June 29, 2001|By BLOOMBERG NEWS
NEW YORK - Credit Suisse First Boston fired three San Francisco brokers yesterday who had been on administrative leave amid allegations that they had violated U.S. securities laws in the allocation of shares in initial public offerings.
The brokers were John Schmidt, head of the company's Technology Private Client Services department in San Francisco, and two of his subordinates, Michael Grunwald and Scott Bushley. The three, placed on leave in March, were the first securities industry employees known to have lost their jobs in connection with the investigation.
"They were in violation of the firm's policies and procedures," said Jeanmarie McFadden, a CSFB spokeswoman.
Authorities are trying to determine whether, as a condition of receiving IPO shares during the dot-com mania of 1999 and 2000, underwriters required investors to pay excessive commissions or to purchase additional shares at higher prices after trading began. Securities rules bar both practices.
"I don't want to call them sacrificial lambs," said Joel Cohen, a former federal prosecutor and now a Miami defense lawyer. "But given the stakes in this investigation, they want to show the government that to the extent there is a problem, they're doing what they can to resolve it."
None of the three could be reached for comment, but attorneys for Grunwald and Bushley denied they did anything wrong.
Credit Suisse First Boston, a subsidiary of Credit Suisse Group in Zurich, Switzerland, was the first firm contacted by the Securities and Exchange Commission in mid-2000.
The firm, led by head technology banker Frank Quattrone, was the No. 1 underwriter of computer, software, Internet and semiconductor company initial stock sales in 1999 and 2000, garnering about 24 percent of the market.
At least six CSFB employees were known to be under inquiry by the regulatory arm of the National Association of Securities Dealers, according to the group's Web site. The three San Francisco brokers who were fired had reported to executives in New York and to Quattrone in Palo Alto, Calif.
Investigations by the NASD, the Securities and Exchange Commission and Justice Department involve at least nine Wall Street firms, including Goldman Sachs Group Inc., Morgan Stanley Dean Witter & Co. and J. P. Morgan Chase & Co., from whom authorities have sought data on their policies for selling IPO shares.
The investigation is a result of the frenzy that swept Wall Street in 1999 and 2000, when investment banks sold about $130 billion in IPO shares, rushing scores of companies to market while collecting billions of dollars in commissions.
Investors profited by selling the shares as prices skyrocketed. First-day gains from IPO shares averaged 87 percent in 1999.
