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Weill 'Outraged' Over Grubman E-Mail Disclosures

Nov 14, 2002 |

Sandy Weill, chairman and chief executive of Citigroup, the world's largest financial services organisation, yesterday acknowledged for the first time that he asked his former star analyst, Jack Grubman, to "take a fresh look" at AT&T, the telecommunications group and a potential investment banking client.

Mr Weill's statement came in response to a report in The Wall Street Journal, which said that Mr Grubman had sent e-mails that claimed he had changed his view of AT&T in November 1999 in order to help Mr Weill win his battle for control of Citigroup.

During late 1999, Mr Weill was vying with John Reed, his fellow chairman and co-chief executive, for control of the company.

AT&T's chairman and chief executive, Michael Armstrong, was also on the Citigroup board.

However, Mr Grubman yesterday dismissed as "completely baseless" the claim he made in the e-mails, which were uncovered by the New York state attorney-general, Eliot Spitzer.

"Regrettably, I invented a story in an effort to inflate my professional importance," said Mr Grubman, who left Citigroup's Salomon Smith Barney investment bank in August.

Citigroup pounced on the incident to launch a counter-attack, marking the second time in recent weeks that it has responded publicly and vigorously to suggestions that Mr Weill could be in trouble.

The company released a memo from Mr Weill, which said that the e-mails had come to light even though the regulators - whom he did not name - knew that Mr Grubman had testified that his e-mails were "fabrications".

Mr Weill said he felt "deep outrage" about the disclosures. But in the process, Mr Weill has cast new light on his dealings with Mr Grubman.

Mr Grubman upgraded AT&T's shares to a "buy" just ahead of a share offering AT&T completed for its wireless unit. Salomon earned tens of millions of dollars in fees as one of the lead underwriters of the transaction in early 2000.

"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.

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

In addition to investigating Citigroup, Mr Spitzer and other regulators are seeking a "global settlement" to prevent conflicts of interest on Wall Street.

Mr Spitzer said on Tuesday night that he hoped a settlement could be reached by the end of the year.

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