Posted on 10/11/2002 6:02:48 AM PDT by Libloather
Report: Ex-Salomon Analyst Helps Probe
Thu Oct 10, 9:30 AM ET
NEW YORK (Reuters) - Former star Citigroup Inc. (NYSE:C) telecommunications analyst Jack Grubman is allying with investigators to show his ex-employer prompted him to keep a positive view on telecommunications stocks for fear of losing banking business, the Wall Street Journal said on Thursday.
New York Attorney General Eliot Spitzer, among other items, is looking at an apology letter Grubman wrote allegedly at the demand of Citigroup Chief Executive Sanford "Sandy" Weill after the analyst didn't include AT&T Corp. (NYSE:T) -- a prize banking client of Citigroup's Salomon Smith Barney research unit -- from a list of list of top telecom companies of the future, the newspaper wrote, citing people familiar with the matter.
Citigroup, for its part, told the newspaper: "Mr. Weill never told any analyst what he or she had to write." Citigroup was not immediately available to comment further.
Spitzer is leading a widespread investigation into conflicts of interest between Wall Street research and investment banking. At issue is whether Wall Street analysts issued overly bullish research reports to win investment banking business.
Spitzer has widened his probe into the integrity of Citigroup's research to include a lucrative AT&T deal Citigroup's investment banking division won in 1999. Spitzer has requested documents from AT&T related to the initial public offering of its wireless unit, an AT&T spokeswoman has said.
Grumban, who resigned from Citigroup on Aug. 15 amid a barrage of criticism, upgraded AT&T to a buy in Oct. 1999, the month before AT&T announced the wireless IPO. Salomon acted as the underwriter, along with Merrill Lynch (NYSE:MER) and Goldman Sachs Group (NYSE:GS). Citigroup has denied a Wall Street Journal report that Weill pressured Grubman into raising his AT&T stock rating to win a role in the wireless deal.
Grubman now is helping investigators show his actions were part of a wider problem at Citigroup and its Salomon Smith Barney securities arm, the Wall Street Journal said, citing people familiar with the matter.
In 1995, Grubman only rated AT&T a 'hold,' the newspaper said. C. Michael Armstrong, who became AT&T CEO in late 1997, became increasingly frustrated with the analyst, the Journal said. Then at a 1998 dinner, Grubman failed to include AT&T on a list of companies expected to be significant players in telecom during the next century, the Journal said.
Armstrong found out and expressed displeasure to Weill, the Journal said, citing two people familiar with the matter. Weill demanded through underlings that Grubman write an interoffice memo that would serve as the basis of an apology letter to AT&T, the Journal said, citing the two people.
BEIJING - More than three years after he stepped down, the former chairman of China's sixth-largest bank was convicted of corruption Thursday and sentenced to 15 years in prison, the official Xinhua News Agency reported.
Zhu Xiaohua, former chairman of China Everbright Group Co. Ltd. and China Everbright Financial Holding Co., Ltd., was also ordered to surrender all his property, Xinhua said, quoting the China Supreme Court. It said the verdict was handed down by Beijing No. 1 Intermediate People's Court.
According to Xinhua, between 1997 and 1999, while Zhu was running the bank, he took bribes of cash and stocks worth of 4.1 million yuan (nearly US$500,000).
Zhu was given leniency because he not only confessed but also gave prosecutors some information they did not have, Xinhua said.
The conviction came three years after Zhu stepped down as chairman of China Everbright amid unconfirmed reports that mismanagement cost the bank US$200 million.
Zhu, who worked in Hong Kong, was also accused of abusing his post to grant improper loans worth hundreds of millions of Hong Kong dollars — the equivalent of tens of millions of U.S. dollars,
Zhu was stripped of his party positions for neglecting his duty and causing huge losses to the government. It said the decision was approved by both the party's Central Committee and the Chinese Cabinet, which controls the bank's parent company.
Zhu arrived in Hong Kong in 1996 to run Everbright's three listed companies and spearheaded deals aimed at turning the group into a major corporate player. He pulled off huge deals including the takeover of state-run China Investment Bank.
But in 1999, he unexpectedly stepped down from all his positions. Company officials denied widespread but unconfirmed news reports that Zhu had been fired and was under criminal investigation.
The Chinese government has said publicly that it is devoting great resources to rooting out and prosecuting corruption, something it considers necessary to present a positive image for international investors.
Firm Controlled by Ebbers Got Citigroup Loans
Excerpts: A closely held company controlled by WorldCom Inc.'s former chief executive, Bernard Ebbers, received $679 million in loans from the Travelers Insurance subsidiary of Citigroup Inc. (NYSE:C - News), adding to the potential conflicts of interest faced by Citigroup in its dealings with WorldCom, a lawsuit alleges, The Wall Street Journal reported Monday.
The lawsuit portrays an even deeper financial relationship than previously disclosed between Citigroup and Mr. Ebbers. The former telecom executive also made personal profits from large stock allocations in hot initial public offerings underwritten by Citigroup's Salomon Smith Barney investment-banking unit. And Salomon earned tens of millions of dollars in fees as an underwriter for WorldCom's stock and bond offerings. ........
The suit doesn't provide details specifically linking the Travelers loans to business that Salomon got from WorldCom. However, it alleges that Citigroup analysts may have maintained an overly positive rating on WorldCom's stock -- despite the company's problems -- in part to protect Mr. Ebbers's financial well-being so that the Travelers loans would be repaid.
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Whew, sorry...MUD
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