Press Room
February 28, 2002
Law Firm Still To Pursue Investigation
Against Salomon
Dow Jones News Service
NEW YORK -(Dow Jones)- Law firm Klayman & Toskes
PA plans to continue its investigation of Salomon
Smith Barney on behalf of participants in WorldCom
Inc.'s ( WCOM ) stock option plan.
The firm estimates total damages at more than
$25 million, and alleges that Salomon failed
to recommend hedging strategies to plan participants
so they could protect their concentrated positions
in WorldCom.
In a press release Thursday, Klayman & Toskes
said the broker team of Phillip Louis Spartis
and Amy Jean Elias mismanaged the participants'
portfolio, noting that options were available
that could have protected the margined portfolio.
The Klayman & Toskes release said Salomon
terminated Spartis and Elias on Feb. 4.
As reported, Spartis and Elias filed a counterclaim
against Salomon and telecommunications analyst
Jack Grubman, saying both Grubman and Salomon
should cover any damages awarded against them
by an arbitration panel from the National Association
of Securities Dealers.
Grubman was bullish on WorldCom, a point Spartis
and Elias say was a major factor in some clients'
portfolio management decisions. Salomon responded
when the countersuit was filed Feb. 22, saying
that although it was difficult to persuade WorldCom
employees to diversify, it was unrealistic to
think clients hinged their entire portfolio strategy
on one analyst's rating.
The Wall Street Journal reported Thursday that
Jack Grubman - an aggressive backer of firms
including WorldCom, Qwest Communications International
Inc. (Q) and Level 3 Communications Inc. (LVLT)
- may see a change in his role, a statement Salomon
denies.
The Journal article indicated that a source
familiar with the matter said Salomon has talked
to another Wall Street analyst about Grubman's
position.
Some have raised concern over Grubman's dual
role as a banker and an analyst, given his penchant
for backing stocks that were also Salomon banking
clients.
Grubman had thrown support behind several companies
that plummeted, including Global Crossing Ltd.
(GBLXQ) and AT&T Corp. (T), the latter of
which brought on a lawsuit - eventually dismissed
- based on an alleged conflict of interest that
led to Grubman's maintaining a "buy" recommendation
on AT&T during a period when the company's
shares fell almost 70%.
Shortly after his AT&T recommendation, the
Journal noted, Salomon was named joint lead manager
of the initial public offering for AT&T's
Wireless Group.
-Gregg Henglein; Dow Jones Newswires; 201-938-5400
