Legg Mason Inc. will pay about $2.7 million to settle a class-action lawsuit alleging that it and 29 other brokerages overcharged clients who bought and sold stocks on the Nasdaq stock market, a company executive said yesterday.
The $2.7 million is a fraction of the total $910 million levied against 30 of the biggest brokerage firms in the securities trading business. Other brokerages have paid another $100 million in settling similar claims in six other lawsuits.
"We didn't do anything wrong," said Charles A. Bacigalupo, senior vice president and a director of the Baltimore-based brokerage and money management firm. "We didn't have too much to say about the settlement other than to get rid of the headache and the nuisance. It is easier to pay the money than to fight the whole issue."
The lawsuit was filed by investors who alleged that from 1989 through 1996, securities dealers with the 30 firms cheated them by colluding with one another to widen the "spread" -- the difference between the offering price of a stock and the price for which it actually is sold -- on about 100 stocks. That way, the dealers stood to make more money, the lawsuit said.
The allegations sparked investigations by the Justice Department and the Securities and Exchange Commission.
The largest firms that settled the lawsuit on Dec. 24 included Dean Witter Reynolds Inc., J. P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., Smith Barney Inc., PaineWebber Inc., and BT Alex. Brown Inc.
Under the settlement, BT Alex. Brown will pay an estimated $35 million.
Bacigalupo said Legg Mason was never part of the Justice Department's investigation into the allegations.
He said Legg is not a major "market maker" like the other firms that settled. A market maker is a securities firm that stands ready to buy select stocks at a particular price and then resell them to investors.
Bacigalupo said the settlement will not have an impact on earnings because the company has been reserving for it for more than a year.
The first payment will be made Jan. 7, 1998, and the remaining amount will be paid by Sept. 30, Bacigalupo said.
Pub Date: 12/31/97