Wall Street Firms To Pay $910 M To Settle Lawsuit

Thirty brokerages, including some of Wall Streets biggest and most prestigious names, agreed to pay $910 million to settle a class-action lawsuit alleging they colluded to fix prices on the Nasdaq market, a plaintiffs attorney said on Wednesday.

It is a magnificent victory for the class and a holiday present for investors, plaintiffs co-lead counsel Arthur Kaplan told Reuters in an interview.

The lawsuit was brought on behalf of people who bought and sold securities on the Nasdaq electronic stock market. It alleged that the Nasdaq market makers conspired to widen spreads between the bid and the ask prices, which would boost profit margins.

 

The lawsuit was filed on behalf of Nasdaq buyers and sellers for a small number of stocks, but was subsequently expanded to 1,659 Nasdaq national market stocks that were the subject of the alleged price-fixing.

The plaintiffs co-lead counsels said in a news release they believed the proposed settlements were the largest anti-trust settlements in the history of federal or state anti-trust laws.

The settling defendants included Merrill Lynch & Co Inc, Americas biggest brokerage; Morgan Stanley & Co Inc; Bear Stearns & Co Inc; PaineWebber Group Inc; Prudential Securities Inc; J P Morgan Securities Inc; Goldman Sachs & Co; Lehman Brothers; and Salomon Brothers Inc and Smith Barney Inc, both part of Travelers Group Inc, the attorneys said.

Also settling were AG Edwards & Sons Inc; BT Alex. Brown Inc; CIBC Oppenheimer Corp, Dean Witter Reynolds Inc, Donaldson, Lufkin & Jenrette Securities; Everen Securities Inc, Furman Selz, part of ING Barings; Hambrecht & Quist Inc; JC Bradford & Co LLC; Legg Mason Wood Walker Inc; Cowen & Co; Mayer & Schweitzer Inc; Pierce, Fenner & Smith Inc; Nash, Weiss & Co; Olde Discount Corp, Piper Jaffray Cos; The Robinson-Humphrey Co Inc; Troster Singer; UBS Securities LLC and Weeden & Co LP.

Credit Suisse First Boston Corp also settled, the plaintiffs counsel said.

Many firms were not available to comment on the settlement, announced on the day before Christmas, including CS First Boston, Prudential, Merrill Lynch, Salomon, Smith Barney, ING Barings, Bankers Trust and Goldman Sachs.

Hambrecht & Quist said on Wednesday it expected to take an after-tax charge of 17 cents per share in the current quarter to settle the case.

Before news of the settlement, the brokerage was expected to earn 54 cents a share in its current fiscal first quarter, according to the First Call research service.

J P Morgan and Lehman Brothers declined to comment.

The Wall Street Journal, citing firm sources, said in its Heard on the Street column that Merrill Lynch would pay about $100 million, the largest chunk of the settlement.

Of the 37 firms accused in the lawsuit, the following six firms have already settled for a total of about $100 million: Jefferies Group Inc, Sherwood Securities, Kidder Peabody & Co, Cantor Fitzgerald LP, Montgomery Securities Inc, a unit of NationsBank Corp., and Herzog Heine Geduld Inc, Robert Skirnick, an attorney for the plaintiffs, said earlier.

All settlements of the 1994 lawsuit were subject to court approval by US District Court Judge Robert Sweet, the counsels said.

The new settlement also preserved damage claims by the class against the remaining defendant, Robertson, Stephens & Co, a subsidiary of BankAmerica Corp, they said.