ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, July 26, 1996 TAG: 9607260033
SECTION: BUSINESS PAGE: B7 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ASSOCIATED PRESS
A federal judge has given class-action status to a lawsuit accusing Merrill Lynch & Co. of misleading investors into buying risky limited partnerships. The action clears the way for thousands of investors to claim damages in the case.
Lawyers for investors said Thursday they also are seeking class-action status for similar suits filed early this year against two other big Wall Street brokers, Dean Witter Reynolds Inc. and Lehman Brothers Inc.
The development in the Merrill Lynch case broadens the legal fight against large brokerage houses that sold the soured investments in real estate, gas and oil wells, and airlines to hundreds of thousands of investors in the 1980s and early 1990s.
The class-action lawsuit increases the legal clout of individual investors while enabling the brokerage firm to focus its defense on a single case.
Investors, who seek unspecified damages, claim their losses total in the hundreds of millions of dollars and that each firm understated the high risks and the low returns of the limited partnerships.
Last week, a federal judge approved a deal in which PaineWebber Group Inc. paid $125 million in cash to compensate for losses, part of a more than $300 million settlement the firm reached earlier this year with the Securities and Exchange Commission. In 1993, Prudential Securities Inc. agreed to a settlement of more serious and extensive charges, which has cost the firm more than $1.5 billion.
Merrill Lynch, Dean Witter and Lehman also are negotiating with the SEC, the federal agency overseeing the brokerage industry, to resolve the allegations.
Merrill Lynch denied any wrongdoing and said it sold the partnerships properly. ``We agreed to the class certification because we believe this is the quickest and most efficient way to dispose of this meritless litigation,'' the firm said through a spokesman.
A spokeswoman for Dean Witter declined to comment. A Lehman spokesman had no immediate comment.
U.S. District Court Judge Michael Mukasey in New York approved the class-action status for the Merrill Lynch case late last week after lawyers for the firm and investors agreed to the terms.
Notices will be mailed to investors within the next two months informing them that they will be part of the suit unless they stipulate otherwise and choose to seek redress on their own.
The focus of Merrill's lawsuit is its sale of more than $1.6 billion of real estate partnerships to tens of thousands of investors from 1980 to 1989.
LENGTH: Medium: 54 linesby CNB