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Citigroup CEO Faces Inquiry In N.Y.

Oct 23, 2002 | AP New York Attorney General Eliot Spitzer will question Citigroup Inc.'s chairman and chief executive, Sanford I. Weill, in its investigation of the company's research practices, a Spitzer aide said Wednesday.

"Sandy Weill has offered to meet with our office and we've accepted his offer of cooperation," said Spitzer spokeswoman Juanita Scarlett.

She said Weill isn't a target of the investigation and no meeting has been scheduled.

Spitzer's office has told Citigroup attorneys that the company's interests may have diverged from those of Weill, according to the Wall Street Journal, which reported the probe on Wednesday.

But Weill issued a memo to Citigroup's senior managers Wednesday, refuting the notion that his interests and those of the company had diverged.

"The Board has been kept fully informed as the investigations have progressed and is fully supportive of my decision to testify," Weill stated.

It's unclear what new information investigators have found, the paper said, except that it falls under Weill's actions regarding Salomon Smith Barney's rating of AT&T Corp., where he is a board member.

The move signals that Spitzer's office could be considering legal action against Weill personally, besides Citigroup, the newspaper's sources said.

Scarlett wouldn't discuss any new information developed in the investigation.

"We'll go where the evidence leads us," she said.

Weill said in a statement issued Wednesday that he never told any analysts what they should write. "My conduct has been entirely appropriate and proper," he said.

Earlier this month, Weill announced his resignation from AT&T's board and said he won't stand for re-election next year to the board of United Technologies Corp. Salomon is Citigroup's brokerage unit.

Weill recently hired two lawyers to represent him from the firm Wachtell, Lipton, Rosen & Katz. The lawyers, Lawrence B. Pedowitz and John F. Savarese, are both former assistant U.S. attorneys.

"The notion that there could be any charge against Sandy Weill is inconceivable," Wachtell's founding partner and longtime Weill adviser Marty Lipton said in the same statement. "There is no divergence between the interests of Sandy and Citigroup."

The enforcement arm of the National Association of Securities Dealers had requested that Weill give a deposition, in a meeting set for Oct. 31, the Journal's sources said. An NASD spokesman had no comment.

Weill also has offered to talk to federal prosecutors in Manhattan and the Securities and Exchange Commission, which also are pursuing investigations into Salomon's activities, a person familiar with the matter said.

Spitzer's office is investigating what role Weill had in Salomon's AT&T rating, including an upgrade made by telecom analyst Jack Grubman right before the telephone giant was planning a massive stock sale to finance its wireless unit. AT&T chief executive C. Michael Armstrong is a longtime Citigroup board member.

Judah Kraushaar, an analyst at Merrill Lynch, said the news reports could reverse investor hopes that regulators and Citigroup had been closing in on a settlement. Still, he added, Merrill Lynch would maintain its "buy" rating.

"Citigroup has an impressive global franchise with enduring strengths, and the stock already seems to discount financial pain from possible legal and regulatory issues."

He said Merrill's target price for the stock was $60. Shares were trading at $34.08 Wednesday afternoon, down $1.45, or 4 percent.

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