Fedl Judge Dismisses Investor Suits Vs. Merrill, Blodget
A federal judge threw out investor litigation against Merrill Lynch & Co. (MER), saying people who lost money because of the dot-com meltdown were "high-risk speculators" who took unjustifiable risks during a volatile market.
U.S. District Judge Milton Pollack in Manhattan said investors who are suing Merrill and its former top analyst, Henry Blodget, cannot twist federal securities laws into a "scheme of cost-free speculators' insurance."
Dozens of investor lawsuits have been filed against Merrill, claiming Blodget and others issued overly bullish research reports to win lucrative investment-banking business and pump up their own salaries.
In a 43-page opinion, the judge said investors can't lay the blame for the Internet bubble on Merrill, saying the law wasn't meant to encourage "a freewheeling casino that lured thousands obsessed with the fantasy of Olympian riches, but which delivered such riches to only a scant handful of lucky winners."
Corrected July 01, 2003 17:41 EDT (21:41 GMT)
Investors in 27 companies have sued Merrill over stock losses. Judge Pollack dismissed claims of investors in Interliant Inc. (INITE) and 24/7 Real Media Inc. (TFSM), and put the other 25 cases on hold while all legal issues in the first two cases are resolved.
The judge indicated in an earlier interview with Dow Jones Newswires that his ruling could shape the outcome of slew of lawsuits in which investors blame not just Merrill but other Wall Street firms for their losses and seek damages of potentially hundreds of millions of dollars.
A Merrill spokesman said: "We're pleased that the judge accepted our arguments."
Judge Pollack had already expressed a critical attitude toward plaintiffs' suits pointing the blame at analysts. In 2001, he threw out litigation against Morgan Stanley (MWD) analyst Mary Meeker, saying it was based on market gossip and was in "grossly bad taste."
This time, however, plaintiffs had hoped that their case would be buttressed by damaging e-mails released last year by New York state attorney general Eliot Spitzer in connection with his investigation of Merrill Lynch.
In those e-mails, Merrill analysts privately called stocks "junk" and "crap" while publicly recommending them. Merrill eventually agreed to pay $100 million to settle the claims against it. Blodget has been fined and barred from the industry.
Spitzer's investigation sparked a crackdown by federal and state regulators on other major Wall Street banks, eventually crafting a $1.4 billion settlement with 10 of the largest, including Merrill Lynch, which in addition to the $100 million is paying $75 million to fund independent research over five years and $25 million for investor education.
In his ruling, Judge Pollack found that investors couldn't prove a direct link between analysts' alleged failure to reveal their conflicts of interest, and the bursting of the Internet bubble.
He also noted that investors couldn't prove that research reports issued by Merrill analysts were false, rather than genuinely held beliefs. He noted that "snippets of e-mails" from Spitzer's probe were improperly included in the suits, because they fail to constitute "well-pleaded facts."
The judge said reports issued by former star analyst Blodget's reports "were replete with risk warnings" of the potential for stock prices to drop significantly. Some of Blodget's disparaging remarks about certain stocks, transmitted via internal Merrill e-mails, were made "after the bubble had burst and after plaintiffs had lost their money," the judge wrote.
Judge Pollack dismissed the suits with prejudice, meaning the claims can't be brought again.
Edward Haber, one of the attorneys representing the plaintiffs, said he is disappointed with the judge's decision and plans to appeal. "We respectively believe that he misapplied the law and reached factual conclusions in his decision that one can't reach in deciding a motion to dismiss," Haber said.
Other plaintiffs' attorneys couldn't immediately be reached for comment.
In a similar case, a separate judge on Tuesday dismissed investor claims against Goldman Sachs & Co. (GS), Credit Suisse First Boston Corp. and Morgan Stanley (MWD). U.S. District Judge Harold Baer Jr. said shareholders of Covad Communications Inc. (COVD) couldn't prove that analysts' recommendations were false or misleading.
In a research note Tuesday, Prudential Financial analyst David Trone said he believes the ruling "provides zero opportunity for plaintiffs' attorneys to bring these suits back in another form." He also said he expects the other stock claims against Merrill to be withdrawn, "since the arguments and Pollack's ruling were cookie-cutter."
In addition, Trone said he believes other similar cases against securities firms will be withdrawn, as they were against Morgan Stanley in 2001. (Prudential owns shares of Merrill Lynch.)
Throughout his opinion, Judge Pollack remained critical of investors who lost money on "highly untested" Internet stocks and then sought to hold Merrill and its analysts responsible for their losses when the market soured.
"The cited alleged omissions of conflicts of interest could not have caused the loss of market value," the judge wrote. "It was the burst which caused the market drop. The plaintiffs controlled their ultimate exit from the stocks after waiting no doubt for a market reversal."
Investors have been successful, however, in pursuing other litigation related to the meltdown of tech stocks.
Last week, plaintiffs' attorneys announced a preliminary $1 billion settlement with corporate issuers related to initial-public-offerings abuses.
The litigation involves more than 300 IPOs between 1998 and 2000 and contends issuers and Wall Street are to blame for the crash-and-burn of dot-coms. The settlement resolves only a piece of the case; still pending are claims against 55 investment banks that underwrote the offerings. The case is before U.S. District Judge Shira A. Scheindlin in Manhattan.
