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Plaintiffs’ lawyers want to vastly expand the scope of lawsuits filed against investment banks for their role in allocating shares of hot initial public offerings by seeking information about the roles played by the defendants’ research analysts. Class action attorneys representing individual investors told a federal judge on Wednesday that they will seek access to internal Wall Street documents relating to as many as 900 technology IPOs. That number includes nearly every tech IPO that occurred during the tech boom — from early 1998 to December 2000. Only about 300 IPOs are included in the suits. The move sets the stage for a lengthy court battle. The plaintiffs insist that they will not accept a global settlement and the defendants — 55 underwriters and more than 300 issuers — have vowed to fight the expanded discovery request. As part of the discovery phase of the lawsuits, the plaintiffs, led by law firm Milberg Weiss Bershad Hynes & Lerach, will have access to all documents underwriters have already submitted to regulators regarding investigations of how investment banks allocated IPOs. Now plaintiffs’ lawyers will push for more: Not only do they want the regulatory submissions for IPO allocation issues, they said, but they are also seeking to include all the documents underwriters have submitted to regulators regarding research analysts’ alleged conflicts of interest. Wall Street banks have already paid billions of dollars in fines relating to both IPO allocations and the research scandals. Credit Suisse First Boston, Robertson Stephens and J.P. Morgan Chase & Co. have paid a total of nearly $140 million to regulators on the IPO allocation issue; 12 investment banks, including Goldman Sachs & Co. and Morgan Stanley, were part of a global settlement reached in December in which the banks agreed to pay a total of $1.4 billion related to the research investigations. U.S. District Judge Shira Scheindlin, presiding over the suits in the Southern District of New York, said both the plaintiffs and the underwriters will have to submit letters and briefs on the issue. Scheindlin, who called the dispute the first major legal point of the lawsuits, said she will look to make a ruling on the subject. For the 300-plus IPOs actually involved in the lawsuits, underwriters have agreed to hand over any documents they have already submitted to regulators, including the U.S. Attorney, New York State Attorney General, NASD and the Securities and Exchange Commission. Plaintiffs’ lawyer Mel Weiss, name partner in Milberg Weiss, also said that Wall Street underwriters could not join forces if they are looking to settle the cases — that, in effect, he would not accept a global settlement. “We have to deal with each defendant separately,” Weiss said in the court conference. “They can’t come to us with a single dollar amount.” Sullivan & Cromwell partner Gandolfo DiBlasi, who is representing Goldman, said the underwriters have not yet made any movement toward settlement talks. Weiss and DiBlasi had a spirited exchange during the conference when it came to which documents will be included in the discovery phase. “Introducing discovery issues in 900 IPOs makes absolutely no sense, and we’re going to oppose that any way we can,” DiBlasi, speaking for all the underwriters, told Weiss. “If you can prove it in 300 cases, that should be enough.” Weiss said he was looking to prove an overarching scheme by underwriters to manipulate IPO shares. “If Mr. [Jack] Grubman or Mr. [Frank] Quattrone wrote a memo that says, ‘We have a scheme to manipulate stock prices,’ I want that document, and I don’t want to be told it’s not included in the cases,” Weiss said. The plaintiffs and the investment banks still have to decide whether the files will be handed over electronically or in paper form. A more complex point comes from the so-called “idiosyncratic issues,” as Weiss termed them, of document destruction. CSFB is currently facing down regulators because it “recycled” some electronic files including material relevant to the investigation of its tech czar, Frank Quattrone. Plaintiffs’ lawyers noted that CSFB’s attorneys have proven willing to cooperate. CSFB and plaintiffs’ lawyers scheduled another meeting on the matter for Wednesday afternoon. Other Wall Street underwriters, including Morgan Stanley, have paid fines to regulators for not retaining files relevant to the research analyst investigations. “Everyone’s under obligation now, so we shouldn’t have any documents disappearing at this point,” Scheindlin told the assembled lawyers. It is also unclear how many underwriters have access to their own documents. Plaintiffs’ lawyers noted that some of the small underwriters have resisted filling out questionnaires revealing how many of their own internal documents they have at their disposal. Scheindin said the small underwriters are out of luck: “Every institutional defendant is going to have to come forth with information,” Scheindlin said. The lawyers also discussed the possibility of choosing 25 to 30 “test cases,” in order to limit the mammoth undertaking of reviewing the documents. Because several underwriters worked on each IPO, establishing test cases would also allow the plaintiffs to bring charges against all 55 underwriters while allowing issuers — the companies that went public during the tech boom — to limit their transaction costs. While lawyers for all sides will meet several times over the next few weeks to iron out a discovery schedule and other issues, the next official court conference is April 3. Copyright (c)2003 TDD, LLC. All rights reserved.

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