Whoops, there goes another Eliot Spitzer project: last week federal judge Milton Pollack dismissed investor lawsuits against brokerage Merrill Lynch based on emails dug up by the New York AG and widely billed in the press at the time as “smoking guns” providing “slam dunk” litigation potential for private plaintiffs. “Judge Pollack used scathing language in his decision in favor of Merrill Lynch released Tuesday in which he explained why he thought plaintiffs had no case. He described the plaintiffs as ‘high-risk speculators’ who lost their money ‘fair and square’ during the bull market of the late 1990s. (Greg Cresci, “Investors blaming Wall Street should think again”, Reuters/Forbes.com, Jul. 2). Meanwhile, a bill pushed by Wall Street firms in Congress would rather cleverly direct the proceeds from massed state-AG regulatory actions away from state budgets and toward the putative victims, namely investors (via the federal Securities and Exchange Commission). State governments in general were not big losers from the challenged Wall Street practices, yet Spitzer’s settlement arranged to spray large sums of money in their direction, winning him lots of gratitude-chits from the political class. Spitzer and his friends are howling foul at the proposed change, thus raising the question of to what extent their crusades have really been motivated by the welfare of mom-and-pop investors after all (Greg Farrell and John Waggoner, “House bill would steer Wall Street fines away from states”, USA Today, Jun. 10). More: a New York Times follow-up points out that what got thrown out were cases brought by nonclients of Merrill, an unusually lame category of claimant, and that actual Merrill clients can still proceed on claims that they lost money relying on deceptive research, though some of the judge’s findings, such as that Merrill’s research was “replete with risk warnings”, will still prove helpful to the firm in defending those claims. (Landon Thomas Jr., “Legal Reprieve for Wall Street Is Not Likely to Last Long”, New York Times, Jul. 4)

Filed under: class actions, Eliot Spitzer, politics