Merill
Lynch |
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Sometime in 2001, Merrill Lynch was found to have been publicly
promoting investments that they had privately damned. It is
suspected that these false statements were made to secure
investment banking deals with the companies whose stock was
being advocated.
One of these clients is believed to be deposed energy leader
Enron. In 1998, a sequence of events unfolded in which the
Merrill Lynch analyst responsible for the downgrade of Enron’s
stock appraisal resigned, the stock was upgraded, and the two
struck several deals for lucrative stock offerings.
New York state Attorney General Eliot Spitzer took the lead in
investigating Merrill Lynch’s practices, finally reaching a
settlement that included a fine and Merrill Lynch promises to
correct the scandalous practices.
When did the wrongdoing first come to light?
While allegations against brokers have been aired in
congressional hearings and on Wall Street for some time, ground
may have been broken on the current Merrill Lynch scandal in
July 2001, when the brokerage firm was forced to reimburse
approximately $400,000 to a former client. The client, Debases
Kanjilal, had invested based upon the advice of his personal
broker and analyst Henry Blodget. Kanjilal and his lawyer
believed they had evidence that Blodget and Merrill Lynch had
some interest in the success of the stock, Infospace, Inc.
The current case against Merrill Lynch began to gather steam in
April 2002. At this point, Spitzer made known that he had
evidence – in the form of emails and sworn testimony – that
analysts had privately emphasized the unattractiveness of stocks
publicly characterized as sure things.
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