47 Brokerage Firms Recommended Shares of Failing Companies Even as They Filed Chapter 11 in 2002, According to Weiss.

Business Editors

PALM BEACH GARDENS, Fla.--(BUSINESS WIRE)--June 3, 2002

Lehman Brothers Gives 6 Failing Companies "Buys,"

and Salomon Gives 8 "Holds"

Among the 50 brokerage firms covering companies that have gone bankrupt this year, 47 firms continued to recommend that investors buy or hold shares in the failing companies even as they were filing for Chapter 11 in the first four months of 2002(1), according to an analysis by Weiss Ratings, Inc., the nation's only provider of ratings on brokerage firms.

Lehman Brothers maintained six "buy"(2) ratings on failing companies, while Salomon Smith Barney maintained eight "hold"(3) ratings up through the date the companies filed for bankruptcy. Also sticking with "buy" ratings until the very end were Bank of America Securities, Bear Stearns, CIBC World Markets, Dresdner Kleinwort Wasserstein, Goldman Sachs, and Prudential Securities.

"This analysis shows that Wall Street's record is far worse than previously believed," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc. "Even when there was abundant evidence that companies were on the verge of bankruptcy, over 90% of the latest ratings issued by brokerage firms continued to tell investors to hold their shares or buy more."

Only three firms - Credit Agricole Indosuez Cheuvreux, Edward Jones and HSBC Securities - avoided issuing positive ratings on failing companies, while at the same time, taking the initiative to warn investors of trouble with at least one "sell"(4) rating. Another five - A. G. Edwards, Credit Lyonnais, Merrill Lynch, Prudential Securities, and U.S. Bancorp Piper Jaffray - issued "sell" ratings by the date of the bankruptcy filing, but also maintained at least one positive rating on other bankrupt companies.

Each brokerage firm rated only some of the bankrupt companies. In some cases, the brokerage firms published new positive ratings on the companies soon before the bankruptcy filing. In other situations, the firms simply kept their earlier ratings in circulation, neglecting to inform the public that their opinions on the companies may have changed or that they had ceased coverage of the companies. The table below summarizes the most recent ratings available on the bankrupt companies at the date of failure and six months prior to failure.

        Breakdown of Ratings Issued by the 50 Brokerage Firms
                    on Companies Filing Chapter 11

                             On Date of            6 Months Before
                          Bankruptcy Filing       Bankruptcy Filing
                         -------------------     -------------------
 Ratings Issued        # of Ratings    %       # of Ratings      %
 --------------        ------------ --------   ------------   --------
 "Buy" or equivalent        38        31.4%         67          55.4%
 "Hold" or equivalent       72        59.5%         49          40.5%
 "Sell" or equivalent       11         9.1%          5           4.1%
                           ----       -----        ----         -----
                 Total     121       100.0%        121         100.0%

13 Companies Entering Bankruptcy Continued to Receive Unanimously Positive Ratings

Of the 19 failing companies rated by brokerage firms, 13 continued to receive strictly positive ratings on the date of bankruptcy filing. For example, on the day they filed for Chapter 11, Global Crossing received five "buys," nine "holds" and no "sells," and Adelphia Business Solutions received two "buys," three "holds" and no "sells." Five companies received a mix of positive and negative ratings, while only one, Steakhouse Partners, received a sell rating exclusively. The table below summarizes the ratings received by the 19 rated companies at the date of failure and six months prior to failure.

   Breakdown of Ratings Received by 19 Companies Prior to Bankruptcy

                                  On Date of         6 Months Before
                               Bankruptcy Filing    Bankruptcy Filing
                               -----------------    -----------------
Companies Receiving:           # of Cos     %       # of Cos      %
--------------------           --------   -----     --------    -----
"Buys" and "Holds" only           13      68.4%        15       78.9%
"Buys," "Holds" and "Sells"        5      26.3%         3       15.8%
"Sells" only                       1       5.3%         1        5.3%
                                 ---      -----       ---       -----
                   Total          19     100.0%        19      100.0%

"Even diligent investors who sought second and third opinions on 13 soon-to-fail companies would have run into a stone wall of unanimous `don't-sell' advice from brokerage firms," added Dr. Weiss. "Our analysis implies that Merrill Lynch's recent settlement with New York State is just the first chapter of a much longer saga, as these firms face mounting investor lawsuits."

Weiss advises individual investors to seriously consider a brokerage firm's integrity and financial stability before doing business with a broker. To help investors select an appropriate firm, Weiss Ratings' Guide to Brokerage Firms, available at many public libraries, is the nation's only source of safety ratings on 612 institutional, full-service, discount, and online brokerage firms. The guide also includes statistics on arbitration cases and regulatory and legal actions taken against all of the firms that it rates.

Weiss issues safety ratings on more than 15,000 financial institutions, including securities brokers, banks, insurers, and HMOs. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 7,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings website at www.WeissRatings.com, or starting at $15 by calling 800-289-9222.

Note to Editors: This is the second release in a three-part series on the financial safety and integrity of the brokerage industry. Also available are: a listing of the 50 brokerage firms with their ratings on 19 companies that filed Chapter 11 Jan. 1 - April 30, 2002 broken out in buy/hold/sell categories; and a breakdown of the buy/hold/sell ratings received by those 19 companies.

Notes

(1) In total, 87 publicly traded companies filed for Chapter 11 between January 1 and April 30, 2002, with a combined peak market capitalization of $185 billion. Of these, only 19, with a combined peak market capitalization of $150 billion, were rated by the brokerage firms covered in this analysis. The analysis covered 121 stock ratings available from 50 brokerage firms six months before bankruptcy and 121 ratings at the date of bankruptcy filing. Data source: The latest ratings publicly available on or from Bloomberg, Yahoo.com, First Call and Zack's.

(2) "Buy" = "strong buy," "buy," "recommended list," "accumulate," and "attractive."

(3) "Hold" = "hold," "hold/neutral" and "market perform."

(4) "Sell" = "reduce" and "sell."