April 30, 1999
 
 
 

                   Justice Department Opens Inquiry
                   Into How Banks Set Fees for IPOs

                   An INTERACTIVE JOURNAL News Roundup

                   WASHINGTON -- The Justice Department said Friday it is investigating
                   a possible conspiracy among securities firms to fix underwriting fees for
                   initial public offerings of stock.

                   Investment giant Goldman, Sachs & Co., which is scheduled to sell stock
                   to the public for the first time Monday, said Friday in regulatory filing it
                   received a subpoena related to the probe. It did not say in the filing
                   whether it considered itself a target of the investigation.

                   A Justice Department spokeswoman confirmed the investigation, but
                   declined further comment.

                   The Justice Department's request comes on the heels of a lawsuit filed in
                   November against Goldman and other securities firms. The lawsuit claims
                   that the firms engaged in a conspiracy to fix the discount that underwriting
                   syndicates receive from issuers of shares in certain offerings.

                   The suit was filed in federal court in Manhattan by Harold Gillett, an
                   individual investor who bought 500 shares of a Horizon Offshore Inc. initial
                   public offering in April. He listed more than two dozen securities firms as
                   defendants, and included all of the major Wall Street firms, among them
                   Morgan Stanley Dean Witter & Co. and Merrill Lynch & Co.

                   Morgan Stanley declined to comment on the Justice Department's
                   investigation. But sources close to the firm said it had also received a
                   subpoena requesting information. The sources said that all of the firms
                   named as defendants in the Gillett suit received subpoenas Thursday.

                   Mr. Gillett alleges the firms conspired to fix their fees at 7% of the total
                   IPO proceeds, about double what investment banks charge to underwrite
                   IPOs in foreign markets. The suit claims the fees are "artificially inflated"
                   and pad the firms' profits at the expense of the companies issuing stock
                   and the investors buying IPO shares.

                   Mr. Gillett's suit was followed by several others making similar allegations
                   against a similar list of defendants. According to court filings, Goldman and
                   other firms filed a motion to dismiss one of the suits Thursday.