Prosecutors have reached a $1.4 billion settlement with the nation’s biggest investment firms that bars Citigroup’s chairman and chief executive, Sanford L. Weill, from communicating with his firm’s stock analysts about the companies they cover, unless a lawyer is present.

The settlement by 10 firms and 2 well-known stock analysts resolved accusations that the firms lured millions of investors to buy billions of dollars worth of shares in companies they knew were troubled and which ultimately either collapsed or sharply declined.

The Securities and Exchange Commission, state prosecutors and market regulators accused - Citigroup’s Salomon Smith Barney, Merrill Lynch, and Credit Suisse First Boston - of fraud. In addition to the three firms accused of fraud, five others - Bear Sterns, Goldman, Sachs, Lehman Brothers, Piper Jaffray and UBS Warburg - were accused of receiving secret payments from companies they gave strong recommendations to buy.

“These cases reflect a sad chapter in the history of American business - a chapter in which those who reaped enormous benefits based on the trust of investors profoundly betrayed that trust,” said William H. Donaldson, the new chairman of the Securities and Exchange Commission. “The cases also represent an important new chapter in our ongoing efforts to restore investors’ faith and confidence in the fairness and integrity of our markets.”.

(via New York Times)