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By Ben King, 6 March 2001 09:30

NEWS Dr Debases Kanjilal has filed the suit, alleging that he bought shares in online directory service Infospace on the recommendation of a Merrill Lynch broker, who was acting on the basis of Blodget's advice. Jacob Zamansky, Kanjilal's lawyer, said: "Mr Blodget had set a target price of $160, my client bought in at $122. The stock never rose above $140, and now trades below $4." The suit alleges that Blodget's criteria for valuing Infospace were baseless, and that Blodget failed to disclose that Merrill Lynch had a material conflict of interest. Merrill was acting as a financial adviser to another internet company, Go2Net, which was later acquired by Infospace - a fact, Zamansky alleges, Merrill culpably failed to disclose when advising Kanjilal to buy shares. Zamansky added: "If we can establish that there was a material conflict of interest, then we will be able to prove that Mr Blodget is guilty of securities fraud." However, UK lawyers believe the suit is speculative and do not rate Kanjilal's chances of success very highly. Richard Reingold, senior assistant in the Tech Group at Berwin Leighton Payser and former Director at Lehman Brothers, said: "I think he is going to struggle, primarily because the firm has categorised this as a very high risk investment. "The only way they may have a case is if they can prove that Blodget wanted to issue a negative valuation, and breached the Chinese wall [which is meant to prevent collusion between analysts and banks working in the same institution]." Despite this, Zamansky said: "This will be a groundbreaking case which will seek to impose personal liability on analysts for issuing unfounded valuations. The analysts artificially pumped up the valuations of internet stocks, reaped huge financial rewards, and left the share-buying public holding the bag."