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Weill Denies New Allegations Over Research

Nov 13, 2002 | Sandy Weill, chairman and chief executive of Citigroup, was on Wednesday forced to defend himself publicly for the second time in a month against accusations of conflicts of interest.

Mr Weill, issued a strongly-worded statement denying a story in the Wall Street Journal that alleged he had ordered star analyst Jack Grubman to review the bank's rating on AT&T.

"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," Mr Weill said in a memo to senior management on Wednesday.

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

Mr Weill first spoke publicly last month in an attempt to clear his name over conflicts of interest accusations surrounding the AT&T upgrades. He said at the time: "I have never told any analyst what he or she had to write and I never would."

At the time Eliot Spitzer, the New York attorney-general, who is probing possible conflicts of interest in the research department of Citigroup's investment banking arm Salomon Smith Barney, hinted he may take legal action against Mr Weill.

Mr Spitzer is investigating Mr Weill's role in a positive research note issued on AT&T shortly before Citigroup won a lucrative financing contract from the telecommunications group.

The WSJ reported on Wednesday that Mr Grubman sent a series of emails to an analyst in January 2001, claiming Mr Weill had put pressure on him, not just because Mr Weill wanted to win a financing deal from the telecommunications group, but also so he could gain support for his leadership bid of the bank.

At the time of the upgrades in 1999, Mr Weill was locked in a leadership battle with Citigroup's former co-chairman John Reed.

By upgrading AT&T's stock, the Journal said, Mr Weill was trying to gain the support of AT&T chief executive Michael Armstrong, who also serves on the Citigroup board.

Citigroup's statement on Wednesday said: "These emails are pure fantasy.

"The suggestion that Jack Grubman upgraded AT&T as part of Sandy Weill's effort to win Mike Armstrong's support on the Citigroup Board is nonsense.

The regulators have already received unequivocal sworn testimony from Mr Grubman that they are "fabrications" with "zero basis" in reality.

"We can't comment on why Mr Grubman wrote them - you'll have to ask him."

Citigroup said it had sent the emails to regulators as part of its defence against conflict of interest accusations. The bank said it was "outraged" that their contents had become public knowledge.

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