Citigroup Inc. could be required to publicly apologize for faulty stock research by the firm’s analysts, but Chief Executive Sanford I. Weill is likely to avoid facing separate charges in a broad regulatory inquiry into whether the nation’s big brokerage firms misled small investors with overly optimistic research on investment-banking clients, people familiar with the matter told The Wall Street Journal.
The financial-services giant will likely agree to pay a fine of about $300 million to $350 million and perhaps will spend as much as $100 million more for independent research to settle the inquiry, according to people close to the inquiry.
Whether the apology comes from Citigroup or Mr. Weill personally has yet to be determined, people familiar with the matter say. Any settlement, however, wouldn’t preclude separate charges against Jack Grubman, the former star telecom analyst at Citigroup’s Salomon Smith Barney unit who has been at the center of the case.
The settlement is significant for Citigroup and Mr. Weill. Regulators, led by New York Attorney General Eliot Spitzer, had been investigating, among other things, whether Mr. Weill had prodded Mr. Grubman to upgrade his rating of AT&T Corp., a corporate client, in late 1999, as well as his involvement with other ratings of such clients. Each has denied wrongdoing, but Mr. Weill has acknowledged asking Mr. Grubman to take a “fresh look” at AT&T’s stock. A Citigroup spokeswoman declined to comment, as did a spokesman for Mr. Spitzer. Neither a spokesman for Mr. Grubman, nor his attorney, Lee Richards, returned calls for comment.
Despite finding evidence suggesting Mr. Weill’s involvement in the ratings process, investigators from Mr. Spitzer’s office were unable to find evidence that would show definitively that Mr. Weill knew the firm was releasing false or misleading ratings, according to people close to the matter.
The developments come as regulators near a broader settlement with five large Wall Street firms, including Citigroup, over misleading research that could include fines totalling nearly $1 billion, and several hundreds of millions more to fund independent analysis for small investors, the people say.
The other firms that tentatively have signed off on the broad outlines of an accord are Credit Suisse Group’s Credit Suisse First Boston unit, Morgan Stanley, Goldman Sachs Group and Merrill Lynch & Co.
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