War on fraud: US firms to pay $1 bn fine

As the US government intensified its crackdown on corporate fraud, America's leading investment banks and brokerage houses have announced they will pay a hefty fine totalling $1billion to settle allegations of conflicts of interest.

Citigroup Inc, parent of investment bank and brokerage firm Salomon Smith Barney Inc, will pay the biggest fine -- $300 mn -- because regulators have discovered "the most damaging information" in the firm's research and initial public offer allocations, The Washington Post reported on Friday.

Credit Suisse First Boston Corp will pay the second largest fine -- $150 mn -- as regulators have uncovered e-mails and documents, which show its analysts placed inflated "buy" ratings on questionable companies to generate lucrative investment-banking business from them.

Both companies are also likely to give written apologies.

Some other firms, like Morgan Stanley, Goldman Sachs, Bear Stearns Cos, Lehman Brothers, UBS Warburg and Deutsche Bank AG are expected to pay $50 mn each. These firms are likely to be charged with violating industry rules as part of the settlement.

Two smaller regional firms, US Bancorp Piper Jaffray Inc and Thoms Wiesel Partners LLC, are expected to pay less than $50 mn but no final amount was set.

Sources told the Post that the settlement will also include a fund for individuals who say they lost money by following the listings of high profile Wall Steet analysts such as Salomon's Grubman and Merrill Lynch's Henry Blodget.