
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, October 27, 1995                   TAG: 9510270077
SECTION: BUSINESS                    PAGE: B8   EDITION: METRO 
SOURCE: BLOOMBERG BUSINESS NEWS
DATELINE: BOSTON                                 LENGTH: Medium

FEE-SPLITTING FINE IS BIGGEST YET

Lazard Freres & Co. and Merrill Lynch & Co. on Thursday agreed to pay $20.4 million to settle charges of fraud related to a fee-splitting arrangement in the municipal bond business.

The cash settlement is the largest ever in the $1.2 trillion municipal market. It settles civil charges with the Securities and Exchange Commission, the commonwealth of Massachusetts, the U.S. Attorney's Office in Boston and the Massachusetts Attorney General, the firms said.

Former Lazard partner Mark Ferber was indicted on 63 counts of fraud and corruption by the U.S. Attorney in Boston in connection with the case. The charges allege Ferber used his role advising several debt issuers to illegally demand and obtain financial benefits for himself and his firms.

Massachusetts officials allege the pact between Ferber and Merrill helped the firms expand their municipal bond businesses, while costing Massachusetts and other agencies millions of dollars in inflated fees and above-market interest rates.

Lazard received $2.55 million in payments from Merrill under the arrangement and $3.14 million from the free splitting provision from 1990 to 1992.

The probe is part of a larger two-year investigation into alleged conflicts of interest and influence peddling in the municipal bond market.

Merrill and Lazard agreed to settle the charges without admitting or denying guilt. The Securities and Exchange Commission said the firms agreed not to engage in any deceptive, dishonest or unfair practices

The SEC found that in June 1990, Lazard Freres and Merrill Lynch entered into a fee-splitting agreement that wasn't disclosed to municipalities and agencies with which the firms did business.

Among the clients allegedly harmed by the relationship were the Massachusetts Water Resources Authority, the District of Columbia, the U.S. Post Office and the Michigan Department of Transportation.

Ferber intents to plead not guilty, according to a statement released by his lawyer, Thomas E. Dwyer Jr.

Ferber, 42, faces maximum jail time of 390 years for all the counts and millions of dollars in fines. The Concord, Massachusetts resident has yet to be arrested and is expected to be arraigned in the next few days.

by CNB