Researcher Turns To Sarbanes-Oxley Over Wachovia Dismissal

The head of collateralized debt obligation research at Wachovia Securities was fired after he and the firm came to an impasse regarding the objectivity of his research, his lawyer stated.

  • 08 Jul 2005
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The head of collateralized debt obligation research at Wachovia Securities was fired after he and the firm came to an impasse regarding the objectivity of his research, his lawyer stated. According to sister publication BondWeek, Arturo Cifuentes, managing director and head of the team, left the firm a couple of months ago and last week filed a Sarbanes-Oxley complaint against Wachovia with the Department of Labor over his dismissal. "Arturo felt he was really tarnished by the way in which he was terminated," said Jenice Malecki, his lawyer.

Cifuentes referred calls to his lawyer. Brian Lancaster, head of structured finance research at Wachovia and to whom Cifuentes reported, did not return a call. Yu-Ming Wang, head of CDO banking, was out of the office last week. His desk referred a call to a firm spokeswoman, who declined comment on Cifuentes or to address his claims that the firm tries to influence the research it produces.

Malecki said potential remedies from the complaint include reinstatement and compensation. She added Cifuentes also wants to call attention to the merits of quality, objective research. "He feels, 'How do we promote an independent research environment unless someone is willing to step up?'" she said. Malecki declined to provide a copy of the complaint, which she said details incidents in which Wachovia tried to alter or stop research reports. The final straw was a disagreement regarding the analyst certification Wall Street firms now include at the end of every research report they disseminate, according to Malecki. The reports require analysts to certify that the views in the report are their personal views and their compensation is not in any way related to the opinions expressed in the report. It could not be determined which of these two tenets caused Cifuentes to balk. He left the firm in May.

Cifuentes was known for producing provocative and sometimes colorful research, including one piece with references to soap operas such as "Days Of Our Lives." Another report, published by his group in February, discussed rating agency correlation methodologies in depth and questioned whether Standard & Poor's maintained liberal assumptions to win business. "He got a lot of flak for that article," said one market participant. "They had a knee jerk reaction that we can't afford to offend someone like S&P."

The market was buzzing last week about the complaint. One analyst noted he avoids writing about potentially contentious topics because he does not want to offend clients or potential clients. "I don't write about CDO managers, because every time I do, I get a complaint." He also took issue with the bit in the certification where analysts must agree their compensation is not tied to their research. "If I manage to destroy the CDO market by what I say, I think that would have an effect on my compensation," he deadpanned.

  • 08 Jul 2005

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