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Section:

Billion-dollar Wall Street settlement imminent;
Executives are likely to escape prosecution

By Luisa Beltran
CBS.MarketWatch.com
7:48p ET Dec. 19, 2002

http://cbs.marketwatch.com/news/story.asp?guid=97262B3F-C9B5-4B56-
AD27-96556D3405F0&siteid=mktw

NEW YORK -- A landmark billion-dollar
settlement of Wall Street's research scandals
could be announced as soon as Friday, persons
familiar with the situation told
CBS.MarketWatch.com Thursday.

While top executives would likely be spared
prosecution, firms involved in the talks are
expected to pay fines of more than $1
billion. Part of the money paid by the firms
will go to a restitution fund for investors,
a source said.

An announcement would end months of
discussions between regulators, headed by New
York Attorney General Eliot Spitzer, and top
securities firms. The investigation centers
on whether analyst research is compromised by
investment banking relationships.

"It's a done deal," one source said.

However, a different person cautioned that
while talks "have picked up" not all firms
have signed off on the pact so a pact could
be delayed.

Spitzer, in an interview with talk-show host
Charlie Rose Wednesday, said he thinks a
settlement of the probes into Wall Street
research is very near. "We're pretty darn
close, I think, to a resolution," he said.

Spitzer's office declined comment late
Thursday.

Firms involved in the negotiations include
Goldman Sachs, Merrill Lynch, Morgan Stanley,
CSFB, Citigroup, Bear Stearns, U.S. Bancorp,
Deutsche Bank, Lehman Brothers, J.P. Morgan
Chase, UBS Paine Webber, and Thomas Weisel.

A resolution would call for the separation of
investment banking from research and a ban on
IPO "spinning." With this practice, many of
the investment banks gave shares in hot IPOs
to executives at companies they were doing
business with.

The Wall Street pact would also call for each
of the securities firms under investigation
to assign an independent monitor who would
distribute company research and at least two
independent research reports.

Spitzer said Wednesday that executives of top
securities firms will not be criminally
prosecuted as part of the pending settlement
of probes into Wall Street research.

"In order to get the systemic structural
reforms that I think is so critical to the
investor and to the marketplace, we have
probably forgone the opportunity to send a
few people to jail," he said.

Spitzer's comments suggested that top
executives, including Citigroup's Sanford
Weill, will not face jail terms. Weill, and
former Salomon Smith Barney analyst Jack
Grubman, have been at the center of an
investigation into whether analyst research
is compromised by investment banking
relationships.

However, other regulators could bring actions
against some individuals after a settlement
is reached, a Spitzer spokeswoman said
Thursday. And the proposed settlement would
not protect analyst Grubman or CSFB uber-
banker Frank Quattrone, a source said.

Throughout the negotiations, firms and
regulators have haggled over the fines.
Citigroup had been expected to pay more than
$500 million and Credit Suisse First Boston
as much as $250 million. However, Citi may
pay only $350 million and CSFB may face fines
of $150 million, according to press reports.

Shares of Deutsche Bank lost $1.67, or 3.44
percent, to $46.89 Thursday, Goldman fell by
3.40, or 4.61 percent cents to $70.30 and
Merrill lost 69 cents to $39.85.

Morgan shed 80 cents to $40.30, Citigroup
lost 15 cents to $37, UBS fell by 13 cents to
$49.43 and J.P. Morgan decreased by 67 cents
to $23.33.

Lehman lost 88 cents to $55.08 while U.S.
Bancorp dropped a nickel to $20.98.