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Grubman: 'I Made It Up'

Nov 13, 2002 | Wall Street Journal Former Salomon Smith Barney telecom analyst Jack Grubman said email messages written by him in 2001 alleging he received outside pressure related to his rating on AT&T Corp. (T) were fabrications.

The Wall Street Journal reported Wednesday that in Jan. 2001, Grubman sent emails to an analyst at a money-management firm indicating that Citigroup Inc. (C) Chief Executive Sanford Weill pushed him to review his rating of AT&T. The emails say that Weill's alleged pressuring of Grubman was done to gain the support of AT&T Chief Executive C. Michael Armstrong, a key Citigroup board member, in a power struggle between Weill and Citigroup's former co-chairman, John Reed, in early 2000.

However, In a press release Wednesday, Grubman said he "invented a story" in order to inflate his "professional importance" and make an impression on a colleague and friend.

"I have said a number of inappropriate, even silly, things in a few private emails that have been made public over the last few months," Grubman noted in the statement. "The contents of these particular emails, while personally embarrassing, are completely baseless."

"My research on AT&T was always done on the merits. It was not designed to help Salomon Smith Barney get investment banking business, nor was it designed to influence Mike Armstrong's vote on Citigroup board matters," said Grubman.

Earlier Wednesday, Citigroup itself issued a statement on The Wall Street Journal article, calling the relevant emails "pure fantasy." In the press release, the financial services company said that any suggestion that Grubman upgraded AT&T as part of Weill's effort to win Armstrong's support "is nonsense."

"Regulators have already received unequivocal sworn testimony from Mr. Grubman that they [the emails] are 'fabrications' with 'zero basis' in reality," Citigroup said.

The Citigroup release included a memo to senior management of Citigroup from Weill indicating "deep outrage" that the emails reached the press in spite of their "lack of factual basis."

"I have said before, and will say again: I never told any analyst what he or she had to write - and I never would," wrote Weill. "I did suggest to Jack Grubman that he take a fresh look at AT&T in light of the dramatic transformation of the company and the industry."

"I always believed that Mr. Grubman would conduct his own research and reach independent conclusions that were entirely his own," said Weill.

Weill also noted that Armstrong has categorically denied that his board vote was in any way connected to the upgrade and Grubman has testified under oath that his statements linking these separate events were his own invention made to inflate his importance.

In Aug. 2002, Grubman, whose bullish calls on the telecommunications sector made him a star researcher at Salomon Smith Barney, resigned from the firm amid multiple regulatory inquiries into whether he hyped once-hot telecom stocks to help his firm win lucrative investment-banking deals.

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