Spitzer's Office Wins a Big One

The Attorney General of New York, Eliot Spitzer, has won a summary judgment motion in a New York state trial court against Clark E. McLeod.  Spitzer argued that McLeod obtained over 30 new IPO "hot stocks" from an investment banker, Smith Barney, making over $10 million during a time when his company< McLeodUSA, was paying Smith Barney $77 million in investment banking fees (primarily as an underwriter in a 1996 IPO)..  The court held that McLead should have told his board of directors about the conflict even though McLeod received the hot stocks from 1997 to 2000, after the McLeod IPO in 1996, when most of the investment banking fees had been paid.  The evidence of a quid pro quo is stronger when the hot stock allocations precede or are contemporaneous with the IPO.