Citigroup Inc.’s chairman and chief executive, Sanford I. Weill, will face questioning by New York Attorney General Eliot Spitzer’s office, which is looking into the way the financial giant conducted its equity research.
But Weill, who said he has instigated meeting with Spitzer, lashed out at any suggestion he influenced research ratings at Citi.
In a memo to employees yesterday, Weill said he “never told any analyst what he or she had to write – and I never would. My conduct has been entirely appropriate and proper.”
A spokeswoman for Spitzer’s office, Juanita Scarlett, said, “Sandy Weill has offered to meet with our office and we’ve accepted his offer of cooperation.” A meeting date is yet to be set.
Spitzer’s investigation has, in part, focused on former Salomon Smith Barney analyst Jack Grubman’s rating on AT&T Corp., sources said. Grubman, the subject of many lawsuits and investigations, is no longer with Salomon, a Citigroup subsidiary.
A report in the Wall Street Journal yesterday said sources believed Spitzer’s office could be considering legal action against Weill personally, because of new information investigators have found. The information, the paper said, deals with Weill’s actions regarding Salomon’s rating of AT&T Corp.
Weill recently announced plans to resign from the AT&T Corp. board of directors before the end of the year.
In his memo yesterday, Weill said that he wanted to cooperate with Spitzer’s office because he “expected that the New York State Attorney General and other regulators would want to hear from me personally.”
Securities lawyers and sources close to the talks suggest that Weill volunteered to cooperate because he knew that Spitzer’s office was likely to seek him out.
“He was being pre-emptive,” said a source. “It’s better if he goes to Spitzer as opposed to Spitzer going after him.”
“This is posturing,” said Howard Meyers, a securities lawyer with Meyers & Heim in Manhattan. “His reputation is on the line. He has to take a tough approach and defend his integrity.”
Scarlett said Weill isn’t a target of the investigation “at this time.” Spitzer, she added, will consider all evidence and won’t rule out any action.
Citigroup will be one of 10 firms represented in Washington, D.C., today at a meeting with Spitzer, federal and state regulators to discuss proposals to settle allegations of analysts’ conflicts of interests, sources said.
As part of the possible settlement, Spitzer is calling for a new investment research body as part of a so-called global settlement and the complete separation of equity research and investment banking departments.
Legal sources speculated that if a global settlement is reached, Spitzer would probably not pursue any individual action against Weill.
Citigroup did not return phone calls for comment.