Risk & Compliance

Whistle-Blower Case Raises Timing Issue

Eliot Spitzer's settlement with Wall Street firms pertained solely to intentionally false and misleading reports; a new complaint focuses on a firm...
Stephen TaubJuly 12, 2005

A Sarbanes-Oxley whistle-blower complaint has raised new issues regarding the 2002 settlement between New York Attorney General Eliot Spitzer and major securities firms aimed at ensuring the independence of Wall Street research, reported Investment Dealers’ Digest.

Arturo Cifuentes, who covered the collateralized debt obligation market for nearly two years as an analyst for Wachovia Securities, reportedly alleged that he was fired in April after complaining that he was being pressured to publish research reports at the same time as his firm was completing structured finance deals.

According to IDD, Cifuentes also insisted that Wachovia tried to prevent him from publishing some of his reports and pressured him to time his reports to please existing and potential clients.

“We feel he was retaliated against for reporting certain things,” Cifuentes’ attorney, Jenice L. Malecki, told the publication. “Arturo is very interested in having an environment to work in which he feels he can be an independent research analyst and report what he feels would be appropriate.” IDD added that Wachovia would not comment on personnel matters.

The case is intriguing, noted the publication, because Spitzer’s settlement pertained solely to equity analysts who intentionally published false and misleading reports with the aim of benefiting their employer’s clients. Cifuentes’ complaint reportedly focused on Wachovia’s attempt to influence the timing of his reports, both to raise the profile of Wachovia deals and to please the firm’s clients.

The tough part about such cases, said Mary Ellen Hogan, a partner at McDermott Will & Emery LLP, according to IDD, is whether the employee can prove that the demotion, termination, or other employer action “is the result of the whistle-blowing or other legitimate, performance-related issues.”

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