New progress in financial fraud

[Charles Brown <cbrown@xxxxxxxxxxxxxxxxx>]

MARK H. ANDERSON, ³Justices Rule Against Investors
In Wall Street Antitrust
Case,²  The Wall Street Journal, June 18, 2007.
WASHINGTON -- The U.S. Supreme Court Monday ruled 7-1 that several Wall
Street firms are immune from a class-action lawsuit brought under federal
antitrust laws over alleged conduct on initial public offerings during the
1990s technology bubble.
The high court, in an opinion by Justice Stephen Breyer, ruled that the
breadth of federal securities regulation prevents the antitrust suit. "We
must interpret the securities laws as implicitly precluding the application
of the antitrust laws to the conduct alleged in this case," Justice Breyer
said in the majority ruling.
            This holding, Justice Breyer wrote, is clear because the
underwriting activities challenged in the lawsuit are "central to the proper
functioning of well-regulated capital markets." Justice Breyer added that
the Securities and Exchange Commission has clear authority to supervise the
IPO activities in question. "The SEC possesses considerable power to forbid,
permit, encourage, discourage, tolerate, limit and otherwise regulate
virtually every aspect of the practices in which underwriters engage,"
Justice Breyer wrote.
            The decision reverses a 2nd U.S. Circuit Court of Appeals
holding that allowed the antitrust lawsuit to move forward. A number of top
Wall Street firms were named in the case, including Credit Suisse First
Boston, a unit of Credit Suisse
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=CS>  Group; Bear
Stearns & Co., a unit of Bear Stearns
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=BSC> Cos.;
Citigroup Global Markets Inc., a unit of Citigroup
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=C> Inc.; Goldman
Sachs & Co., a unit of Goldman Sachs
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=GS>  Group Inc.;
J.P. Morgan Securities
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=JPM>  Inc., a
unit of JPMorgan Chase & Co.; Lehman Brothers Inc., a unit of Lehman
Brothers <http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=LEH>
Holdings Inc.; Merrill Lynch Pierce Fenner & Smith, a unit of Merrill Lynch
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=MER>  & Co.; and
Morgan Stanley & Co., a unit of Morgan Stanley
<http://online.wsj.com/quotes/main.html?type=djn&amp;symbol=MS> .
            The antitrust suit accused the firms of illegally pumping up
prices on IPOs and profit margins during the late 1990s technology bubble.
Under federal antitrust laws, the companies could have faced tripled damages
if the lawsuit was allowed.
            At issue was whether tie-in agreements -- deals between
investment banks and securities firms that require the purchase of
additional securities in after-market trading of new stock offerings --
amounted to antitrust violations that can support a private antitrust
lawsuit. The investors who brought the lawsuit allege such agreements
created stacks of stock purchases that artificially drove up the price and
margin on hot new stocks.
            After dismissal of a broad array of claims by a federal trial
court, the Second Circuit, based in New York, revived claims on tie-in
agreements after a U.S. District Court dismissed the lawsuit. During
briefing of the case, the U.S. Solicitor General's office had suggested a
compromise position that sought balance between the reach of federal
securities laws and federal antitrust laws to the questioned underwriting
practices. Justice Breyer said the Supreme Court was rejecting that
compromise, however, because it would likely lead to inconsistent rulings in
future cases. "The solicitor general's proposed disposition, however, does
not convincingly address the concerns we have set forth here," Justice
Breyer said.
            Justice Clarence Thomas dissented from the majority. Justice
Anthony Kennedy recused himself from the case. The case was Credit Suisse
First Boston Ltd. v. Billing.