A House committee issued a subpoena Tuesday to Citigroup in an investigation of whether the banking giant offered potentially lucrative stock to executives of now-bankrupt WorldCom.
Rep. Michael Oxley, chairman of the House Financial Services Committee, said the panel subpoenaed Citigroup because of its incomplete response to a July 23 request for documents.
The committee is examining whether Citigroup’s investment division, Salomon Smith Barney, and Salomon telecom industry analyst Jack Grubman gave clients such as WorldCom special access to shares of hot new stock offerings.
“We will continue to cooperate with the inquiry,” Salomon spokeswoman Arda Nazerian said.
She said the investment firm was compelled by federal law to withhold the information from the committee to protect the privacy of shareholders.
The committee is investigating multibillion-dollar accounting irregularities at WorldCom, whose interests include the nation’s No. 2 long-distance telephone company, MCI. WorldCom became the biggest corporate bankruptcy in U.S. history on July 21, about a month after disclosing it had falsely inflated profits by nearly dlrs 4 billion.
The Justice Department and the Securities and Exchange Commission, which already has filed civil fraud charges against WorldCom are investigating the accounting problems.
At a committee hearing on July 8, Grubman testified that he did not know and did not recall whether WorldCom executives received special access to the new stock. He added, “But I can’t categorically say it didn’t happen.”