m settlement with regulators after some of its brokers were found to be extracting excessive commissions from investors for shares of hot IPOs.
Both firms said they would cooperate with the requests.
Goldman added that it was "surprised" to have been asked. "We too have read recent reports of so-called industry practices and they do not accord with how we do business at Goldman Sachs."
DNC Chairman McAuliffe Statement on Settlement in Florida Election Lawsuit
Wednesday September 4, 8:14 pm ET
Press Release Source: Democratic National Committee
WASHINGTON, Sept. 4 /PRNewswire/ -- Democratic National Committee (DNC) Chairman Terry McAuliffe issued the following statement:
"Almost two years after the 2000 Presidential Election controversy, a legal settlement has finally been reached in Florida to address the voting irregularities that occurred. State and local election officials have agreed to implement many of the systematic election reforms that Florida badly needs. From restoring the names of voters who were improperly removed from the voter lists, to encouraging voter registration at their local department of motor vehicles, Florida is moving in the right direction.
"As for President Bush and the Republicans in Congress, they need to stop standing in the way of election reform on the national level. They should immediately join Democrats in their efforts to restore integrity to the electoral process, and get the legislation out of conference committee. The time has come for the federal government to provide the guidelines and resources that will help the states promote and protect the right to vote."
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