Credit Suisse First Boston
About a month ago, regulators sent evidence of wrongdoing to New York's attorney general, Eliot Spitzer, urging his office to file criminal charges in the matter. Spitzer's been wielding New York's powerful Martin Act like a weapon, and Galvin would like to see him use it against CSFB. New York investigators have yet to file any criminal charges but are looking into it.
Galvin, who wants a complete divorce between investment banking and research, isn't waiting to see what New York might do. His distaste for CSFB and its practices have been obvious, and he'll take any action he can get.
Talks between CSFB and Galvin's office allegedly broke down last week, after the company balked at settling for $100 million and refused to make Galvin's proposed changes to the way it structures its business. Galvin was hoping for a settlement similar to Merrill Lynch's with Spitzer.
With that off the table, Galvin decided to take what legal action he could, filing an administrative action against the company, which could come as soon as today. CSFB's top lawyer sent a letter yesterday to Galvin's office, decrying the move as too hasty and in conflict with the current "global settlement" being drawn up by the Securities and Exchange Commission (SEC) and multiple state regulatory agencies.
CSFB agreed to pay $100 million in January to settle unrelated claims brought against it by the SEC and the National Association of Securities Dealers. Another $100 million charge so soon would be a big blow to the company, which has said it wants to be a "model" for the rest of the industry. On top of all that, CSFB could still face criminal charges from New York.
We're having a hard time feeling sorry for CSFB. We do feel sympathy, though, for the investors who were misled by the company's callous disregard for the truth. Suck it up, CSFB -- you played dirty, so don't cry about it when you're forced to pay for it.