NEW YORK (CNN/Money) -
Settlement talks between Thomas Weisel Partners and federal regulators have broken down, leaving the West Coast investment bank out of a broad Wall Street accord, a source familiar with the matter said Thursday.
But New York Attorney General Eliot Spitzer, who helped draft the $1.4 billion settlement, said that the final version is still another week or so away, regardless of whether Thomas Weisel is included.
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"I've made it eminently clear, anyone who walks away will be sued," said Spitzer, who spearheaded the investigation into conflicts of interest on Wall Street that concluded with the December settlement. "It will take me 10 minutes to sign a complaint, we'll be in court."
Weisel, based in San Francisco, was the last of 12 investment banks to agree to a settlement with the Securities and Exchange Commission, Spitzer and other state and federal regulators.
Talks with the SEC have broken down, said the source, who did not disclose the reasons for the rift but said the firm still is hopeful it can come to some kind of a resolution with the agency.
A Weisel spokeswoman declined to comment on the matter.
Spitzer, who spoke to a group gathered at the Association of the Bar of New York, said he'll likely get signatures from the other 11 firms, and a Thomas Weisel omission wouldn't affect the final deal.
In February, Weisel said it agreed to pay $12.5 million to settle an investigation into its stock research and initial public offering allocation practices.
The Wall Street Journal said Thursday that Weisel was ousted from the settlement because its chief executive had a problem with use of the word "fraud" in the settlement documents.
Spitzer assured the group that some of the firms would in fact be accused of fraud in the final settlement, an accusation that could make lawsuits easier.
"The word 'fraud' will be in some of the documents that are the settlement documents," Spitzer said. He added, "I believe very deeply that at its root what was going on with the analysts and the investment bankers was probably the largest fraud ever committed upon the investing public."
At the end of last year, eleven other banks, including Citigroup Inc. (C: down $0.52 to $36.52, Research, Estimates) and Credit Suisse First Boston (CSR: down $0.20 to $18.20, Research, Estimates), agreed to pay a combined total of more than $1.4 billion to settle a probe spearheaded by Spitzer into Wall Street business practices.
Regulators had accused analysts of misleading investors by issuing biased research to woo investment banking clients. They also accused investment banks of bribing favored clients with shares of hot initial public offerings in exchange for underwriting and merger advisory business.
All 11 banks agreed to put up higher walls between their research and investment banking departments.
The settlement is still not completed, as lawyers on both sides hammer out the language of the final draft. The banks are wary of including anything that could arm disgruntled investors, who have filed a raft of class-action lawsuits.
"The only delay," Spitzer said, "is that when you are dealing with 50 states, 12 investment banks, a significant number of regulatory entities, simply getting sign-offs, drafting agreements on stray words takes a bit of time."
-- from staff and wire reports
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