Updated from 3:24 p.m. EDT
Massachusetts securities regulators filed civil charges against Credit Suisse First Boston, claiming its tech stock analysts produced "tainted" and "corrupted" research reports. The complaint seeks a $2 million fine.
Massachusetts authorities, who have plowed through tens of thousands of email messages from CSFB employees, have been threatening to bring the civil suit for several weeks.
In announcing the filing of the suit at a Monday afternoon press conference, Massachusetts Secretary of State William Galvin said the action was needed "to stop the conduct that we have discovered." He accused the
Securities and Exchange Commission
of standing by and allowing the abuse he found at CSFB to occur.
The allegations in the civil complaint would seem to point a finger at Frank Quattrone, one of CSFB's most prominent technology investment bankers during the bull market. The complaint alleges the tech analysts at CSFB tailored their research reports to help the firm win lucrative investment banking deals from tech companies.
Quattrone's investment group was one of the leading underwriters of initial public offerings during the technology boom of the late 1990s.
Galvin's office filed the charges after talks with CSFB over a potential settlement broke down this weekend. The firm balked at paying a fine and agreeing to big changes in the way the firm does business, especially while other securities regulators are working to formulate a global settlement of Wall Street's many conflicts of interest. Galvin's suit seeks to force CSFB to separate its stock research from its investment banking business.
Earlier this year, CSFB paid a $100 million fine to the SEC to settle an investigation into allegations it received inflated commissions from money managers seeking to get their hands on shares of hot technology offerings.
For several weeks now, Galvin's office has been trying to put pressure on CSFB by leaking emails to the press that purport to show the firm's analysts maintained high ratings on technology stocks in order to please investment bankers.
Massachusetts officials also asked New York State Attorney Eliot Spitzer, who earlier this year pursued a similar conflict of interest case against
, to consider filing criminal charges against CSFB. Galvin's office, unlike Spitzer's, doesn't have the power to file criminal charges.
But Spitzer's office, which never filed criminal charges against Merrill, appears to have reacted coolly to that suggestion. Instead, Spitzer is focusing most of his attention on a wide-ranging investigation into conflicts of interest at
Salomon Smith Barney division.
A Spitzer spokesman said the office is still reviewing the allegations referred to it by Galvin's office.
Spitzer also is working with Securities and Exchange Commission chief Harvey Pitt in trying to hammer out a global settlement for dealing with industrywide conflicts of interest on Wall Street.
CSFB officials, in a last-ditch attempt to persuade Massachusetts officials not to file the charges, claim the state's action will interfere with those broader settlement talks. The firm accused Massachusetts officials of pursing a "patchwork" approach to securities regulation.
In a letter delivered Sunday to Massachusetts' authorities, an attorney for the Wall Street firm said the state "risks imposing action that is inconsistent with, and potentially in conflict with, the new industrywide reforms being developed for the entire nation."
Before Spitzer assumed the mantle of Wall Street's principal dragon slayer, Galvin had been one of the state officials best known for taking on Wall Street investment firms.
CSFB fired back at Galvin late Monday, saying his allegations "are riddled with misleading statements and inaccuracies." The firm accused Galvin's office of taking emails out of context and chided regulators for not interviewing any CSFB employees before filing the charges.