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Florida is one of six states that hasn't approved Merrill Lynch's payout.
By JEFF HARRINGTON, Times Staff Writer
© St. Petersburg Times, published August 30, 2002
Merrill Lynch's agreement to pay $100-million to settle claims that its analysts misled investors may be jeopardized unless Florida and several other states that have been apparent holdouts decide to sign off.
Analysts from the country's largest brokerage firm have been accused of fueling demand for now-shattered Internet and technology stocks with rampant "buy" recommendations aimed at winning lucrative investment banking business from those companies. Internal e-mail messages revealed cases in which the analysts privately derided as losers the same stocks they were enthusiastically promoting to investors.
In a landmark settlement reached in May with New York Attorney General Eliot Spitzer, Merrill Lynch offered a formal apology and a $100-million payout. The firm also said it would stop paying its 800 analysts based in part on how much investment banking business they bring in.
An escape clause, however, lets Merrill Lynch walk away from the deal if even one state refuses to go along. Merrill had asked that the rare stipulation be included so it could avoid liability from multiple state investigations, according to American Banker, a trade publication that raised the issue Thursday.
The clause is unusual in that nationwide regulatory settlements typically are announced after all the states that choose to participate have come to an agreement.
Reportedly, seven states have not signed the pact: Florida, New Jersey, Ohio, Missouri, South Dakota, Colorado and California.
Merrill Lynch spokesman Bill Halldin on Thursday said he could not comment on what his company would do if some states did not sign. Under the settlement, New York is to receive between $43-million and $48-million from Merrill, with the rest split among the remaining 49 states, the District of Columbia and Puerto Rico.
There is no set deadline for the states to act.
Don Saxon, director of the division of securities and finance in Florida, said the pact is being reviewed. A decision on whether to sign off may be made as soon as next week, he said.
Florida has gone on its own before, seeking a better deal than a national settlement with Publishers Clearing House and going after Big Tobacco on its own terms.
Some believe Florida may opt to seek a separate settlement again.
"I don't think they will (join the New York agreement), and I don't think $100-million is enough," said Jonathan Alpert, a Tampa attorney who has filed two lawsuits accusing Merrill Lynch analyst Henry Blodget of misleading investors.
"I think they need to clean house," Alpert said. "It's just a problem that has shaken the foundation of this economic system. It's like we found out that Wall Street was Las Vegas on the Hudson and the dice were loaded and the tables were crooked."
-- Times files were used in this report. Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.