Merrill Lynch hires Giuliani to help with investigation

ALBANY, N.Y. -- Merrill Lynch & Co. has hired former Mayor Rudolph Giuliani to advise the firm in its dealings with the state attorney general, who has threatened to bring criminal charges over the firm's business practices.

Giuliani Partners is helping Merrill Lynch negotiate a settlement with New York Attorney General Eliot Spitzer, who claims some of the brokerage company's analysts promoted stocks publicly while expressing doubts about the shares in private e-mail messages.

"The issues presented in this matter are complex and require a comprehensive understanding of the market system," Merrill Lynch spokesman James Wiggins said. "Rudy Giuliani has an extensive background in this area and has demonstrated his skills as an innovative problem solver and an effective negotiator."

Before he was mayor, Giuliani was U.S. Attorney for the Southern District of New York in the 1980s, prosecuting some of the biggest scandals in Wall Street history. Among the convictions won by his office were those of Ivan Boesky and Michael Milken.

The firm said it did not hire Giuliani to lobby Spitzer.

The former mayor called Spitzer on behalf of Merrill Lynch on April 8, the day Spitzer made the allegations public, Spitzer spokeswoman Juanita Scarlett said Wednesday.

"That was the first discussion between the attorney general and the former mayor," Scarlett said. "The attorney general noted the interest of investors comes first."

She declined to discuss other details, saying it was a private conversation.

"There were points I made that he agreed with, but we did get into the merits, and he did not agree with that," Giuliani told The Wall Street Journal in Wednesday's editions.

Dan Connolly, director of Giuliani Partners, said Wednesday the former mayor was "retained as a consultant and to provide legal advice as it relates to the investigation by the attorney general."

Spitzer made public a series of internal e-mails suggesting that analysts were recommending clients buy stock in some companies even when the analysts had grave doubts about those companies.

Spitzer said Merrill Lynch pushed the stocks because the firm wanted to keep the companies' lucrative contracts for investment banking services. Merrill Lynch said the e-mails were taken out of context.

Last week, the firm agreed to provide greater disclosure to investors when the firm's analysts are rating companies with which Merrill Lynch has or seeks investment banking business.

Spitzer is also investigating at least six other major Wall Street firms and seeks industrywide reforms. He has said criminal convictions could result from the investigation.

In their conversation, the former mayor told Spitzer that Merrill is a good corporate citizen, noting it returned to its headquarters at in lower Manhattan after the Sept. 11 terrorist attacks, the Journal reported.

"There is a problem here; no one is running away from that," Giuliani said. "We should try to find a solution that corrects it and that really requires more than one player, not just one attorney general taking action."

Merrill Lynch also contacted Sen. Charles Schumer, D-NY, who did not offer to help the company, the Journal said.