Merrill Lynch & Co. and Lazard, Freres & Co. will pay $3.64 million to settle allegations by the District of Columbia that the investment firms had an undisclosed conflict of interest in their financial dealings with the city, it was announced yesterday.
Lazard Freres was hired by the district to act as its financial adviser, but also had a contract with Merrill to help market complex interest rate swaps issued by Merrill to the District and other municipalities. As the city's financial adviser, Lazard had recommended the swaps to the city, and Merrill had sold about $530 million of the swaps between 1991 and 1992.
In a settlement reached Dec. 30, the two firms denied any wrongdoing.