联邦法官语出惊人，股评欺诈案美林胜诉
投资者要想从证券公司索回在股市泡沫中的损失看来并非易事。
纽约联邦法官波莱克(Milton Pollack)周二驳回了投资者针对美林公司(Merrill Lynch & Co.)及其前雇员－－网络股明星分析师亨利?布洛杰特(Henry Blodget)－－提出的集体索赔诉讼，理由是投资者未能证明美林的股评对他们构成了欺骗。投资者在这起诉讼中指称，美林及布洛杰特在股评方面误导投资者，在股市崩盘时美林曾大力推荐的两只互联网股票暴跌，给投资者造成巨大损失。
对华尔街公司来说，此次裁决是一次突破性的胜利。过去15个月，华尔街的大公司一直因涉嫌以不客观的股评换取企业投资银行业务而受到监管机构和投资者的猛烈抨击。
现年96岁高龄的波莱克法官在措辞严厉的裁决书中称，提起诉讼的这些投资者均为高风险投机者，对诉讼中所指的极不稳定且未经市场检验的股票所隐含的难以预测的风险有充分的认识。但他们现在却希望扭曲联邦证券法律，为投机者寻求免费的保险。他表示，原告完全无法使他相信，美林存在任何欺骗原告的故意。
作为原告的这些投资者曾投资24/7 Real Media Inc.和Interliant Inc.两只互联网股票。24/7 Real Media的股价一度超过60美元，而目前却不到1美元。Interliant股价在1999年首日上市交易时曾涨至16美元以上，但目前股价只有寥寥几美分。
原告还就另25只股票的投资损失对美林提起诉讼，这些股票在股市泡沫破灭后都一路狂泻。波莱克法官暂时搁置了这些其他诉讼，以待周二裁决中的法律问题解决后再作处置。原告律师托尔(Steven J. Toll)表示，"我们认为法官的裁决是错误的。我们需要讨论一下，以决定是申请复议还是上诉。"波莱克法官表示，他将在恰当的时机决定周二的裁决是否适用于上述其他诉讼。
无独有偶，另一位纽约联邦法官拜尔(Harold Baer Jr.)周二也驳回了投资者因投资Covad Communications Co.股票蒙受损失，而对另3家华尔街公司提出的集体诉讼。但该案的裁决主要基于程序上考虑，因此对类似诉讼的审理不具有重要参考价值。
今年4月份，美国证券监管当局指控美林等3家公司发布欺骗性的股票研究报告。一年前，纽约司法部长斯皮策(Eliot Spitzer)披露了布洛杰特和其他美林分析师的电子邮件，其中对美林所推荐的互联网股票极尽嘲讽之能事，并指出这些看涨的股评不过是赢得企业投行业务的伎俩。
美林于2002年5月同意支付1亿美元罚金、公开道歉并将股票研究部门从投资银行部门剥离，以平息斯皮策办公室对其进行的司法调查。2003年4月，在证券监管机构同10家证券公司为解决股评利益冲突问题达成的14亿美元和解协议中，美林同意另外支付1亿美元，用于解决同欺骗性股评相关的民事诉讼。花旗集团(Citigroup Inc.)的前电信股明星分析师杰克?格鲁曼(Jack Grubman)和美林的布洛杰特个人也受到指控。花旗集团亦公开向投资者道歉，并全面改革了股票研究程序。在2003年的和解协议中，华尔街公司既未承认也未否认存在任何不恰当的行为。
波莱克法官指出，斯皮策最初于2002年4月8日提出的指控中已经说明，其在该案中引用的纽约州法律不同于联邦证券法律，不需要提供欺骗的故意、投资者对股评的依赖或损失证明。
波莱克法官称，投资者未能论证"损失的因果关系"，也未能证明美林及其分析师的行为构成"明确的误传或疏忽"。他说，美林的股票研究报告对有关风险作出了充分的警告。他甚至以法定时效为由推翻原告的诉讼，称早在1999年和2000年，媒体在新闻报导中就强调了股票分析师的利害冲突问题，就连布洛杰特将他所推荐的一些股票称做"无用的点缀"一事也有所披露。
哥伦比亚大学(Columbia University)的证券法教授柯菲(John Coffee)认为，周二的这份裁决对美林来说非比寻常，因为它很可能为其他类似诉讼提供了一个范例。但柯菲又指出，此案可能并不适用于另外一些情境－－例如花旗集团分析师格鲁曼的案例，其中分析师同所跟踪股票的公司的管理层关系密切，而在股评中故意对他所了解的不利消息隐瞒不报。
美林公司的发言人表示，美林对法官接受该公司的论证感到高兴。
受该消息鼓舞，美林等证券公司股价周二上涨。纽约证交所收盘时，美林股价上涨1.52美元至48.20美元，涨幅3.3%。花旗集团股价上涨1.10美元至43.81美元，涨幅2.4%。美国股市在伊拉克战争前夕开始反弹，自那以来，证券和金融类股票持续攀升。Baseline的统计数据显示，这段时期证券金融类股的平均涨幅达34%。
一些专业人士认为，虽然波莱克法官的裁决对美林客户提出的类似仲裁案不具备法律约束力，但仍可能对这样的法律行动产生一定影响。但在索赔仲裁案中代表投资者的律师佐曼斯基(Jacob Zamansky)表示，能够证明其投资依赖于美林股评的美林客户仍然有能力在仲裁中胜诉。
