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Credit Suisse probe dropped
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November 29, 2001: 4:54 p.m. ET
Investment bank says U.S. ended probe of its IPO allocations.
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NEW YORK (CNN/Money) - Credit Suisse First Boston said Thursday the U.S. Attorney's Office in Manhattan had dropped an investigation into alleged violations in the market for new stock offerings by the investment bank.
While Marvin Smilon, spokesman for the U.S. Attorney for the Southern District of New York, would not confirm that CSFB had been cleared, a spokesman for the firm told CNNfn, "CSFB is pleased that the U.S. attorney's office has decided to close its investigation of CSFB IPO allocation practices without filing any charges."
The U.S. Attorney, the Securities and Exchange Commission and the regulatory unit of the National Association of Securities Dealers have been looking at potential abuses in how shares in initial public offerings of stock were allotted to investors during the tech sector boom of the late 1990s and early 2000.
CSFB is a unit of Zurich-based CS Group shares. Its shares closed down 0.8 euro, or 1.8 percent, to  43.80 in Frankfurt trading Thursday, while shares of the American depositary receipts of Credit Suisse Group (CSR: down $0.27 to $39.30, Research, Estimates) were also down in U.S. trading. Banking stocks have been under pressure because of worries about exposure in the sector to stricken U.S. energy trader Enron Corp. (ENE: Research, Estimates).
A Wall Street Journal report Thursday said CSFB still is talking to other regulatory agencies in an attempt to settle possible civil charges in the IPO matter.
Thursday's decision could mean quicker settlement of the civil cases against CSFB being pursued by the SEC and the NASD, the newspaper said, as coordinating civil and criminal investigations can be time consuming. But there also is a far higher bar for bringing criminal securities cases than for civil proceedings.
But the CSFB spokewoman dismissed the civil complaints, saying, "these allegations have no merit and we intend defend ourselves vigorously."
A large number of class-action suits were filed in U.S. federal courts against several firms starting last January.
CS said in a regulatory filing in September inquiries relating to CSFB focused on two IPOs, including one for VA Linux Systems Inc. (LNUX: Research, Estimates), the software specialist whose shares opened at nearly 10 times their $30 offer price before closing first-day trading at $239.25, up nearly 700 percent, on Dec. 9, 1999.
Shares of VA Linux are now trading at less than a tenth of their offer price and down almost 99 percent from their first day price. They fell 6 cents to $2.78 Thursday.
CS said in September that CSFB also is a defendant in two class-action suits, including one by some IPO issuers and a second by retail investors, alleging CSFB and another unnamed investment bank issued favorable analyst reports on Covad Communications Group Inc. in order to get its banking business.
Covad, a California-based Internet communications provider, filed for bankruptcy protection in August.
CS hired Wall Street veteran John Mack in July to head up CSFB, tighten controls and lead a reorganization of the unit. 
Reuters contributed to this report
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