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Wv sues wallstreet firms { June 24 2003 } Original Source Link: (May no longer be active)
http://reuters.com/financeNewsArticle.jhtml?type=usFundsNews&storyID=2982665http://reuters.com/financeNewsArticle.jhtml?type=usFundsNews&storyID=2982665
UPDATE 1-West Virginia sues Wall St. firms, seeks $300 mln
Tue June 24, 2003 05:36 PM ET
(Adds details in paragraphs 8, 10-15, adds byline)
By Kristin Roberts
MIAMI, June 24 (Reuters) - West Virginia's attorney general said on Tuesday he filed suit against 10 Wall Street firms, claiming relationships between banking and research departments represented an illegal conflict of interest under state law.
The complaint filed by Attorney General Darrell McGraw comes two months after a record $1.4 billion global settlement with those same firms following New York Attorney General Eliot Spitzer's probes of stock research by Wall Street analysts.
West Virginia seeks more than $300 million in damages based on its Consumer Credit and Protection Act. The state is suing on behalf of residents who may have made investment decisions based on what it said could be biased research issued by the firms' analysts.
The firms are Bear Stearns Cos. Inc. BSC.N , Credit Suisse CSGZn.VX unit Credit Suisse First Boston, Goldman Sachs Group Inc. GS.N , Lehman Bros. Holdings Inc. LEH.N , Citigroup's C.N Citigroup Global Markets, J.P. Morgan Chase & Co. JPM.N , Morgan Stanley MWD.N , Merrill Lynch Cos. Inc. MER.N , UBS UBSZn.VX unit UBS Warburg, and the Piper Jaffray unit of U.S. Bancorp USB.N .
Seven of the firms reached on Tuesday said they had no comment on the case. The others were not available.
Fran Hughes, deputy attorney general, said West Virginia was not asking the court in this case to force the firms to eliminate or alter any of their practices. Rather, West Virginia was seeking only monetary penalties.
"We just want them to pay for all the losses that they've intentionally caused," Hughes said.
The state also claims two of the 10 Wall Street firms engaged in "spinning," the practice of giving top corporate clients access to hot initial public offerings of stocks.
Under the West Virginia law, any unfair, deceptive or dishonest act directed at or affecting a state resident is punishable by a fine of up to $5,000 per offense. The attorney general said there could be "hundreds of thousands" of violations in this case.
GLOBAL SETTLEMENT PAYMENT
West Virginia plans to sign the global settlement finalized in April, at which point the state will receive $4 million.
The global settlement involved state securities regulators -- in West Virginia's case, the state auditor. In some states, including West Virginia, the attorney general has some separate authority to bring actions on behalf of the state.
Christine Bruenn, president of the North American Securities Administrators Association, said negotiators on the global settlement anticipated that some state attorneys general would file cases related to pension losses, but not suits that largely mimic the global case.
The West Virginia case depends in large part on evidence used in the global case, Bruenn said.
"My hope is that we won't see more of these lawsuits like West Virginia," Bruenn said. "I don't think they serve investors. It's on the same facts and really just duplicates our efforts."
The complaint was filed in Marshall County Circuit Court. No hearing date has been set.
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