Alex
Brown likes to steep itself in its two centuries
of history, proud to have financed the nation's
first water utilities and railroads. But two new
lawsuits paint a disturbingly different picture
of America's oldest investment bank, alleging fraud,
mismanagement, inept options trading and conflicts
of interest. Even more surprising is the source
of the suits: several dozen executives at Yahoo,
Ask Jeeves and other big-name firms.
"Even
the biggest fish in the pond can get screwed," says
plaintiff Philip McKee, the former chief executive
of TurboChef Technologies. "If they can do it
to us, they can do it to anyone." Among the
alleged screwees:Yahoo cofounder Jerry Yang (who
put in $3 million); Bruce Toll, cofounder of homebuilder
Toll Brothers ($1 million); former Ask Jeeves boss
Roger Strauch ($1 million); and former Omnipoint
chairman Douglas Smith ($3.7 million).
In
1997 and 1998 some 170 highly sophisticated investors,
many of them techies flush with soaring stock options,
put $286 million in stock into two so-called exchange
funds. The funds are designed to let execs diversify
beyond their own company stock--and dump insider
shares without full disclosure or having to pay taxes
on any gains. But the clients lost hundreds of millions
of dollars, the suits claim,when the two funds bet
wrong as tech stocks rocketed up in 1999, then bet
wrong again when the market fell. |
