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Merrill Lynch  Chief Executive David Komansky apologized Friday for the now-notorious emails in which Merrill analysts disparaged stocks that they were simultaneously plugging to investors.

"The emails that have come to light are very distressing and disappointing to us," Komansky told shareholders at the company's annual meeting. "They fall far short of our professional standards, and some are inconsistent with our policies."

The messages were uncovered early this month in an investigation of analyst conflicts of interest by New York Attorney General Eliot Spitzer. In July of last year, Spitzer began investigating Wall Street brokerages, seeking evidence that their equity analysts wrote favorable research reports on stocks in order to obtain investment banking business.

Many investors got burned heeding the analysts' buy recommendations even as the shares plummeted, sometimes to zero. Merrill has already agreed with New York state to increase disclosure on its analyst equity research reports and is discussing further terms of a settlement.

Komansky's regret might reflect more than conscience in light of the potential penalties hanging over the firm. A spokeswoman for the attorney general's office called the apology "a good first step," adding: "contrition has always been a critical part of initial discussions to resolve the matter."

Merrill shares, which have lost 21% since April 8 when the discovery of the emails was made public, closed Friday up 2% to $43.38. Other brokerage shares also rose.

In addition to Merrill, brokerages currently under scrutiny in the investigation include Goldman Sachs, Credit Suisse First Boston, Morgan Stanley, Lehman Brothers, Citigroup's, Salomon Smith Barney unit, UBS PaineWebber, Lazard Freres and Bear Stearns


An open letter to Goldman's Abby Joseph Cohen:

Dear Abby:

When I heard you were appearing on Louis Rukeyser's Wall Street last week as his special guest, I watched with interest, with the outside hope that perhaps you would finally apologize for making all those grandiose market calls during the go-go years.

You know the ones, Abby -- those bold and self-assured bullish pronouncements that encouraged investors to pile into every conceivable sector and stock, helping propel the market spacecraft to the moon.

Rukeyser began his introduction of you defensively, admitting he was deluged with email, protesting having you as his featured guest. With all your market calls that helped lead the lemmings out to sea, other viewers of the show were obviously still feeling the same disgust that I was for your part in frothing up the market fervor.

If that wasn't enough, Abby, Rukeyser then proceeded to make excuses for you. He said that your poor record was the result of the unpredictable terrorist activity and corporate fraud that brought the markets to its knees over the last three years.

Rukeyser asked rhetorically, how could Abby, as "brilliant" (his description) as you may be, be expected to take all of these exogenous events into account? His point was that you didn't have a crystal ball to predict these events.

Abby, the problem with Mr. Rukeyser's defense is that your market calls came before the terrorist attacks of Sept. 11, 2001. With the wealth of knowledge at your fingertips about companies and your understanding of accounting practices, I wish you had come out and waved a red flag if you knew things were getting out of hand.

You could have simply alerted the common investor to the mutually rewarding relationship between analysts and investment banking.

That's why they pay you so much every year, right? To analyze everything you can get your hands on, interpret it, and then make judgments for your employer. Abby, while you may have done well for your employer, you failed in your duty to investors.

You could have used your stature to alert investors. At the very least, you could have told us to be careful, that the market was too frothy, that we were being set up for a major bursting of the bubble. But you didn't do it. You were just one more analyst who was part of the problem, when you could have been part of the early-warning radar.

Why not at least admit that you and other analysts exacerbated the problem? I don't have to tell you how much your profession has suffered a deserved disrepute and how poor the image of brokerage analysts has become.

In the last three years, I've never heard you say you may have been mistaken. I've never heard you say your analysis may have been overly influenced by the circumstance of the times. Why not, Abby? Why no apology?

Abby, show the investing public that at least one influential analyst has the integrity to admit that she was wrong. Then maybe some others will take your lead and follow.

I will never again take your analysis seriously. You have lost your credibility with me and with millions of other investors. Whatever analytic skills or insights you possess will never again be appreciated by those who can now see that back then, you were simply a cog in the market complex, who wouldn't speak up for the small investor.

You owe us an apology, Abby. And we're still waiting for it.

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