Salomon Probe Includes Senior Executives ("Enron" Rubin/"Global Crossing" McAuliffe watch - Day 35)

Yahoo News ^ | 09/03/02 | Charles Gasparino, Anita Raghavan

[Libloather]

New York Attorney General's Salomon Investigation Targets Senior Executives
Tue Sep 3, 1:13 AM ET

Amid disclosures that investment-banking clients of Salomon Smith Barney pocketed huge profits from hot IPOs, the New York attorney general's office is looking into the activity of senior Salomon executives who worked closely with former research analyst Jack Grubman, Tuesday's Wall Street Journal reported.

Attorney General Eliott Spitzer is seeking to determine if roles played by Mr. Grubman's bosses resulted in firm-wide conflicts of interest involving the sale of now-worthless telecommunications stocks during the late 1990s, people with knowledge of the probe say.

Investigators from Mr. Spitzer's office are reviewing subpoenaed Salomon documents -- including e-mails -- for interaction between Mr. Grubman and senior executives about initial public offerings of stock, his research reports promoting the stock Salomon sold and advisory work on lucrative investment- banking transactions, these people say. In addition, they have interviewed telecommunications-industry executives who were Salomon clients about the practices of Salomon officials, they say.

While Mr. Grubman is still at the heart of the inquiry, the attorney general's office is specifically interested in the activities of Michael Carpenter, the head of Citigroup Inc.'s Salomon unit; Eduardo Mestre, chairman of Salomon's investment bank; and Kevin McCaffrey, head of Salomon's stock-research department and Mr. Grubman's direct supervisor, these people say.

A spokeswoman for Salomon said Mr. Spitzer's office hasn't interviewed either Mr. Carpenter or Mr. Mestre; she declined to comment about Mr. McCaffrey. In a statement, the spokeswoman added: "As you know, we are cooperating with the investigation and will continue to do so." Messrs. Carpenter, Mestre and McCaffrey didn't return calls for comment. As reported, Mr. Spitzer's office also is examining what role Citigroup Chief Executive Sanford Weill may have played in a decision by Mr. Grubman to upgrade his rating on AT&T Corp. stock during 1999, a move that helped Salomon win a lucrative investment-banking assignment.

Mr. Spitzer's inquiry is part of a broad investigation by state and federal officials into whether Wall Street firms violated regulations by hyping stocks of companies that were investment-banking customers, possibly deceiving investors who lost billions of dollars when many went bust.

Mr. Spitzer declined to comment, but the latest inquiries by his team represent a shift in their thinking, people familiar with the matter say. Originally, Mr. Spitzer focused largely on the activities of Mr. Grubman, a high-profile analyst who resigned from the firm last month amid investigations into his research practices. Mr. Spitzer often carried with him a chart, showing Mr. Grubman at the center of a triangle, representing the various ways Salomon may have cozied up to corporate executives while touting their stock.

Wall Street Journal Staff Reporters Charles Gasparino and Anita Raghavan contributed to this report.

[Libloather]

Rubin is conspicuously left off the perp list.

[clamboat]

I wish I could join a class-action lawsuit against my former brokers at Smith Barney - Newbold Strong and Doug Delong in the Philadelphia office. These two "investment advisors" advised the purchase of MCI-Worldcom when it was at about $60. After I agreed to buy some it dropped like a stone, to about $40. I called and asked them what was up? Is it time to unload this turkey? "No, no", they said, "the drop is expected - it is just arbitrageurs hedging their bets around the MCI-Sprint merger. Now is the time to buy more!" So like a fool I listened, and we doubled my investment in MCI worldcom.

I finally pulled all of my remaining portfolio out of Smith Barney late last year - too late to save much. I sold the Worldcom at $17 per share. Other stellar recommendations from these fools were CMGI, Lucent, JDSU, EMC, etc. I made my own poor investment descisions as well, which didn't help. But if you want to hold on to your money, make your own mistakes rather that letting these rippoff artists at Smith Barney lose it for you.

If they were not involved in a criminally fraudulent effort to sell securities that they knew were dogs, then they are the biggest investment fools I've seen - right behind me who listened to them. That's quite a choice - they're either incompetent idiot investment advisors or criminals.