Client Brought Public in IPO Sues CSFB
A former corporate client of Credit Suisse First Boston opened a new legal front in the attack on how Wall Street allocates initial public offerings of stock.</br></br>Creditors of the company formerly known as Mortgage.com Inc., which was taken public during the IPO boom, accused the Wall Street firm, a unit of Switzerland's Credit Suisse Group, of breaching its underwriting contract by "obtaining kickbacks" in the form of unusually large trading commissions from investors seeking IPO allocations.</br></br>The suit by MDCM Holdings Inc. -- the entity that survived after Mortgage.com sold its name and Web site address last year for $1.8 million to a U.S. unit of ABN Amro Holding NV -- is a rare effort by a company claiming it was shortchanged in the IPO allocation process, securities lawyers say. Before ceasing operations, the suit says, MDCM was a provider of online-mortgage services.</br></br>The case marks a twist in the current controversy surrounding the way Wall Street allocates IPO shares. Since December, individuals have filed more than 125 suits against major securities firms, alleging that they violated federal securities laws by seeking, among other things, oversized commission payments from investors who received IPOs, according to lawyers tracking the suits.</br></br>But the MDCM suit stands out because it represents a corporate client of a Wall Street firm alleging IPO impropriety. Legal actions by corporate clients potentially are more problematic for Wall Street firms because such companies could possess more detailed data about who received their IPO shares.