Veteran BMO Junk Analyst Claims Bankers Interfered With His Research

  • 16 Jun 2002
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Owen Cheevers, the former head of high-yield research at BMO Nesbitt Burns, has filed a $100 million arbitration claim with the National Association of Securities Dealers against his former employer, arguing that he was terminated because "he refused to acquiesce to improper demands made upon him by the firms investment bankers, to manipulate his research recommendations." The statement of claim, a copy of which was obtained by BondWeek, says that the firm's telecom group investment bankers "killed his [radio industry] research report after he declined to change his recommendations." He further alleges that his complaints about this interference to his superiors and the firm's compliance department directly resulted in his termination.

Cheevers, reached at his office at New York hedge fund The Clinton Group, declined to comment. Rick Hurwitz, the head of high-yield at BMO Nesbitt Burns, declined to comment when reached at his desk. Calls to Michael Zeiss, the firm's general counsel, were not returned as of press time. Bruce Eatroff, the firm's head of U.S. telecom corporate finance, declined to comment. Kim Hanson, the firm's spokeswoman, declined to comment, citing corporate policy.

As did the recent high-profile case involving Merrill Lynch, the statement of claim quotes from what it says are e-mail conversations between Cheevers and other people at the firm. The claim cites an e-mail exchange of Feb. 8, 2001, in which Eatroff tells Cheevers that, "Before any rating is initiated, pulled or ratings changed, the High Yield group needs to contact the relationship manager for that account...also, research should be reviewed by the banking group for accuracy and completeness prior to publication." Another quoted e-mail from Eatroff to Cheevers, dated Feb. 16, 2001 and in reply to Cheevers' complaints about compromising the independence of the research department, said "this [corporate finance's review of research prior to publication] has happened at every [investment] bank I've worked at." Prior to joining BMO Nesbitt Burns, Eatroff worked at UBS Securities, CIBC World Markets and Goldman Sachs.

Another e-mail exchange quoted in the statement of claim occurred on March 27, 2001, between Cheevers and U.S. radio industry relationship manager Michael Andres, who, according to the claim, had both commercial lending and investment banking duties. Andres, who had obtained a first draft of a radio industry fixed-income overview done by Cheevers, e-mailed him that "the overall tone of the research report should be much more bullish." Andres' e-mail continued that "the report needed to take a much more bullish view" of two [unidentified] companies that were both BMO commercial loan and corporate finance clients. He concluded the quoted e-mail with an admonishment to Cheevers that "we accomplish nothing marketing-wise by being negative about prospects for industry." Andres declined to comment when reached on his cell phone.

The claim says that on April 11, after Cheevers complained to compliance, he received an e-mail reply from Robert Bade, the head of U.S. compliance at the time for the firm, who wrote: "there may be some serious securities law considerations here." Bade could not be reached for comment; A BMO Nesbitt Burns compliance official said he left the firm "several months ago." The claim did not include any other details about Bade's reply. The claim refers to an e-mail dated April 11, in which Andres wrote Cheevers that, "we wanted a product which will allow us to compete and win high-yield mandates...This is all based on our belief that there is only one opportunity to make a great 'first impression.'"

The statement of claim says that on June 7, 2001, Cheevers "was presented with a letter of termination." The document says that his U-5 termination notice "stated that his job was eliminated as a result of restructuring within capital markets."

Cheevers' lawyer, Jeffrey Liddle of Liddle & Robinson, says that he "has a pile of e-mails an inch thick documenting their [BMO Nesbitt Burns] interference in, and unhappiness with, Cheevers' objective research calls."

  • 16 Jun 2002

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