Shearson Didn't Act Improperly With Computervision

Your article, "The fingers pointed at Shearson" (Finance, Oct. 19) is an unbalanced account of Shearson Lehman Brothers' role in the initial public offering of Computervision Corp. common stock. The article leaves the impression that Shearson could not properly act as a lead underwriter, given its ownership interest.

There is no basis to this claim. Investment banks traditionally act as lead underwriter of offerings where they have an ownership interest. Of the 14 reverse LBOs involving investment-bank ownership since 1990, the owner (or partial owner) has been the lead underwriter in all but a single instance where there was an initial public offering. The reason for this is simple: Investors expect the investment banks to take a lead role in stock offerings of this kind.

Underwriters have clearly defined responsibilities, but they do not extend to events over which they have no control--in this case, the unexpected decline of Computervision stock. The article should have taken more care in making this important distinction.

Howard L. Clark Jr.

Chairman, CEO

Shearson Lehman Brothers

Holdings Inc.

New York

Editor's note: Samuel L. Hayes III, a professor of investment banking at Harvard business school who was quoted in our story, says he was wrong in saying that it is unusual for an investment bank with an ownership interest to be a lead underwriter in the offering. Professor Hayes does believe, however, that this practice represents a conflict of interest.

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