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Source link: http://archive.mises.org/3057/spitzer-charges-against-wall-street-were-baseless/

Spitzer Charges Against Wall Street Were Baseless

January 30, 2005 by

A federal appeals court has upheld a lower court’s dismissal of lawsuits accusing Merrill Lynch of hyping stocks and causing investor losses during the collapse of the tech bubble. Hundreds of lawsuits spawned by New York state attorney general and gubernatorial candidate Eliot Spitzer have been filed against Merrill, Morgan Stanley, and Lehman Brothers. Their core conflict-of-interest argument, that Wall Street research analysts harmed investors by publishing misleading stock recommendations in a bid for investment banking business, has been rejected as false. The ruling is likely to result in the dismissal of approximately 130 other lawsuits against Merrill Lynch based on the initial Spitzer charges.

The three-judge 2nd Circuit appeals court panel rejected arguments presented by Spitzer in briefs supporting the plaintiffs. The panel upheld an earlier ruling by district judge Milton Pollack (now deceased)calling plaintiffs “high-risk speculators” who “now hope to twist the securities laws into a scheme of cost-free speculators’ insurance.” It further noted that Merrill’s research report, written by Internet analyst Henry Blodget, “adequately warned investors that the Internet companies it was recommending were “high-risk investments” with “no proven track record of earnings.”Despite the now established fact that conflict of interest charges had no basis in securities law, Spitzer has collected $1.4 billion in fines from a dozen Wall Street firms. Under the terms of the Spitzer settlement, these enterprises must still transfer millions each year to nominally “independent” competitors in order to make amends for past infractions. Too late for the investment banks, we now know the misconduct was non-existent.

{ 4 comments }

edoardo rozza January 30, 2005 at 6:14 pm

Mr.Henderson,what you are selling on this site? The candid brave hearts of this bankgansters? You have my email and I can do it better. Right?

James Nesfield January 30, 2005 at 8:01 pm

The misconduct was non-existent is a far reaching statement considering the facts of the case. The fact that a group of judges judged the plaintiffs as somewhat unacceptable given the nature of their work high risk speculators does not remove the misconduct. Merrill is lucky they where non banned from conducting securities business in the State of New York. A good way to look at this is if you where a prostitute and some one killed you does it remove the murder because you are a prostitute? The answer is no and twenty judges could declair you free. The 2nd circuit court should hold their heads low the rule of law has gone the way of the bank balance. Spitzer should relaunch the case with other plaintiffs ones more acceptable to the jurist. The statement that no misconduct happened is short sighted please recall that pension funds and other forms of retirement money where involved. Of course Merrill got off lightly they are still in business orperating with the same lack of ethical restraint they have always had. Henry Blodgett is a whores whore and so are speculators but crimes and the rule of law should not be removed due to the nature of the enviroment it is happens in. Consider this I have never seen a stock bought in my whole life only sold Blodgett sold stock with a huge amounts of lies and his conflict of interest is only replicated in Chinese government offices. Spitzer drew a remedy from Satan himself Merrill Lynch. I think the judges should be scorned because I suspent they where paid off or influenced. I suggest that the need for Blodgetts has seen better days if real time accounting for public companies can be implemented the shareholders like the banks do now will recieve valid financial information without the spin of second hand journalist like Blodgett. It should be noted Blodgett also did investment banking deals with the same companies stocks he covered a void of ethics in courts and the boardrooms is more highlighted by Spitzers honesty.

JS Henderson January 31, 2005 at 9:19 am

Rozza and Nesfield, perhaps you could re-write your posts using proper English grammar. It is difficult to understand elliptical questions and/or run-on, typographical error-riddled sentences.

To Rozza: I don’t understand your point about “I can do it better.” What are you talking about?

edoardo rozza January 31, 2005 at 5:46 pm

Mr. Henderson, I’m talking about take the defense of a very difficult enquiry basically lost, to cover better a poor innocent people persecuted by an implacable judge.It’ clear? For money, of course.

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