IN THE COURTS

IPO CLASS-ACTION SUITS CERTIFIED AGAINST CSFB, MORGAN STANLEY

Morgan Stanley, Credit Suisse First Boston Inc., and 53 other investment banks will face at least six class-action suits stemming from claims that they and Internet start-ups rigged initial public offerings in the 1990s.

U.S. District Judge Shira Scheindlin in New York certified as class actions six of the more than 300 cases arising from allegations that the IPO market was manipulated during the technology stock boom. The six class-actions will serve as “test cases” for the remaining suits, Scheindlin said.

“In their zeal to defeat the motion for class certification, defendants have launched such a broad attack that accepting their arguments would sound the death knell of securities class actions,” Ms. Scheindlin said in a 148-page ruling.

Victoria Harmon, a spokeswoman for CSFB, did not immediately return a call seeking comment on the ruling. Morgan Stanley spokeswoman Melissa Stonberg declined to comment.

During the IPO frenzy, investment banks raised about $130 billion for the companies they brought to market. The banks made billions in fees. Investors who received IPO shares profited from selling stock as prices soared. Many of those stocks later plummeted and the companies declared bankruptcy.

The six cases certified today involve IPOs for Corvis Corp., now known as Broadwing Corp.; Engage Inc.; Firepond Inc.; iXL Enterprises Inc.; Sycamore Networks Inc. and VA Software Corp., formerly known as VA Linux Systems Inc.

– Bloomberg News

REGULATORY

ACCOUNTING BOARD APPROVES OPTIONS-EXPENSE RULE

The U.S. Financial Accounting Standards Board approved a rule that will force companies to treat employee stock options as an expense and delayed its implementation until next June.

The 5-2 vote by the Norwalk, Conn.-based board ended two years of debate that pitted proponents such as billionaire investor Warren Buffett against Craig Barrett, chief executive officer of Intel Corp. The delay, which will give companies more time to set up procedures to value options, may also aid opponents who still hope to scuttle the rule.

“We’ve seen the power of the high-tech community as they have blasted away at this one,” said a former Securities and Exchange Commission chief accountant who is now managing director of research at Glass Lewis & Co. in Denver, Lynn Turner. “The notion that this could come back next year is certainly on the table.”

The change forces companies to more clearly state the cost of awarding employee stock options, which until now has mostly been relegated to footnotes in financial statements. Such accounting would have reduced per-share profit among companies in the Standard & Poor’s 500 Index by 3% in 2003, according to a study by Bear Stearns Cos.

– Bloomberg News

SEC PROPOSES NEW INITIAL PUBLIC OFFERING RULES

American securities regulators proposed new rules aimed at stopping Wall Street underwriters from artificially spurring demand for new stock offerings.

The Securities and Exchange Commission voted 5-0 to seek public comment on the rules, which would bar underwriters from inducing customers to buy IPO shares. Underwriters wouldn’t be allowed to allot hot IPOs in exchange for investor promises to buy more shares later at higher prices or less-attractive offerings.

The proposals take aim at abuses that surfaced in the Internet stock boom that ended in mid-2000 and were criticized in SEC settlements with JPMorgan Chase & Co. and Credit Suisse Group’s Credit Suisse First Boston. By explicitly barring these practices, the proposals would make it easier for the SEC to win lawsuits challenging this misconduct.

“Instead of having a broad sword, the SEC would have a sharper sword to go after these abuses, and the sharper sword may save the enforcement staff some time,” former SEC commissioner Edward Fleischman, now with the Linklaters law firm in New York, said in a telephone interview.

SEC Chairman William Donaldson said the new rules are designed to treat all investors equally. Share prices “should be free from manipulative influence or misconduct on the part of those brought the offering to market and who stand to profit most,” he said before today’s commission vote.

– Bloomberg News

AHOLD REACHES SETTLEMENT WITH SEC, WON’T PAY FINE

Royal Ahold NV, the Dutch retailer that overstated more than $1 billion of profits, reached a settlement with the Securities and Exchange Commission, ending a 20-month investigation into accounting fraud.

The SEC will drop its probe of Ahold, which won’t pay a fine, said Peter Wakkie, a member of the retailer’s board. Former Chief Executive Officer Cees van der Hoeven, 57, and former Chief Financial Officer Michiel Meurs, 53, also settled with the SEC, and the two men and Ahold agreed not to violate securities law in the future, the agency said in a statement.

Ahold said on February 24, 2003, that it overstated three years of earnings and ousted Van der Hoeven and Meurs, causing its stock to drop by two-thirds in a day. The company cited irregularities at its American Foodservice unit, prompting an investigation by regulators and a class-action lawsuit. Van der Hoeven’s successor, Anders Moberg, reversed the stock’s decline by starting to unwind $19 billion of acquisitions and cut debt.

– Bloomberg News

EARNINGS

HARLEY PROFIT RISES 20%; SHARES FALL ON RETAIL SALES

Harley-Davidson Inc., the largest American motorcycle maker, said third-quarter profit rose 20% on increased shipments of custom and Sportster bikes. Its shares fell after the company said sales at U.S. dealers declined.

Net income increased to $229 million, or 77 cents a share, from $190.1 million, or 62 cents, a year earlier, the company said in a statement. Sales at the maker of Fat Boy and Road King motorcycles rose 15% to $1.3 billion from $1.13 billion.

Harley-Davidson, which hasn’t had a quarterly profit decline since 1997, records revenue when it ships a motorcycle rather than when dealers sell the vehicle. American shipments of Harley-brand models rose 22%, as retail sales fell 9.8%. The Milwaukee-based company blamed the retail drop in part on hurricanes in the Southeast and plans incentives in the region.

Harley-Davidson said retail sales also were hurt by the comparison to a year earlier, when a promotion of the company’s centennial boosted sales to a record.

– Bloomberg News

NY TIMES THIRD-QUARTER NET DOWN

New York Times Co.’s third-quarter net income slipped 3.6%, hurt by higher expenses for newsprint and added color capacity amid sluggish ad revenue growth. Advertising revenue so far in October is growing at a faster year-over-year pace than in September, but the advertising environment remains “uncertain, and month-to-month variability is significant,” New York Times Chief Financial Officer Leonard Forman warned in a statement. For the third quarter, New York Times earned $48.3 million, or 33 cents a share, compared with $50.1 million, or 33 cents a share, a year ago. Revenue rose 1.9% to $773.8 million from $759.3 million. Advertising revenue, which accounted for 64% of the company’s overall revenue, gained 3.7%,while circulation revenue was little changed from the third quarter of last year. Expenses increased 3.4% to $689.5 million. Operating profit fell 9.1% to $84.3 million, from $92.7 million.

– Dow Jones Newswires

NATIONAL

DISNEY CUTTING WEINSTEINS FREE OF CONTRACT

The Walt Disney Company has given movie moguls Harvey and Bob Weinstein notice that it intends to cut them loose in September 2005, according to trade publication Daily Variety. The move would end a 12-year relationship that has produced hits such as “The Hours” and “Chicago.” The Weinstein brothers have a contract that expires in 2009, but an option in the contract allows Disney to renegotiate the relationship in 2005. The Weinsteins, who founded Miramax studios in 1979, were publicly at odds with parent company Disney over its refusal to distribute Michael Moore’s “Fahrenheit 9/11.’ They are, however, reportedly lobbying to keep the relationship. “Bob and Harvey hope for an amicable resolution that will allow them to continue to be productive members of the Disney family,” Variety quoted a Miramax spokesman as saying.

– Staff Reporter of the Sun