Banks near settlement in tech stocks IPO case

By Grant McCool and Dan Wilchins

NEW YORK, Oct 28 (Reuters) - Morgan Stanley (MS.N), Credit Suisse Group AG (CSGN.VX) and several other firms are close to settling litigation over investor allegations they rigged IPOs during the late 1990s dot.com stocks boom, a source familiar with the talks said on Tuesday.

Thousands of separate claims were brought in 2001 by investors who accused firms of cheating them out of billions of dollars during the initial public offering process for more than 300 technology companies, some of which collapsed.

Those sued included Morgan Stanley and Credit Suisse, 55 underwriters, 310 issuers and hundreds of individuals from the issuing companies.

A spokeswoman for Credit Suisse declined to comment on the possible settlement.

A spokesman for Morgan Stanley was not immediately able to comment.

Lawyers for the banks and other firms could not be reached for comment.

The banks have denied wrongdoing in the boom-and-bust technology stocks market of a decade ago. Investors claimed underwriters such as Goldman Sachs Group Inc and Merrill Lynch & Co rigged the IPO market for tech stocks.

In an Oct. 22 letter, Joel Haims, a lawyer for some of the banks, asked Judge Shira Scheindlin in U.S. District Court in Manhattan for more time to file a document in the case "while we work on the settlement papers."

In the letter, which became public on Monday, the lawyer sought an extension through Jan. 30, 2009. The judge granted the request. Any settlement must be approved by Scheindlin.

Years ago in the contentious litigation, Scheindlin had consolidated the lawsuits into 310 cases and approved a settlement in 298 of the cases, providing plaintiffs with recovery of $1 billion.

The claims against the underwriters included requiring investors to buy shares after the IPO, to pay "undisclosed compensation" to underwriters and to buy other unwanted securities.

The lawsuits also charged underwriters with using analysts in improper ways by setting unrealistic price targets, tying analyst compensation to performance of the investment banking division and letting analysts own shares of stocks they were touting without disclosing those conflicts.

A partial settlement by JPMorgan Chase & Co in 2006 was scrapped after a federal appeals court in New York ruled that the lawsuit had too many investors as plaintiffs to proceed. (Editing by Susan Kelly)