NASD Fines Analyst Who Worked for GrubmanApr 5, 2004 | AP
The National Association of Securities Dealers has fined and suspended a former Citigroup Inc. analyst who had worked for telecom superstar Jack Grubman.
The NASD Monday said it fined Christine Gochuico, 35, $100,000 and suspended her from working in the securities industry for six months for her role in covering telecom firm Winstar Communications Inc. In addition, Gochuico is barred from using her name on any securities firms' material for another 18 months after her suspension ends.
Gochuico was a vice president and senior analyst at Salomon Smith Barney under Grubman, and her name appeared alongside his on research reports on Winstar. The pair were accused of publicly recommending that investors buy Winstar and of placing an unrealistic price target of $50 a share on its stock from Jan. 25 through April 17, 2001, even though Gochuico told an institutional investor privately that the target wasn't feasible.
During that time, Winstar's stock price fell from $20 a share to 14 cents a share, even as Gochuico and Grubman praised Winstar and attacked another analyst who was critical of the firm, according to the NASD complaint. Citigroup received $24 million in investment banking fees from Winstar, money that regulators claim influenced the pair's research on the telecom firm.
Winstar filed for Chapter 11 bankruptcy protection in April 2001. IDT Corp. purchased Winstar's assets in 2002.
In various e-mails to institutional investors, Gochuico had a more negative view of Winstar than what was published publicly, according to the NASD. When one client questioned why her estimates were so high, she e-mailed back that there "really is no good reason" except for her team's unwillingness to change their target price because it wouldn't look good, according to the complaint.
The settlement with Gochuico is the final step in the NASD's case against Citigroup and its employees over its research on Winstar. Citigroup settled the charges for a $5 million fine in September 2002, which at the time was the third-largest NASD fine ever.
Grubman settled the claim against him in April 2003 as part of the global research settlement with the NASD, Securities and Exchange Commission and state regulators. As part of that settlement, he paid $15 million and was barred from the industry for life. In February, he took on a job consulting to small tech firm Distinctive Devices.
It isn't clear what effect the suspension and prohibition against publishing research for 18 months will have on Gochuico. She was on maternity leave when Citigroup settled the charges in September 2002, and left the firm in December of that year. NASD records show that she isn't working anywhere in the securities industry, and the NASD settlement order states that she has been unemployed since leaving Citigroup.
Her attorney didn't immediately return calls seeking comment.
The NASD said that if Gochuico elects not to return to the industry, she won't have to pay the fine.