Subject: [NEXTEL-1] IPO fraud case clears hurdle

From: Marcel <[email-masked]>
Date: Thu, 20 Feb 2003 03:40:51 -0500

Thursday, February 20, 2003

IPO fraud case clears hurdle
Claims by investors that they were cheated are allowed to proceed

By LARRY NEUMEISTER
THE ASSOCIATED PRESS

Investors in at least 13 Seattle-area initial public offerings who say investment
banks cheated them by plotting to make Internet companies skyrocket in value
when they went public cleared a legal hurdle yesterday when a judge refused
to toss their claims.

U.S. District Judge Shira Scheindlin said investors in those companies and
nearly 300 others nationally presented "a coherent scheme" in which the banks
joined with Internet companies to defraud the public of billions of dollars by
hiding secret deals and analyst conflicts to artificially inflate new shares and
deliver a payoff to insiders.

The plaintiffs charged that the banking companies required their customers
who wanted a piece of initial public offerings to pay undisclosed compensation
and to engage in tie-in deals that guaranteed they would buy more stock on the
open market.

"Subsequent purchases at escalating prices falsely inflated the price of the
shares. This very conduct evinces a strong inference that defendants intended
to defraud the investing public," the judge said.

If the allegations are true, "this scheme offends the very purpose of the
securities laws," Scheindlin wrote. "Where insiders conspire to frustrate the
efficient function of securities markets by exploiting their position of privilege,
they have perpetrated a double fraud: they have manipulated the market, and
they have covered up that manipulation with lies and omissions."

In her 238-page ruling, Scheindlin said she had considered the claims and
counterclaims made in more than 1,000 lawsuits filed in Manhattan from Jan.
11, 2001, through Dec. 6, 2001.

Investors allege the value of their holdings plummeted as a result of the alleged
fraud in connection with 309 initial public offerings of stock, including those of
shares in theglobe.com, Global Crossing, Martha Stewart Living Omnimedia
and MP3.com.

The decision came at the stage of litigation in which defendants attempt to have
lawsuits dismissed on the grounds that there are insufficient allegations to put
before a jury. Scheindlin said some defendants could be dropped from the
case because there was not enough evidence against them, but that most
would stand.

Melvyn Weiss, a lawyer for the plaintiffs, said the investors were looking to
recover "many, many billions" of dollars and expected the defendants will be
interested in beginning settlement talks.

Richard Peterson, a market strategist for Thomson Financial, agreed, saying
the onset of discovery in the case and the opportunity for plaintiffs to look at
internal records of investment banks would encourage settlements.

He said it was unlikely that large banking institutions, some with billions of
dollars in annual sales, fear damage to their finances as much as the danger of
what might be discovered as the public pokes through their records.

"It would open the floodgates to litigation in other areas by anyone who feels
they were given bad advice," he said.

Gandolfo DiBlasi, a lawyer for the underwriters, which include J.P. Morgan,
Salomon Smith Barney, Credit Suisse First Boston, Robertson Stephens and
Morgan Stanley, said he could not immediately comment.

Jack Auspitz, a lawyer for the issuing companies, said he had not seen the
ruling and could not immediately comment.

The lawsuits named as defendants 55 underwriters, 309 issuers of stock in
high technology and Internet-related stocks and thousands of individuals. They
target a high percentage of the more than 460 high technology and
Internet-related companies that raised capital by selling ownership of their
company to the public from January 1998 to December 2000.

AREA IPOs IN SUIT

Investors in 13 Seattle-area initial public offerings -- among 309 nationwide --
say investment banks cheated them of billions. Those IPOs were:

Avenue A
B Square
Concur Technologies
Drugstore.com
Expedia
F5 Networks
Internap
Loudeye
Metawave
Nextel Partners
Onvia.com
Onyx Software
Primus Knowledge Solutions
 http://seattlepi.nwsource.com/business/109336_ipofraud20.shtml
--
    "NEXTEL-1 IT'S NOT JUST NEXTEL"
  Note The New address
Subscribe to Nextel-1: http://www.groups.yahoo.com/subscribe/NEXTEL-1

  "NEXTEL2 FOR iDEN SOFTWARE DEVELOPERS"
Subscribe to Nextel2: http://www.groups.yahoo.com/subscribe/NEXTEL2

  "WIRELESS FORUM HOMELAND SECURITY GROUP"
     The Complete Resource for Wireless Homeland Security.
Subscribe to WFHSG:  http://www.groups.yahoo.com/subscribe/WFHSG

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/