NEW YORK, May 2, 2005 (PRIMEZONE) -- A New York based NASD arbitration panel, which included former New York State Assemblyman John Duane Esq. as the Chairman, ordered Merrill Lynch Pierce, Fenner & Smith (Merrill Lynch), to pay a New Jersey couple $164,842.57 and to pay all $9,000 in arbitration fees. The couple sought a total of $188,443 in losses, all related to their investment in Internet Capital Group Inc (Nasdaq:ICGE) a public internet company and thus recovered 87% of their losses from the award which was assigned case number 03-06839.
The couple claimed that they were defrauded by Merrill Lynch as a result of the fraudulent research published by Merrill Lynch and relied upon by their Merrill Lynch broker in recommending ICGE to them. The Claim which arose out of the historic New York Attorney General's investigation/settlement, asserted that Merrill Lynch's research department was conflicted due to the influence of its investment banking department and that, as a result, fraudulent ratings were issued and maintained with regard to ICGE. The couple remain clients of the same broker who is still with Merrill Lynch. The broker, Michael Paolone, was not named as a Respondent in the arbitration since the couple did not blame him for the losses and asserted that, like many Merrill Lynch brokers, he was also misled. The couple did not assert that they were sent or directly relied upon any research report, but that the broker had informed them that he was relying upon Merrill Lynch's research in making the recommendations. Further, an email from the broker inquiring with Mr. Blodget was introduced into evidence. The broker's email expressed concern about ICGE and the many clients that the broker had recommended the stock to. Among the many Attorney General related email's submitted included comments from Mr. Blodget such as an August 12, 2000 email stating "I'm now officially scared to death of ICGE", while Merrill Lynch maintained a Buy rating on the stock. During the hearing the broker testified that he allegedly did not rely upon Merrill Lynch's rating system in making the recommendation and he testified that he utilized three magazine articles written about ICGE in forming his recommendation on the stock as well as the research. However, in cross examination it was pointed out that the date of the last article was six months before the couple first purchased the stock and that in the interim Merrill Lynch issued numerous research reports, including one just two weeks before the couple first purchase of the stock on March 22, 2000 at $110 per share. In addition, excerpts of Merrill Lynch's compliance manual were submitted in evidence, which established that the broker could not have recommended the stock to the Claimants without the stock being covered by Merrill Lynch along with a buy or accumulate ratings.
Although former Merrill Lynch Senior Internet Analyst Henry Blodget's appearance as a witness was sought by the Claimants, Mr. Blodget, through his lawyer, refused to voluntarily appear before the arbitration panel.
In the end, the Panel apparently agreed with the Claimants in awarding them 87% of their damages and ordering that Merrill Lynch pay for all the arbitration and filing fees.
Representing the Claimant was securities arbitration attorney Stuart D. Meissner who commented on the award: "This case could not have been brought, but for the release of information from Attorney General Spitzer's investigation. It is apparent that the arbitrators agreed that, like many investors, Merrill Lynch defrauded the Claimants in its quest for investment banking revenues. He continued "I hope that this Panel's message to the industry was heard loud and clear -- if you permit the defrauding of your own clients for the sake of investment banking revenues, it very well may come back to haunt you".
Stuart D. Meissner Esq. was formerly a prosecutor in the Trial Division of the Manhattan District Attorney's Office and was also a prosecutor in the Securities Investor Protection and Financial Crimes units of the New York State Attorney General's Office under both Eliot Spitzer and his predecessor, prior to entering private practice.
The Meissner Law Firm is investigating other matters related to Merrill Lynch's recommendation of the following stocks: ICGE, ATHM, AETH, CMGI, DCLK, INSP, TFSM, OPWV, HOMS.
See Image Accompanying This Release http://www.stockesq.com/pressrelease/
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.