Lawsuit against New York Stock Exchange

Calpers Sues NYSE, Alleges Fraud

Reuters -December 17

NEW YORK/SAN FRANCISCO (Reuters) - Calpers, the biggest U.S. public pension fund, filed a lawsuit on Tuesday against the New York Stock Exchange and its specialist trading firms, claiming that widespread fraud and lax oversight cost investors millions of dollars.

The lawsuit, filed in the U.S. District Court, Southern District of New York, comes three months after Calpers' protests helped push out former NYSE Chairman Richard Grasso following the disclosure of his $188 million compensation package.

The pension fund alleged that specialists, in conjunction with the NYSE, routinely engaged in "wide-ranging manipulative, self-dealing, deceptive and misleading conduct" that hurt public investors seeking to trade stocks.

This lawsuit detailed three types of improper trades allegedly conducted by the NYSE specialist firms, including "freezing" the display of prices on a given stock so a firm could trade for its own account before executing investor orders.

It also claimed "front-running," when a firm uses its knowledge of pending orders to trade ahead of their completion, and "inter-positioning," when a firm fails to match buy and sell orders in order to get a better price on a stock itself.

Calpers' president Sean Harrigan at the news conference to announce the lawsuit said that the NYSE had "looked the other way" when trading rules were violated. "We intend to seek recovery of every single dollar lost," he said.

The firms named in the suit include LaBranche & Co. Inc. ; Van der Moolen ; Spear Leeds & Kellogg, which is owned by Goldman Sachs Group ; Fleet Specialist Inc., a division of FleetBoston Financial Corp. ; Bear Wagner Specialists, partly owned by Bear Stearns & Co. ; Susquehanna Specialists Inc. and Susquehanna International Group LLC; and Performance Specialist Group.

A spokesman for Goldman Sachs had no comment while a spokesman for Susquehanna said the two companies should not have been named in the lawsuit.

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printed from Lawsuit against New York Stock Exchange on 2004-03-23 20:07:28