Recently several class action suits have been filed against Citigroup's Salomon Smith Barney, the world's largest financial services company. These violations include the misuse of stock option plans, the misuse of margin, unsuitability claims, failure to supervise, misrepresentation and material omissions of fact, and excessive trading (churning) of customers' accounts. At the time of this writing Citigroup faces at least 62 lawsuits related to its research practices.
Notable among these cases is a landmark action filed by the National Association of Securities Dealers against top telecommunication analyst, Jack Grubman. The suit is in response to the increasingly strong evidence that Salomon Smith Barney "traded" favorable analyst reports for investment banking business.
Specifically, the NASD is investigating evidence that indicates quite clearly that Mr. Grubman's gave positive research reports on the communications company Winstar, despite the fact that the company was in serious financial trouble. These misleading reports artificially inflated the stock prices of Winstar and companies like it, damaging hundreds of investors.
In response to these claims, Citigroup Inc., has allocated $1.5 billion to cover legal related expenses but will nevertheless report a net income for 2002 greater than any other company in the world.
''Not a bad performance when you consider what we had to face.'' Sanford Weill, the Citigroups CEO, shared with reporters.
It is expected that the government's investigation will result in the disclosure of further evidence that will greatly support the claims of additional lawsuits. Many estimate that the 1.5 Billion the Citibank has set aside, will not be enough to cover the entire cost of settling private litigation. In a similar instance, Prudential Financial Inc. paid out three times as much as it originally estimated when lawsuits in the 1990s proved that it had fraudulently sold $8 billion of limited partnerships.
Mr.Grubman recently revealed to government investigators that he was paid an average of around $20 million a year over the last decade.
The following are stocks that Jack Grubman covered at Salomon Smith Barney:
Intermedia, Winstar XO Communications Pacific Gateway, GTE, Williams, Flag Telecom, AllegianceTelecom, Broadwind, Qwest, Nextlink, ATT,
Level 3 Communications, Carrier 1, McCleod USA, PSI Net, Rogers Wireless
If you have experienced fraud with Salomon Smith Barney contact us to determine your legal options
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