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Raised Stakes

September 30, 1998|THOMAS S. MULLIGAN

Merrill Lynch & Co. continues to suffer unwanted publicity in the wake of the near-collapse of investment firm Long-Term Capital Management last week--and the news isn't doing anything to help Merrill's sagging shares.

The brokerage confirmed Tuesday that 123 of its executives, including Chairman David Komansky, had personally invested a total of $22 million in Long-Term Capital, the Greenwich, Conn.-based hedge fund that Merrill and 13 other major banks and brokerages rescued last week with a $3.5-billion capital infusion.

The executives' investment was made earlier this year through a deferred-compensation plan open to senior executives, a Merrill spokesman said. The plan offers about 50 investment choices, among them a hedge fund option in which contributions are split among four hedge funds, including Long-Term Capital.

Komansky's share of the investment initially was $800,000, Merrill confirmed, but both his stake and those of the other executives have shrunk significantly given Long-Term Capital's dire problems with wrong-way bets on interest rates.

No estimate of the current value of their investment was available Tuesday.

Asked whether Merrill's participation in the rescue plan constituted a conflict of interest, considering the executives' personal stakes in Long-Term Capital, the spokesman said: "The investment had absolutely no effect on the decision to join in the recapitalization effort."

The spokesman noted that Komansky holds Merrill stock worth around $100 million, far outweighing his own and his colleagues' total investment in Long-Term Capital.

For whatever reason, investors shaved Merrill stock again Tuesday, driving it down 81 cents to $50.13, its lowest since spring of 1997.

Komansky's Merrill stake, while huge, had been a lot bigger recently: Merrill's stock has plummeted 54% just since July 13, when it peaked at $109.13.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Merrill's Fast Fall

Merrill Lynch led major brokerage stocks ower Tuesday, falling to its lowest price since spring of 1997, as investors continued to pull away on fears about financial system losses. Weekly closes and latest on the NYSE:

Tuesday: $50.13

Source: Bloomberg News

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