“Securities regulators charged a former Merrill Lynch & Co. stock analyst with issuing misleading research, saying his relationship with Tyco International Ltd. was too close and some of his bullish reports didn’t reflect his private doubts about the company,” writes Randall Smith in today’s Wall Street Journal.

“In a civil disciplinary proceeding, the National Association of Securities Dealers painted an unusually vivid picture of the chummy ties that sometimes developed between stock-research analysts and the companies they covered during the 1990s market bubble, underpinned by lucrative investment-banking fees received by the analysts’ firms and the hefty paychecks received by the analysts who were paid from those fees.”

“In this case, the former analyst, Phua K. Young, received a guaranteed annual minimum pay package of $4.5 million in 1999 and 2000 after being recruited by Merrill from Lehman Brothers Holdings Inc. in mid-1999. In an e-mail to a senior Tyco official, Mr. Young candidly said: ‘I am paid indirectly by Tyco.’ Merrill led four different Tyco debt issues that generated $20.2 million in fees between 1999 and 2001, according to Thomson Financial, which tracks securities issues.”

“The NASD charged Mr. Young, 48 years old, with sharing unpublished research reports and ratings with the company, improperly disseminating nonpublic information about an acquisition, and with publishing misleading research that didn’t reflect his own doubts about the company’s strategy.”

“The NASD also accused Mr. Young of violating a $100-a-year gift limit by giving a $4,500 case of wine to Tyco’s then-Chief Executive Officer Dennis Kozlowski as a wedding gift. (He also allegedly received a $3,500 case of champagne from Mr. Kozlowski for his own wedding.) He flew on one of Tyco’s corporate jets, solicited tickets to the U.S. Open tennis tournament from Tyco for his brother-in-law, and obtained information about “a personal friend” through a Tyco-commissioned report from a private-investigation service, the NASD said. And the NASD alleged that Mr. Young skipped a required compliance meeting held in 2001 by Merrill, and asked that a subordinate falsify his signature stating that he did attend.”

“A lawyer for Mr. Young, Christopher Wilson of Hughes Hubbard & Reed LLP, said Mr. Young was being made a ‘scapegoat’ in the charges, which he is contesting, and was only trying to obtain information about the company when he sent investor-relations officials provocative e-mails describing himself as a ‘LOYAL TYCO EMPLOYEE,’ or describing doubts he had about a planned split-up of the company in 2002.”

“Mr. Wilson said the charges were brought based on Mr. Young’s high profile at Merrill, where he was the No. 1-ranked analyst covering multi-industry companies, and his work with Tyco, two of whose former executives led by Mr. Kozlowski were charged last September by the Manhattan district attorney with grand larceny for selling $400 million in stock without disclosing information about executive compensation and loans.”