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Source: NY, Merrill Lynch Settle

May 21, 2002

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ALBANY, N.Y. (AP) _ Merrill Lynch & Co. and New York’s attorney general have agreed to settle charges that the firm’s analysts misled investors with their stock ratings so the company could win lucrative investment banking fees, a source told The Associated Press on Tuesday.

Terms of the agreement between Merrill Lynch and Eliot Spitzer were to be announced later Tuesday morning, according to a source familiar with the negotiations who spoke on condition of anonymity.

A spokeswoman for Spitzer had no immediate comment. A Merrill Lynch spokesman didn’t immediately return a telephone message seeking comment.

The Wall Street Journal first reported the settlement on its Web site on Tuesday.

At one point during negotiations Monday, the newspaper said Merrill had agreed to pay a fine of close to $100 million, no longer pay analysts directly for work on investment banking deals, and make a statement of contrition for its research.

But the Journal said it was unclear whether the final deal would reflect all those conditions.

Spitzer seeks reforms, a fine and an admission of guilt by the nation’s largest brokerage because analysts advised individual investors to buy stocks the researchers privately criticized in e-mails.

Spitzer contends analysts inflated the prospects of companies’ stock to help land the firms as investment banking clients.

Negotiations between Merrill Lynch and Spitzer have been under way since April, when Spitzer unveiled the results of his 10-month investigation.

The investigation also includes key Merrill Lynch rivals, and any settlement reached is expected to serve as a model for the industry.

Spitzer has subpoenaed information from at least a half dozen other major brokerages. Some of the evidence collected so far includes employment contracts that detail how analysts were to be compensated for helping to land investment banking clients.

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