E-mails Leave More Egg On The Face of GrubmanNov 17, 2002 | FT.COM Jack Grubman's reputation as a Wall Street analyst suffered when WorldCom, Global Crossing and other telecommunications companies he touted crashed into bankruptcy.
But now, Mr Grubman faces another threat: becoming a laughing stock.
The disclosure of e-mails suggesting that Mr Grubman might have altered his stock picks to help his twin daughters get into an elite New York nursery school marks one of the more bizarre chapters yet in a year of Wall Street scandals.
Mr Grubman told the tale in an e-mail to another analyst, in which he also claimed his stock picks were intended to help his former boss, Sandy Weill, Citigroup chairman and chief executive, win a power struggle at the company.
Even to those familiar with the battles that well-heeled parents wage to win spots in New York private schools, the idea that an analyst paid more than $20m a year could base his picks on such a consideration is hard to believe.
Mr Grubman has rejected the evidence, saying in a statement that the claims he made were false and attributing them to a penchant for self-aggrandisement. Attempts to reach Mr Grubman's attorney were unsuccessful.
Legal analysts say Mr Grubman's denials have further eroded his credibility, which could affect investigations into Mr Grubman and his former employer, Citigroup's Salomon Smith Barney investment bank.
"I'm sure this is going to come up in other cases," says Marvin Pickholz, a New York attorney. "What he has just told us is that he is willing to lie if it will benefit him. It certainly diminishes him as a witness."
Eliot Spitzer, the New York attorney-general, and other regulators are investigating whether Mr Grubman made stock picks for reasons other than helping investors make money.
Of particular interest has been Mr Grubman's decision to rate AT&T a buy in November 1999. Mr Spitzer has been trying to determine whether Mr Weill influenced the change.
Lawyers were sceptical the latest e-mails would be sufficient for authorities to bring charges against Mr Weill or Mr Grubman. But Mr Grubman's denials could hurt his standing in pending class-action lawsuits against him.
"What's emerging here is how baseless these stock recommendations were," says Jacob Zamansky, who is representing a group of investors suing Salomon and Mr Grubman. "This ruins his credibility."
Mr Grubman may also have less hope of striking a deal with investigators, lawyers say. As Tom Dewey of Dewey, Pegno & Kramarsky, put it: "It's not exactly helpful to have a star witness who's discredited."
In 1999, Mr Grubman's AT&T call raised eyebrows because he had been a long-time critic of the company. Many assumed it was calculated to help Salomon win a lead underwriting role on a lucrative banking transaction involving AT&T Wireless.
Mr Grubman's e-mails suggested he changed his mind to help both his twin daughters and Mr Weill, who was battling for power at Citigroup with his fellow chairman and co-chief executive, John Reed.
Mr Weill sits on AT&T's board, and AT&T's chairman and chief executive, Michael Armstrong, is a Citigroup director.
Following last week's disclosures, Mr Weill acknowledged he had asked Mr Grubman "in late 1998 or early 1999" to "take a fresh look at AT&T".
Mr Weill denied helping Mr Grubman's children to influence their father's stock recommendations.