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Stan O''Neal, newly designated Chief Executive Officer (CEO) of Merrill Lynch, was torn by the need to move forward boldly to deal with the series of scandals that hit the firm starting in Spring of 2002, and competing need to avoid taking steps that might drive away clients of Merrill''s own financial advisers. The settlement with the State of New York had terms in which Merrill paid a US$100 million fine in June for abuses focused mainly on stock analysts who had promoted stocks that their analysis did not support (but which were important to Merrill for obtaining underwriting business). Then they had to the deal with Martha Stewart, who apparently traded on inside information (provided by a Merrill financial advisor) in ImClone Stock and sold shares just before bad news was announced publicly. Merrill Lynch was in the hot seat in the press. O''Neal had been named President of Merrill in July of 2001, Chief Executive Officer in July of 2002, but to take over from December 2002, and Chairman in April 2003, when David Komansky was to step down. The situation was extremely difficult for the new CEO, because the stock market had been in a tailspin for more than a year by August of 2002. All investment banks were facing declining business volumes and were having difficulty in keeping their existing clients happy. Merrill Lynch had already laid off 9,000 people in 2002 due to the downturn, and the firm was not looking to the prospect of more layoffs and a resulting drop in morale among employees. Mr O''Neal was hoping to make his tenure as Merrill''s leader the most successful in history, but he was hamstrung by the repeated rounds of bad news that never seemed to end in the summer of 2002. His plan to build up the investment banking business and to make Merrill the global leader in wealth management were put on hold while he sought to shore up the organization and get it moving in the right direction once again. Stan O''Neal said in The Economist on 8 June, ''there is an air of cynicism surrounding every institution that underpins our capital markets'' [p65]. The question was: how could trust in Merrill Lynch be re-established? This case provides an overview of the situation facing Stan O''Neal, recently designated CEO of Merrill Lynch & Co, at the time of the huge legal case brought by New York Attorney General Elliott Spitzer against Merrill and other investment banks for failing to protect investors from biased investment advice given by their research analysts. Merrill was at the center of this storm, along with Citibank, since Merrill''s top dotcom analyst, Henry Blodgett, was accused (and later convicted) of telling investors to buy shares of stocks that he said in internal company messages were ''dogs''. The broad lawsuit was eventually settled at the end of the year by a dozen of the investment banks, agreeing to pay US$1.4 billion to the governments of the states of the US, and to develop outside sources of independent research to provide to investors in addition to their in-house analyses. Merrill initially settled on 21 May, 2002, in US$100 million agreement with the State of New York. The intent of this case is to provide a setting for the discussion of business ethics or corporate responsibility. This could be focused at the individual level, looking at the appropriate behavior of a research analyst, an investment banker, or a leader of this kind of firm. In addition to the issue of the conflict of interest between investment bankers and stock analysts, the case points out a litany of unrelated, visible problems that hit Merrill Lynch in the summer of 2002. These events included the accusation of Martha Stewart for trading on inside information provided by her Merrill broker; the participation of Merrill in some unethical profit-shifting for Enron through purchase and resale of two oil barges; and other incidents that made the news during this time period. The case thus is written more to emphasize the problem at the corporate level than to focus on a particular poor decision or action of any individual.