The New York attorney general plans to sue former WorldCom chief executive Bernard Ebbers and four top executives of other companies over accusations that they took profits in initial public offerings without disclosing potential conflicts of interest, a source familiar with the case said Monday.
The planned suit will accuse the executives of receiving shares of lucrative IPOs for steering their companies’ underwriting business to Salomon Smith Barney, according to the source, who spoke on the condition of anonymity. The executives will be accused of failing to disclose their companies’ underwriting relationship with Salomon Smith Barney as required by state law.
Attorney General Eliot Spitzer is looking at how top executives at Wall Street firms have used IPOs to land investment banking business, the source said. The suit is part of Spitzer’s investigation of conflicts of interests at brokerages that sought investment banking business from companies while publishing inflated ratings of their stocks.
The Wall Street Journal reported Monday on it s Web site that the suit will show Ebbers made more than $11 million from several dozen IPOs in the late 1990s.
WorldCom, which owns the nation’s second largest telephone company MCI, did not immediately return a call seeking comment.
Last week, Salomon agreed to pay a $5 million fine to settle charges star analyst Jack Grubman issued misleading research reports about a telecommunications company that ended up filing for bankruptcy.
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