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Brokerage Faces $5-Billion Judgment in Suit

Courts: BancAmerica, which had rejected $15-million settlement offer, will contest stock-rigging charges.

January 01, 1998|From Bloomberg News

BancAmerica Robertson Stephens & Co. on Wednesday said it faces a possible $5-billion judgment in a class-action lawsuit that alleges the brokerage colluded with other firms to rig stock prices on the Nasdaq Stock Market.

The San Francisco-based brokerage, a BankAmerica Corp. unit, is the lone holdout from a landmark $1.01-billion settlement between 36 brokerages and investors who filed the 1994 antitrust suit. The complaint accuses the firms of keeping trading spreads--the difference between the buying and selling price--artificially wide on 1,659 stocks between 1989 and 1994.

Dana Welch, general counsel of the company's Robertson Stephens division, said the company intends to contest the charges in federal court in New York.

"We haven't seen one fact indicating that we did anything wrong, or that any of our personnel did anything wrong," Welch said. A $5-billion judgment, while possible, is "highly unlikely" because the facts are in the company's favor, she said.

BancAmerica rejected a $15-million settlement offer last week, Welch said. The company, the No. 13 stock underwriter in the U.S. last year, resisted strong verbal pressure to settle from many of the other brokerages that were sued.

Plaintiffs' attorneys will soon start trying to depose senior executives at many of the Wall Street firms that were sued and will seek tape recordings of brokers' conversations at these firms, said Robert A. Skirnick, a lead plaintiffs' lawyer in the case.

Under federal antitrust law, BancAmerica can be held liable for the offenses of all 37 brokerages that were sued. This concept of "joint and several liability" requires a jury to establish the total losses suffered by investors from all firms and then to triple the award before subtracting out the settlement amount already agreed to.

Welch said she agreed with antitrust expert Garret Rasmussen, who said Wednesday that a jury that found BancAmerica liable would probably award about $5 billion.

The jury would likely find that investors lost at least $2 billion, based on the $1-billion settlement, Rasmussen said.

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