Jack Grubman did not upgrade AT&T shares in order to help propel his boss to the top of the No .1 financial services company, the former telecom analyst said Wednesday.
The boss, Sandy Weill of Citigroup, agreed as the two responded to a story that floats a new motive behind allegations of tainted stock research on Wall Street.
The Wall Street Journal reported Wednesday that Grubman, a former Salomon Smith Barney telecom analyst, claimed in a 1999 e-mail that his AT&T upgrade was part of a power struggle by his boss, Citigroup Chairman and CEO Sanford Weill to oust the company’s then co-CEO John Reed.
“Sandy needed Armstrong to nuke Reed,” Grubman’s e-mail said, according to the Journal.
Grubman said Wednesday he lied in the e-mail.
“Regrettably, I invented a story in an effort to inflate my professional importance and make an
impression on a colleague and friend,” said the statement from Grubman, who left Citigroup’s Salomon Smith Barney unit under pressure in August. “My research on AT&T was always done on the merits.”
The e-mail, which Grubman sent to an analyst at a money-management firm in 2001, was uncovered by New York State Attorney General Eliot Spitzer, who is investigating whether analysts were pressured to write upbeat research to win investment banking deals for their firms.
Shares of Citigroup fell $1.17, or 3 percent, to $35.22 Wednesday. The stock is down 31 percent this year as probes by federal and state regulators question the credibility of investment banking and expose the industry to costly lawsuits.
Investors are looking forward to a settlement between regulators and Wall Street that would end the string of revelations that often show up as embarrassing e-mails.
The Journal said regulators have been investigating whether the 1999 rating change was made to secure a lucrative financing deal from AT&T.
Grubman, who said there was no investment banking motive behind the e-mail, joined Citigroup in saying it also was not part of any executive power play.
In the message, Grubman indicated that Weill pushed him to review his AT&T stock rating to gain the support of AT&T CEO AC. Michael Armstrong, a key Citigroup board member, to help “nuke” Citigroup’s former co-chairman John Reed in early 2000, the Journal said, citing people close to the matter.
Reed stepped down in February 2000.
Weill and Reed had been locked in a battle for control of Citigroup, which was created in April 1998 when Travelers Inc., run by Weill, agreed to merge with Citicorp, run by Reed, the newspaper said.
Citigroup said the suggestion that Weill had pressed for the upgrade to win Armstrong’s support is “nonsense.”
“The regulators have already received unequivocal sworn testimony from Mr. Grubman that they are ‘fabrications’ with ‘zero basis’ in reality,” Citigroup said. “We can’t comment on why Mr. Grubman wrote them — you’ll have to ask him.”
But Weill said there was some contact between himself and Grubman regarding 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,” Weill wrote in a statement. “I always believed that Mr. Grubman would conduct his own research and reach independent conclusions that were entirely his own.”
Grubman asserted that his research on AT&T was “always done on the merits” and was not meant to help Salomon Smith Barney get banking business or influence Armstrong.
“I have said a number of inappropriate, even silly, things in a few private e-mails that have been made public over the last few months,” Grubman wrote. “The contents of these particular e-mails, while personally embarrassing, are completely baseless.”
The New York attorney general’s office has deposed dozens of people about the Solomon Smith Barney e-mail traffic but has not yet determined whether this particular e-mail had any merit.
Citigroup, along with other big financial institutions, has been under investigations over whether stock research was tainted by pressure to win investment banking business from the companies they cover.
But the latest e-mail appears to be the first to suggest a stock was upgraded as part of an effort to influence a board member’s management decision.
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