Securities regulators yesterday fined former Merrill Lynch & Co. analyst Phua K. Young $225,000 and suspended him from the industry for a year for improperly sharing his research reports and developing an overly cozy relationship with executives at Tyco International Ltd.
The ties between Young and Tyco executives were so close that Young presented L. Dennis Kozlowski, then Tyco's chief executive, with a $4,500 case of wine when Kozlowski remarried. Kozlowski at one point used Tyco funds to pay a private investigator to look into the background of Young's fiancee.
NASD said Young broke its rules by providing advance copies of his research to Tyco officials and others. In one such contact, Young called himself a "Loyal Tyco employee!" Regulators also alleged that Young, 48, sent e-mail messages that contradicted his public recommendations to buy Tyco and Honeywell International Inc. stock.
"The conduct of this analyst amounted to a betrayal of the objectivity and honesty in research that investors are entitled to," Barry R. Goldsmith, executive vice president for enforcement at NASD, said in a written statement. "We will continue to hold analysts to high professional standards and appropriately sanction them for misleading and skewed research."
The fines and suspension were part of a settlement between Young and NASD. Young did not admit or deny wrongdoing in connection with the deal. Edward J.M. Little, an attorney for Young, told Bloomberg News that his client is eager to move on.
"We wanted a speedy resolution of this case so that Phua Young could return to work as soon as possible," Little said.
Young was dismissed by Merrill Lynch in April 2002 for violating the investment bank's policies. At the time Merrill was crafting a settlement with New York state Attorney General Eliot L. Spitzer over tainted research. At the height of his career, Young earned $4.5 million per year and was ranked at the top of Institutional Investor's list of analysts in the "multi-industry sector," according to settlement papers. He was one of several stock analysts accused of getting too close to managers at companies they rated during the 1990s boom era.
Regulators said Young once told a Tyco investor relations official, "I am indirectly paid by Tyco." Separately, he asked a Tyco staffer if he sounded sufficiently "pumped up" about the company in a voice mail he sent to institutional clients.
While Young drafted public reports lauding Tyco and Honeywell, he privately fretted about the companies' financial health in e-mails to investors, according to the settlement order, calling Honeywell a "lemon" and "a disaster" in June 2000.