Gotcha! Post scoop leads to probe of Toys “R” Us owners

The talks on Wall Street to take Toys "R" Us public in 2010 were definitely not suitable for children.

Eager to pitch the giant toy retailer's private-equity owners as they weighed an initial public offering of the chain, one analyst at Needham & Co. went into graphic detail about his hankering.

"I would crawl on broken glass dragging my exposed junk to get this deal," the analyst wrote in a May 2010 e-mail to a colleague.

The dirty message was among dozens released Thursday following a four-year probe by the Financial Industry Regulatory Authority that was initially sparked by The Post, said Finra spokeswoman Nancy Condon.

In June 2010, The Post exclusively reported that Wall Street analysts felt that KKR, the lead owner of Toys "R" Us, "attempted to grill and cajole" them into giving upbeat valuations of the retailer as investment bankers at their firms lobbied for a piece of the deal.

"Can't slip anything by a crackerjack analyst, can you?" one analyst said sarcastically of The Post's report in an email unearthed by Finra, suggesting that the pressure was obvious and blatant.

Indeed, Finra's exhaustive investigation showed that the conflicts of interest were routine rather than unusual, as 10 of Wall Street's biggest banks were slapped with $43.5 million in fines on Thursday.

Goldman Sachs, JPMorgan, Credit Suisse and Citi were fined $5 million apiece, while Deutsche Bank, Merrill Lynch, Wells Fargo and Morgan Stanley each paid $4 million.

The prospective IPO — an $800 million deal that ultimately flopped — was one of the hottest deals brewing on Wall Street at the time, as the 2008 financial crisis had dried up the market.

The bankers and analysts who participated in the "bake-off" were as giddy as children on Christmas morning to underwrite the deal, according to documents released by Finra.

Credit Suisse's analysts bragged that they were "off the charts" bullish on the company. They even tried to push a "home court advantage" line to the Wayne, NJ-based toy store since Credit Suisse's analyst lived in the Garden State, according to documents.

"I so want the bank to get this deal!" one Citigroup analyst gushed in an e-mail to a supervisor after discussing the Toys "R" Us IPO with bankers.

After getting invited to pitch, a Goldman Sachs dealmaker told a colleague that he wanted the investment banking team to be "tightly coordinated" with the firm's toy analyst.
None of the companies admitted or denied any wrongdoing in the settlement.

"Fundamentally, the analyst work product is presented to investors as independent analysis," Brad Bennett, Finra's chief of enforcement, told The Post.

As previously reported by The Post, Toys "R" Us owners KKR, Bain Capital and Vornado Realty, who have still failed to take the company public, weren't legally barred from pressuring analysts.

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