The Telegraph
Since 1st March, 1999
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Salomon Smith Barney fined $5 m

New York Sept.24 : Regulators fined Salomon Smith Barney $ 5 million Monday on charges that its former analyst Jack Grubman relentlessly touted a telecom stock despite signs that the company was in severe financial trouble.

The National Association of Securities Dealers (NASD) also brought a similar complaint against Grubman and his assistant, analyst Christine Gochuico. They are contesting the allegations and could face stiff penalties if found guilty in an NASD civil hearing, including monetary fines or a permanent bar from the industry.

Salomon and the two analysts were charged with breaking several NASD rules, including those requiring high standards of business behaviour and barring misleading statements to investors. However, they were not charged with potentially more serious infractions of fraud or intent to deceive investors.

Salomon, a unit of Citigroup Inc., settled the case without admitting or denying wrongdoing.

The NASD alleged that Grubman went out of his way to talk up the prospects of Winstar Communications Inc. despite having no logical basis for his optimism.

For example, Grubman steadfastly maintained that Winstar’s stock would rise to $ 50, even as it sank to 14 cents a share, the NASD alleged.

When others on Wall Street questioned Winstar’s prospects, Grubman shot back with reports praising the company while “belittling and attacking” Winstar’s critics, the NASD said.

The $ 5 million penalty was the third-largest ever levied by the NASD. But it was only a fraction of the $ 24 million in investment banking fees that Salomon earned from Winstar.

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