Another one of Merrill Lynch's elite analysts has been placed among the fallen by a U.S. regulator angered over dealings with troubled Tyco International.
On Wednesday, NASD charged former research analyst Phua Young with publishing misleading reports on Tyco and with accepting freebies from the company. The alleged misconduct took place over three years and is the latest blotch on a Merrill Lynch track record containing many tech-stock advice snafus.
"The conduct of this analyst, as evidenced by his own e-mails, gifts to the CEO of Tyco, and favors he received from the company amounted to a betrayal of objectivity and honesty in research," said Mary L. Schapiro, NASD Vice Chairman and President of regulatory policy and oversight. "NASD will continue to hold analysts accountable whenever the interests of issuers and investment bankers cause them to lose their objectivity and produce misleading and skewed research."
The National Association of Securities Dealers (NASD) is an industry watchdog that can bring sanctions such as a fine, suspension or expulsion from the analyst business against Young. The analyst, already let go by Merrill, can request a hearing before a NASD panel.
The list of charges brought against Young would bring a smile to the face of any corporate letch. NASD said that Young would provide Tyco with advance copies of his research reports - proposed ratings included. The analyst also put out "misleading statements and exaggerated claims" about Tyco that were not quite like the views he expressed in private, NASD said.
In e-mails cited by NASD, Young wrote to a Tyco executive saying, "I am indirectly paid by Tyco." Then after sending off a voicemail to Merrill clients, Young asked Tyco's investor relations department, "[d]id I not sound pumped up enough?"
How could Young not be pumped up?
He flew on Tyco's corporate jets for business trips and even had Tyco foot the bill for a private investigator. The analyst was not stingy, however, and gave Tyco's CEO a $4,500 case of wine.
None of this should come as a surprise.
The thick stench of Merrill's dirty laundry hovers over New York. The company's misguided minions last month were slapped with a $100 million fine by the SEC for pumping up the value of losing companies.
Merrill's great Internet guru, Henry Blodget, agreed to heave up $4 million in fines and to accept a ban from the securities business.
Tyco - part of the Enron, WorldCom crowd - faces troubles of its own and has solicited outside help to boost its brand. ®