Wednesday, September 3, 2008

Investment Banking: PR Hits the Skids at Lehman Brothers

Talk about bad investment banking public relations: Lehman Brothers was caught red-handed, having plagiarized parts of a Sanford Bernstein report on virtualization technology, according to Wall Street Journal reporter Susanne Craig. Known for its research excellence, Bernstein is headquartered in New York.

A research report produced earlier this year by a Lehman analyst — who has since moved on to greener pastures — contained passages that were surprisingly similar to several notes written earlier by Bernstein analyst Toni Sacconaghi.

In a letter sent last week to its clients, Lehman acknowledged the plagiarism. “The material was not sourced to Bernstein and was used without the firm's permission,” Lehman wrote. “We sincerely apologize to Bernstein, the authors of the reports, and our clients for this incident.”

The apology was accepted, but this was a crisis that should never have happened.

Because Mr. Sacconaghi is an extremely well-regarded analyst, whose work is closely followed and widely quoted, it was almost inevitable that this misappropriation of intellectual property would be uncovered. What makes this an especially unfortunate PR issue for the investment banking sector is the fact that this scandal comes at a time when Wall Street firms are trying to rebuild the public confidence in the credibility of their research departments.

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